❌ This Startup Rejected Me

It's time to revisit a startup that scorned me.

Offline hit the crowdfunding scene in 2022 - I evaluated the opportunity and decided to invest.

But Offline was rapidly funded and I got booted from the round because the startup had reached its maximum.

Now Offline is back and there's time to get in - but should you? Let's find out!

• 🏁 Off to the Races: Recapping Offline's Traction

• 😋 First Food, then…The plan to dominate human connection

• 💵 Will I Invest? Do they still deserve a spot in the CROWDSCALE portfolio?

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OFF TO THE RACES

Quite possibly the best business model ever?

Offline came onto the scene in Raleigh, North Carolina. Their $15/month subscription sends members two $10-$30 discounts for restaurants in their city each month.

The idea is that Offline forces you to try new places, and members get more value in doing so (they pay $15, but receive up to $60 in discounts).

The beauty in the business model is that Offline doesn't pay a cent for these discounts.

The restaurants themselves front the discount in an effort to bring in additional customers. Offline simply collects the membership dues and continually sources new restaurants to their network.

Offline started the model in Raleigh - they're perfecting it in Charlotte, Tampa Bay, and Nashville.

And the data from the markets they're live in is really encouraging:

• Member participation is fairly high - around 60-70% of the user base are active each month

• Restaurant retention is extremely high at 97%

• Number of paying members across 4 cities has risen to 10,000+, the company remarked on recently surpassing $2M in ARR

• Social accounts are solid, growing, and active. 510,000 followers across their various local accounts

Offline works in part because it makes sure the restaurants benefit by participating. Offline guarantees that each restaurant profits by participating - and tracks credit card spend to validate the claim.

With a 97% restaurant retention rate, I'm inclined to say that their claim is probably true.

Offline has grown mainly through word-of-mouth and social media - eating out is a social activity which makes it easy to naturally spread the brand. But word-of-mouth comes with limits - in the next section I'll break down the future of Offline.

FIRST FOOD, THEN…

David Shaner’s vision for the future: nationwide super-subscription.

Offline has a vibrant presence in 4 mid-market cities. I spoke with the founder David Shaner on Offline's next chapter.

Shaner wants to further saturate America's mid-market cities. He plans on bringing Columbus, Denver, Austin, and Orlando online (offline?) by the end of 2024. For the next 3 years he envisions a goal of doubling the number of cities Offline launches.

By 2026 he estimates that Offline can 8x current revenues to $16M in ARR.

Further expediting growth is the rollout of paid marketing - Shaner and his team has worked to perfect the advertising formula and reduced the cost-per-acquisition by 50%. 

Offline now acquires customers for ~$16 and sees roughly $100 in LTV. What I like here is that the team developed a mostly organic playbook before resorting to paid ads to drive growth.

I asked Shaner if he foresaw expansion into other community activities. The 12-year founder remarked that it was a realistic possibility to expand the Offline subscription to encompass fitness, youth activities, and other categories.

I imagine restaurants will likely make up 90%+ of the business for the foreseeable future, but it's good to know that there's additional potential once all markets are saturated.

If it came to the point where Offline included all activities, it could resemble Groupon with a different business model. Groupon is currently worth over $500M, and I believe that Offline's business model is superior & more sticky with consumers.

The one downside is that with Groupon, restaurants and businesses will actively advertise their Groupon deal. This serves as free marketing for Groupon - with Offline, restaurants are not incentivized to promote Offline.

WILL I INVEST?

Decision-Making Time…

I was sold on the investment when they raised at a $10M valuation and less traction - but do I still believe?

My main concern with this concept is that members would get weary of the restaurant selection after a year or two and cancel their membership. Shaner eased my concerns by commenting that Offline has 100-150 restaurants active in Raleigh alone, and are adding around 5-6 each month.

This makes it seem like their network can scale large enough to prevent user wearout from a small selection of restaurants.

I'm also extremely encouraged by the active participation of subscribers in the first Offline crowdfund.

Over 70% of the investors in their first oversubscribed round were subscribers. That's 500+ people who like the service so much they're willing to invest in it. An absolutely huge positive signal that demonstrates Offline has found product-market fit.

Offline's new valuation has not increased drastically since the first round - they're raising at a $14M valuation in a priced round. Given their high margins, proven model & clear path to increase ARR, strong founder - I am more than comfortable investing at this valuation.

Offline has the ability to scale into a self-sustaining business, or become an attractive acquisition target for Groupon, Time Out, etc. Either way, I’m in.

That's my take and I want to hear yours!