🏆 Top Investment Pick: ESPN in a Box

There are 50 or so startups that launch equity crowdfunding campaigns each week.

MOST of these I glaze over. SOME I’ll look into.

And very few that make me go ‘Wow that is such a great idea’

Uncanny.gg fell into that category.

I’ve since pored over their SEC Filing, researched competing products, read personal reviews, and got on a 30 minute Zoom with their founder

The result of my research & due diligence: my 2nd largest investment ever in a startup

In this newsletter, I’ll provide the Crowdscale Rating for Uncanny which should help explain why I am so bullish on their prospects. But first, let me explain what they do:

Turning Regular Livestreams into ESPN

When you watch a sporting event on TV, what happens after an amazing play? Instant replay. Zoomed in close-ups, and maybe even a graphic overlay with additional stats on the players involved.

• Uncanny wants to bring that production quality to livestreams. But hiring a graphics team and stream manager aren’t really within most streamers’ budgets

• So Uncanny is tapping into computer vision to analyze livestreams in real-time and autonomously add in some of these cool features

Let’s say you’re a Fortnite streamer and you get an awesome squad wipe - Uncanny’s software would automatically detect this and run an instant replay for the viewers. The streamer doesn’t have to do anything, this all works seamlessly in the background and allows them to focus on playing the game.

This is a visual product, so this video might help you understand how their technology comes to life. Now that you know what the product is, let’s dig into the Crowdscale Rating for Uncanny.gg.

Business Model - 19/20

Uncanny is free for streamers. The strategy is to obtain quick adoption and then monetize the audience of their collective streamers

Monetization will primarily come in the form of sponsorships & a cut of donations to streamers

Advertisers can choose to feature some of the overlays that Uncanny powers. For example, if a streamer gets a cool kill, the instant replay would show a company logo with text that says ‘Brought to you by McDonalds’

What I love about their business model is that it employs the ‘Build once, sell twice’ strategy. Once the computer programming is built, they can make revenue again and again without having to build another product

• The only cost that Uncanny carries is the processing power of their computer vision software, which comes out to $0.03 per hour streamed (according to the company)

• The unit economics in this case are incredible - to be profitable they would need to earn just $0.04 in an hour of a streamed content

As a marketing professional, I know that the CPM (cost per thousand impressions) for a sponsorship like this could easily be $10. If their instant replay sponsorships get shown to 1,000 people in an hour, this theoretically generates $10 of revenue on just $0.03 of COGS (cost of goods sold).

Now a chunk of this goes into the pocket of the streamer, but Uncanny could keep just 10% of sponsorship revenue and still walk away with 97% profit margins in this instance

I don’t know about you, but 97% profit margins sound like an incredible business to be a part of. And this doesn’t even account for the cut of donations that Uncanny takes in as well.

Total Addressable Market (TAM) - 16/20

On Twitch alone, the platform boasts over 7M active streamers. There’s also YouTube, Facebook, and a host of other platforms that enable streaming.

Consumption of livestreams has gone up considerably in past years - 23% of all video viewing time is now live content.

Audiences watch a gargantuan 20 billion hours of livestream content per year, and the livestream market is expected to reach $247B by 2027.

The livestreaming eco-system is huge, and it’s led by gaming content. But what’s great about Uncanny is that its tech could theoretically be applied to any content category:

• Cooking: Computer Vision could detect ingredients in-screen and show an overlay of how many calories are going into a dish

• Shopping: Uncanny could add in overlays of a dress’ information - the designer, cost, materials, etc

Uncanny is starting out with gaming as it makes the most sense, but expansion to other content categories is well within reach for further growth

Competition & Risks - (18/20)

Twitch or YouTube could roll out their own version of this, but I believe it would be easier and faster to simply acquire Uncanny

There are other services that improve the production quality of streams - however I found none that analyze what is happening in the livestream in real-time

The fact that this software is free to streamers AND brings them a revenue source leads me to believe that there won’t be much motivation for streamers to switch or choose a different provider

That isn’t to say there aren’t risks, below are a couple:

• Advertising is mostly done on a CPM basis - I could foresee Uncanny having difficulty obtaining viewer counts and therefore being unable to accurately provide a readout on ad delivery/performance

• Costs of analyzing a stream are said to be $0.03/hour now but could significantly increase

Ultimately, I think these are manageable risks that I am comfortable taking on.

Founder Strength - (8/10)

Uncanny.gg is led by David Sturgeon, who is a gamer himself. One thing I look for in founders is adaptability.

Scanning through Uncanny’s old tweets, I realized that the company made a major pivot sometime in 2020.

Uncanny was initially designed to analyze e-sports gameplay to provide recommendations on how players could get better. While this isn’t a terrible idea, I think their pivot was a great call and I’m glad that David was able to course-correct to Uncanny’s current form.

Sturgeon also went through Techstars, a prestigious startup accelerator, and has since forged some impressive relationships.

Uncanny counts the VP of Sales at Twitch and the cofounder of IGN as key advisors to the company - this is more than just fluff, these are key strategic partners to have in the space.

Between the product he’s made, the streamers he’s signed up, and the connections he’s made - we think Sturgeon is adept for the job.

Exit Potential - (8/10)

To me, Uncanny has two routes that it can take to determine its potential exit event. If the company is unable to break out of its gaming niche, I think it would make a lot of sense for a company like Streamlabs or even Twitch to acquire the technology

If they are able to break out of the gaming niche and catch traction with other content categories, I believe a public listing is within reach for Uncanny

Both seem achievable.

Valuation - (7/10)

Uncanny is valued at $13M, which is slightly high for a pre-revenue startup. However, I think they’ve got an excellent product and have shown user traction that makes up for it

On the topic of user traction, Uncanny claims to have over 25,000 connected accounts. I’ve looked at their SEC filing and they’ve spent essentially nothing on marketing in 2020 + 2021, so I’m assuming these were mostly acquired organically - a healthy sign of product-market fit

Uncanny’s investment tiers are also extremely generous, investors that pledge $1,000 get an extra 10% in bonus shares (+ a whole host of other perks)

All in all, I’m not going to sweat the valuation here and I think it’s a fair price to set.

CROWDSCALE RATING - 86/100

This a very favorable rating, and as disclosed earlier I decided to invest in this current round.

If you’d like to learn more about Uncanny.gg, here is a link to their fundraising page.

These company deep-dives are fun to make but take a lot of time to research for you. Consider subscribing (free) as a way to say thank you and stay in the loop for future reports!

Please conduct your own research before deciding to invest. Startup investing is extremely risky, only invest that which you are able to lose.