Happied: A Company Finally Delivering Happiness
Happy Wednesday! 👋
I’m excited to announce that Omnidollar is backing Happied in their oversubscribed $1.6M pre-seed round! With participation from HearstLab, Palo Alto-based True Ventures, Alumni Ventures’ AVG Basecamp and High Street Equity, the investor composition was incredibly impressive.
In addition to my excitement around the opportunity to back the incredible founders powering Happied, this investment marks two key milestones for Omnidollar:
B2B SaaS: With our previous 6 companies being primarily in the Sports Tech realm, this is the first time we have invested outside of that category, backing our first B2B SaaS business.
Public Syndicate: Now with ~65 LPs from all over the globe, this marks our first round of investment sourced through the public syndicate.
From the first time that I watched Happied’s pitch at the Techstars Minneapolis program, I was locked in on backing April and her team. The further I dug into establish whether or not there were appropriate secular growth theses behind the business, the more I realized what a tremendous opportunity this was.
One of my favorite books of all-time is Delivering Happiness by Tony Hsieh (Late Founder of Zappos). I’ve read it multiple times throughout my career, and each time, I take away a new key learning. Ultimately, his story opened my eyes to how amazing company culture can be a key differentiator and unfair advantage. It also set me on my own journey at Upper Hand to deliver the best possible culture to our employees.
This is where I learned how incredibly difficult it is to deliver on that mission, and why I’m backing Happied: A Company Finally Delivering Happiness.
Enjoy!
Myles
Secular Growth Thesis
Engineers rule the world. If you’ve been operating in the tech scene for the past 15 years, this is something that you’ve likely grown familiar with. They began telling us that work from home was possible due to the scope of their work long before most knew it was a possibility. With Covid forcing the entire world to shelter in place, we were all forced into a sink or swim situation where we either figured out to work remote, or our competition ate our lunch.
Most start-ups were well accustomed to the “Slack life”. However, bigger corporations were forced to quickly adopt new technologies to be able to support a distributed workforce. Fast forward 2.5 years, and most companies are now permanently distributed or hybrid workplaces. According to an Owl Labs study, after Covid, 92% of people surveyed expect to work from home at least 1 day per week and 80% expected to work at least 3 days from home per week. Most companies that I know are on a hybrid work schedule where their employees are working 2-3 days from home and a few days in the office.
Regardless of whether a company is fully distributed, hybrid or in-person, culture has become a staple point of conversation in every single interview. From lower paying service industry jobs to high paying “knowledge worker” jobs, employees are making career decisions based on culture. Since I was first introduced to the concept of culture during my days at FactSet, I’ve been more or less obsessed with the topic. My position on culture building is that you must first establish core values, hire individuals whom have a track record of excellence in these core values, and then hold your team accountable against them.
But culture is so much more than that. Culture is feeding the human’s need to belong. It’s ensuring that employees are appreciated, heard and respected. It’s allowing employees to feel like they can bring their whole selves to work. And finally, it’s about building community. Your goal as an employer should be for someone to feel your culture from the first time they see an image of your brand to well beyond their days of contributing to building your company. Many companies, especially throughout the past few years, have frankly failed at a lot of this. This is leading to increased turnover.
Employee retention is an age-old problem. Search the web about the importance of companies being able to retain employees, and you’ll find countless statistics around turnover being extremely expensive. Not only do you lose productivity when the employee is unhappy/looking for another job, but you’re then forced to spend precious time focused on recruiting for their replacement after they leave. According to the Work Institute, they estimate that the cost to replace an employee is about 1/3 of the employee’s salary.
While running Upper Hand, whether we were in-person, fully distributed or hybrid, retention was always a challenge even with such meaningful focus on culture since day one. Companies are struggling more today than ever before to engage their employees, understand where they are mentally, and to build strong promoters within their organization. They are struggling to keep their employees, well…Happy.
There are really four forces at play here:
After the “Great Rebalance”, companies and employees alike are living new normals. This has led to many people working from home a few days a week or are now entirely remote.
For well over a decade now, consumers (employees) have increasingly put more weight into culture as a key element while deciding whether or not they want to join and stay with a team.
We are experiencing one of the tightest labor shortages that our economy has ever seen.
The growing adoption of Artificial Intelligence (AI) is further strengthening the capabilities of this burgeoning technology.
The collision of these themes is fueling an unstoppable secular shift that does not appear to be slowing down any time soon. As companies hopelessly try to better engage with their employees, they’re investing massive capital into solving the problem through both human and technological resources. But the main problem is that they are missing big on a key ingredient of happiness: Effective Engagement.
