Novel Effect Storytelling App
DEAL
EPISODE SUMMARY
🕓 Air Date: October 29, 2017
Asking For:
$500,000 for 10%
Investor:
Lori Greiner
Deal:
$500,000 for 15%
PRODUCT SUMMARY
Novel Effect is an app that enhances story time by using voice recognition to sync theme music, sound effects, and character voices with the reader's narration of children's books.
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Background Story
Novel Effect’s founders, Matt and Melissa Hammersley, came up with the idea during a baby shower when a friend captivated everyone with sound effects and character voices while reading a story. The couple sold their house, moved to Seattle, and invested $620,000 to bootstrap the company. The concept was born out of a desire to make story time more engaging for children.
The Product
Novel Effect’s app employs voice recognition technology to synchronize music, sound effects, and character voices with the reader’s narration of children’s books.
Users select a book from the app’s library, comprising about 75 titles, and read aloud while the app enhances the experience. The company is currently pre-revenue and aims to adopt a subscription-based model at $5 per month. They are partnering with Amazon and planning to be in bookstores like Barnes & Noble.
How It Went
The company’s position before Shark Tank
Novel Effect has raised $620,000, with $500,000 coming from a convertible note at a $4 million cap. They recently secured an investment from the Alexa Fund at Amazon. The business is pre-revenue as they focus on building their library of content. Their strategy includes partnerships with major retailers like Amazon and Barnes & Noble, and they plan to expand their library in collaboration with publishing partners.
The Negotiations:
The Sharks showed interest, but Mark Cuban expressed skepticism about the business model, and eventually, he went out. Other Sharks followed, citing concerns about the valuation, subscription model challenges, and customer acquisition.
Lori Greiner made an offer of $500,000 for 20%, expressing uncertainty about the venture’s future. The founders counteroffered with the terms given to prior investors – a $4 million cap. After some back-and-forth, Lori agreed to a $500,000 investment of 15%, finalizing the deal. The negotiation highlighted challenges in the business model, but the founders secured a deal with Lori’s expertise and investment.
