$13M email software 💌

Welcome to this week’s edition of CROWDSCALE - we’re putting another startup on the scale and seeing what it spits out.

AppMail is software that enables online shopping to be done entirely within email. We’ll be covering:

• ✅ The Good: Valuable email solution, intuitive product

• ⛔️ The Bad: Limited potential, strong competition

• ✏️ The Decision: Will I invest in AppMail at a $13M valuation?

IT SHOULD COME AS NO SURPRISE…

…that I am bullish on email.

I have an email newsletter, so I have to be! Email has stood the test of time (50+ years and counting!), and it’s increasingly difficult to live without it.

Will people still be using email in 10 years? Yes. In 20 years? Probably.

AppMail is looking to usher in a new age of email marketing, one where everything can be done without clicking out to an external site.

Right now, if Macy’s sends you an email you’ll probably see a number of clothing options for sale. But to purchase anything, you would need to click on a link and do your actual shopping on Macy’s website.

AppMail is building an interactive solution where you could add items to a shopping cart all within email. Their software would pull in various options from the website and can even check if items are still in stock.

HOW THEY PROVIDE VALUE

AppMail claims that this reduced user friction can result in up to 37% higher conversion rates.

I believe that AppMail has a strong value proposition. While AppMail is currently in beta testing and does not have a pricing model established, I believe that businesses could be willing to pay ~$40/month for a 37% higher conversion rate.

Shi Li, the founder of AppMail, expects to acquire customers at a <$40 CPA based on their initial testing. Even charging just $10/month would enable AppMail to break even on each customer after just a four month payback period.

AppMail is also fairly simple to use - they have a drag & drop editor that’s intuitive to pretty much anyone.

While their business model is not yet clearly defined, I believe that their value proposition is strong enough to support a profitable operation.

FEAR #1 - SHOPIFY JAIL

At the moment, AppMail is only integrated with Shopify, a platform that easily allows anyone to set up a digital store.

This is because all Shopify stores are structured in the same way - this lets AppMail easily pull information + images into a neat & tidy email format. This uniformity is essential - and it could also be the reason for AppMail’s failure.

To expand outside of Shopify, AppMail will have to create a custom software solution for each business. Most large businesses (like Macy’s) have a custom website - it wouldn’t be cost effective for AppMail to spend time building out software that works with their site and then hope that one business becomes a customer.

So I think one of the largest problems is that AppMail is likely confined to Shopify stores (Etsy could be within reach though). Now make no mistake, the Shopify eco-system is massive. Shopify’s merchants bring in ~$200B in revenue each year.

But while Shopify apps can often be profitable, they rarely are able to make $1M+. In 2021, only 0.18% of Shopify apps were making over $1M annually.

Let’s say AppMail is able to crack $1M in revenue, what valuation could they fetch? I headed over to Acquire.com to see what others were selling their Shopify apps for.

Of the dozens listed, not a one was bringing in over $1M annually (not encouraging). It seemed that 5-7x annual revenues was a fairly common multiple for these Shopify apps.

So in an ideal state where AppMail is bringing in $1M, they might only be valued at $7M in total. Their valuation in the current raise stands at $13M. Translation - if AppMail is confined to Shopify, your investment is doomed.