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Spectalix

We are creating the future of social video marketing

Israel
Market: Education, training, Entertainment, Artificial Intelligence, Virtual and Augmented Reality, Mobile applications
Stage of the project: Operating business

Date of last change: 11.10.2020
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Idea

We developed a revolutionary video marketing app for businesses, which dramatically increases user engagement. It allows mobile phone users to separate people from their background in real-time, using either live video capture or pre-recorded clips in the phone gallery. The user can then place the segmented persons in a banded video scene to seamlessly interact with brand's talent or celeb.

Current Status

We have a working product on Android and are about to finish development of our porudct on iOS this month. Although we are a pre-revenue company, we are already in POC discussion with a number of tier1 companies world-wide, some of which signed LOIs. These are movie studios/broadcasters, brands/creative agencies, sports clubs (NBA) and mobile operators. We are currently finalizing engagement with our local broadcast authority and a prominent soccer club. The metrics derived from these pilots will serve us well when penetrating foreign markets.
We expect to start commercialization this month (October) and expect to be cashflow positive by Q3 2021. Due to our B2B licensing business model and the fact that we have a very hot product, we shall do well with a relatively small marketing budget and low overhead. Covid19 is actually in favor our business, since brands and especially sports teams try to increase their exposure to digital media, especially mobile and video. We give them an additional revenue stream and access to their user data.

Market

Amid the COVID-19 crisis, the global market for Digital Advertising and Marketing estimated at US$322.5 Billion in the year 2020, is projected to reach a revised size of US$640.2 Billion by 2027, growing at a CAGR of 10.3% over the analysis period 2020-2027. Our video marketing solution is perfect for creative teams of broadcasters and sports teams as well as creative agencies who implement in the consumer apps of their customers (we are currently in discussion with one of the large 4 largest agencies to integrate our technology into an app they it is creating for one of the most prominent consumer brands in the world).

Our video tool will appeal to a large age range, between 12-50 or even higher.
Spectalix’ customers come from various markets verticals and value proposition:
• Sports Clubs: Increase fan engagement by generating scenes with the team’s stars and invite fans to interact with them (playing with Messi, sitting with Lebron on the bench). Clubs can also sell these clips to sponsors and create revenues.
• Studios/Broadcasters: Generate promo clips of movies and TV shows, so that viewers could place themselves in them.
• Brands/Creative Agencies: Generate strong brand engagement by creating branded video commercials and asking users to take part in them, or to create cool home-grown ads.
• Mobile Operators and Device Manufacturers: Can use Spectalix white label app as a value-added-app which enriches their product or services and increase their subscriber’s/consumer’s engagement.
• Games: New games in which the player’s avatars will be replaced by live videos of the players themselves.

Problem or Opportunity

With the popularity of social media platforms like Instagram, TikTok and Facebook, brands have it difficult to engage their target audience on their consumer apps.
Company around the world are pouring billions of dollars into mobile marketing, whereas video is the most popular marketing tool.
We have talked many dozens of high-profile companies who have all expressed their difficulties to keep their audience on their apps. Instead of placing ads on the social media platforms, they'd much prefer to get their targeted audience back onto their B2C apps and to get access to their priceless data.
The businesses have one thing the social media doesn't have: brand & talent! They should more effectively monetize their assets. And while social media platform content is user generated, the brands can offer professional, high quality content.

Solution (product or service)

We at Spectalix offer business a mobile AI technology that can be easily integrated into their apps. It allows mobile phone users to separate people from their background, using either live video capture or pre-recorded clips in the phone gallery. The user can then place the segmented persons in a branded video scene from a large and diverse collection of background clips. This unique video-on-video compositing process is done in real-time. It allows companies to drive their app's user engagement and attract many more users to their apps. The videos produces by the users will be shared on their social media accounts and this will in turn expose the brand to large audience and case a migration to their app.

Competitors

Currently we are not aware of another company that developed a video on video life segmentation platform for the mobile phone. TikTok came out with an instant segmentation feature that cuts out a person from his background and places him on an image. We developed a state of the art deep learning engine that segment people from a distance of a few meters, shot (in landscape mode) with the rear camera. In additional to the core technology, we developed a unique editor that allows the user to resize, rotate and reposition the cut-out persons with his fingertips.
It is possible that in the future social media platforms will develop a similar technology, but they would all want to brands to place their ads on these platforms. Spectalix work for the brands and offers them a technology that will run on their own apps.