The Opportunity
Think back to the years you’ve spent in the workforce, and some of the most memorable moments are the fun times that are oftentimes preceded by difficult challenges. Office happy hours, charity events, holiday parties, team building off-sites: These are some of the most memorable moments that you share throughout your tenure. And the reason that they are the most memorable is because we are innately wired to remember moments that are challenging, but rewarding. When we are rewarded with something, our brains see a boost of oxytocin which in turn reduces Amygdala activity. The Amygdala processes fear and threat, so when this is reduced, we are more receptive of social interactions as we feel safe. Put simply, when the Oxytocin is flowing, our brains are wired to better remember social interactions. Deep, I know.
But in order to truly see the opportunity at hand, it’s important to recognize the unstoppable, congenital human forces at play. It’s critical to understanding why I think that the key to delivering employee happiness is nothing more than better engagement.
Delivering Happiness through Engagement
In my experience running operations for Upper Hand, I saw these problems firsthand. As a burgeoning start-up, then scale-up, we lacked the resources to justify hiring someone full time to plan events and focus solely on culture building. As a result, someone from our team (you know who you are…thank you!) oftentimes stepped up to organize and plan events. Many companies find themselves in a similar situation. Lacking the proper resources, they blindly make inefficient investments into the most memorable engagement experiences that serve as key culture building moments. Engagement moments that boast these types of benefits:
Other common arrangements are for Executive Assistants or “Planning Committees” to take on the responsibility. Unless you have awesome party planners like we did at Upper Hand, this oftentimes leads to a disjointed, unorganized experience that is lackluster in results. This leads to the opposite effect that these events are supposed to have on employees.
This may explain why so many employees loathe attending corporate events. Google the search term “employees unhappy with corporate events” and you’ll find countless articles from credible sources instructing them on the proper way to avoid their company’s outings. You’ll see articles talking about how unhappy employees eventually try to avoid these events.
Put simply, corporate events are broken. Given that companies globally spent $1.07 TRILLION on planning and producing events in 2017, there is a massive problem to be solved.
Enter…
April Johnson, CEO of Happied, has a big vision for the company. Ultimately, she wants their SaaS platform to be the “Culture Dashboard” for a company. But to start, she and the team are employing a land & expand strategy to capitalize on years of experience organizing events for companies in an unscalable fashion.
They are using these key learnings, intimate knowledge of the consumer, and key relationships with Fortune 500 companies to build an AI-powered platform to deliver happiness through automating the ideation, booking, contracting and management of corporate events.
The Team
There’s a lot to be loved about this team. For starters, the Happied Team knows how to plan and execute on killer corporate events. But the most impressive to me was how scrappy they are. Having founded a company in the past, I have a tremendous amount of respect for teams that are able to bootstrap to key milestones. However, I am in awe when I hear stories like that of Happied.
Using a non-scalable, services-based business model out of the gates, they grew their revenue to over $1M with zero capital raised. This scrappiness is important for several reasons. When you hold the key to your own destiny as an entrepreneur, this creates a tremendous amount of flexibility. That flexibility leads to opportunities such as being selected to the inaugural Techstars Minneapolis Cohort. While the team lacks product development experience, they’ve surrounded themselves with experienced technical advisors such as Chetan Shenoy to help bridge the gap. They have chosen to build the company around a Product Led Growth (PLG) strategy, which should put them in a great position to build a fantastic product.
The Product
As mentioned earlier, April’s vision for Happied’s product spans well beyond corporate events. She is determined to become the culture dashboard for all businesses. This big vision aside, Happied was founded as a services-based business that provided experienced human capital to help streamline corporate events, saving their customers money. They’ve essentially served as the “easy button” for corporate events:
The product’s value proposition is very simple and caters toward two distinct customers:
Event Organizers: Make events easy.
Event Attendees: Make events more fun.
So how successful have they been at satisfying these customers? They currently boast a 92 NPS for event attendees. To put this in perspective, this NPS score places them near the top of the most popular consumer brands in the world:
Given that Happied plans to employ a PLG strategy, NPS is critical to viral growth. The happier the customer, the more they are going to tell other potential customers about your product. Put simply, with a 92 NPS, they’ll have a lot of people promoting their product for free, which drives down cost of acquisition (CAC).
This is how the Happied Product has progressed over the years:
Founding (Services-Based): Deploy humans that are way better at planning and executing on events than the average employee with a plethora of other responsibilities.
Current (Hybrid MVP): Leveraging off the shelf technologies for an MVP product, they’ve validated what’s needed for product market fit.
Future (SaaS): The AI-powered SaaS product that Happied is developing has the ambitious goal of reducing the average number of people to organize a corporate event from 7 to 1.