Advantages or differentiators

While social media platforms and device manufacturers work on human segmentation (which in most cases doesn't mean cutting out, but rather blurring the background), we offer a true greenscreen feel.
Additional technologies and features include:
-Live video-on-video
segmentation
-Full body
segmentation
-Live editor:
Resize/Reposition
-Professional quality
-Content vs UGC
-B2B model

The last point is significant, as mentioned before: We cater for businesses.

Finance

Spectalix will charge a one-time setup fee for the app/SDK and a fee for every download of a branded background clip. Revenue sharing model will be applied to customers who partner with sponsors/advertisers to create content. We estimate to get on average 3 cent for each downloaded background video.
Case in Point: The large soccer teams in Europe have tens of millions of followers. Real Madrid and FC Barcelona each have 100m followers on their Facebook pages. You can imagine you can expect a lot of app users to place themselves into a scene with a Ronaldo or a Messi. So companies that run an app with our technology have the options to get their revenues from ads (pre-rolls or native) or from the user for offering premium content.
There are an estimated 2000 large sports teams in the world. Each one of them is a potential customer worth $250k-$2m annually.

Business model

We are a B2B company that licenses its disruptive video technology to its customers. We leverage our sales by partnering with creative agencies who cater for many brands. We meet our clients on trade fairs and LinkedIn. Thru added value investors in our company we can get to marketing executives in the movie business in Hollywood and CMOs of the large sports teams of the four big leagues in the US.

Money will be spent on

Rough breakup of expenses:
75% - R&D: we plan on developing more exciting features, for which we expect to receive a government grant of up to $800k that needs to be matched. We plan to hire another 3 software developers in addition to the current 5 developers.
20% - Marketing & Sales: Will need to add head of media, account managers
5% - Legal

Current burn rate is around $60k.

Offer for investor

We currently have an open SAFE with a discount of 25% to the next round. A high-profile executive in the sports business has invested $275k in this SAFE. We wish to extend it to $750,000.
We are very positive that we shall receive a follow-up government grant. In which case every dollar of the investor will be matched by a government grant.

We plan on raising some $2m as part of Round A early next year.

Team or Management

Risks

There might arise a competitor.
We do have a very high barrier of entry, as we assembled the brightest minds in deep learning algorithm have developed proprietary technologies; for one of them we wrote a patent.

We depend on creative agencies and content companies to create a lot of background video to be uploaded onto their resp. consumer apps.
Hence, we are also dependent on the marketing efforts by our clients and partners. Then again, we received throughout our listening to businesses' needs and expectations very positive feedback. The two local entities we are finalizing POCs with were willing to start product of their content before signing any deal and receiving our SDK.

There is a chance that the large social media players like Google, Facebook, Tik Tok and Snapchat will develop a similar video technology. They are though not B2B companies, but rather try to draw companies and user to their portals. A company would much prefer to bolster its own userbase on its consumer app and gain access to their user data, than doing similar activities on third party platforms.

Incubation/Acceleration programs accomplishment

NO

Won the competition and other awards

'Top Innovator' at Venture Summit in the West Coast in May
We were told by the Israel Innovation Authority that we are the first and only startup to receive a sizeable grant in the 'startup stage' (Nov 2018) even though we had not yet developed our mobile app and had no traction either. We were vetted by a team of ex-Intel team leaders in a grueling technical due diligence process.

Invention/Patent

After an in-depth search done by Clarinate Analytics which didn't show any similar patent, we wrote a provisional patent for an invention relating to the intersection of deep learning algorithms and image processing. We now submitted a PCT. Not public.

Photos

Photo 1 - We are creating the future of social video marketing

Product Video

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Idea
Current Status
Market
Problem or Opportunity
Solution (product or service)
Competitors
Advantages or differentiators
Finance
Invested in previous rounds, $
Business model
Money will be spent on
Offer for investor
Team or Management
Mentors & Advisors
Lead investor
Risks
Incubation/Acceleration programs accomplishment
Won the competition and other awards
Invention/Patent
Photos
Product Video