This slide from the Happied pre-seed deck highlights how they’re moving toward better scalability:
Again highlighting their innate scrappiness, they developed an MVP with off the shelf technology that customers are now paying for. This has allowed them to obtain critical feedback on what to build in a very effective manner. As product leaders know, the most expensive mistakes are when you build something that customers don’t want. By cost-effectively producing an MVP product with zero engineering resources, they’re in a great position to take their key learnings and apply them to converting their manual, services-based “easy button”, into a powerful AI-powered event management platform that has the potential to be a $1B+ business.
The Unfair Advantage
Having an unfair advantage is many times what sets aside the good from the great. As I constantly assess Omnidollar’s current investment portfolio as well as companies that I passed on, these unfair advantages continue to play big roles in the early success/failure of a company. Here are a few key learnings that I am using to assess deals now, that I didn’t know when I first began investing in early stage companies:
Founders Role & Time Decay: As my time invested in theses companies continues to lengthen, I am learning that the quality of the founding team is critical in ensuring that new unfair advantages are created. If a founder sleeps on an unfair advantage and lets their guard down, this opens the door for competition to creep in and tilt the table. Put simply, there is a time decay on these unfair advantages, and I am seeing that the great management teams are able to better lengthen, or create new, unfair advantages.
Accelerators & Venture Studio Companies: Ironically, a big part of what I have considered an unfair advantage for Omnidollar (plugged in to Techstars) is equally, if not more, advantageous for the companies coming out of these programs. Not only are key learnings accelerated at a critical inception stage, the vertically-centric programs are getting really, really good at adding value through key resources & relationships. Companies coming out of these programs have significant unfair advantages relative to their competition.
Defensibility: This, like many aspects of investing at pre-seed stage, tends to be very subjective analysis. However, sometimes the defensibility of an unfair advantage can be pretty clear, cut and dry. For example, if a company has a key patent issued that blocks out competition for a set period of time, this is clearly defensible. On the contrary, the unfair advantage of coming out of a top tier accelerator or venture studio will weaken at a certain point.
Taking this all into account, Happied has three key unfair advantages out of the gates:
Financial Strength & Acumen: Having an established services business producing cash flow to reinvest back into the development of their AI SaaS product is a meaningful unfair advantage out of the gates. I have not seen many companies be able to raise zero capital and be profitable on $1M with a services-based business.
Profitable Customer Discovery: Because they have been operating their services-based business for well over a year, they have an incredible amount of expensive customer discovery under their belt and out of the way. To intimately learn about their core customer and the problems that they are having, while making a profit doing so, will help them to scale in a much more capital efficient manner.
Techstars: Sometimes companies are accepted into these programs that are at a stage where the program is simply less effective. Happied was at a perfect stage and had gaps in their business (strong tech acumen) where the program could really add tremendous value.
As they continue to mature as a business, it will be critical for them to continue to find and fortify new unfair advantages, but Happied is in a great position to effectively allocate their pre-seed capital to get to true product market fit and beyond.
I can’t underscore enough how big of an advantage it is that Happied was able to pay for customer discovery with zero dilution by building their services-based business to over $1M while remaining profitable. I’ve yet to see a team operate so effectively at such an early stage, which is going to pay dividends to them as they eventually make the transition from start-up to scale-up.
The Business
At pre-seed stage, it’s difficult to really understand the economics of a business. Most of the data either doesn’t exist, or the dataset is not ample enough to draw confident assumptions around the longer term viability of the business. When investing at this stage, I have to be confident that there is a massive market, strong secular tailwinds, and a product-first management team. Happied checks all three of these boxes. While there are many things that I love about how they’re building their business, I have always been very attracted to “SaaS Plus” business models. Happied is combining three revenue streams in what I see as a very attractive business model with tremendous upside.
Economics
So how does Happied make money? Their pricing model is simple:
Yearly Event Planning Subscription: 80+% SaaS Margins
In-House Online Events: Services-based with 50%+ margins
Vendor Commissions: 5-10% per event when a customer books a vendor through Happied
Historical SaaS models tend to have a core software subscription and services-based fees to juice the Lifetime Value (LTV) of the customer. These services many times make the higher margin SaaS business stickier, leading to reduced churn and again, higher LTV. With SaaS Plus models, it accomplishes all of this, but each marginal dollar earned is more profitable. The reason is that there is little to no additional investment needed to be made from a support perspective once the functionality is built. Through vendor commissions, I see enormous upside to the economics of the Happied business model.
Let’s run through an example and back into to some basic unit economics based on Happied & industry data.
Key Assumptions:
SaaS Annual Contract Value (ACV): $5,200 (Subjective)
US Total Addressable Market (TAM): $210B (From Happied Pre-Seed Deck)
Total US Companies: 33M
Churn: 10% annually (Subjective)
I assume that retention will be strong given the high NPS that Happied boasts. Also, we can deduce that the average US company spends around $6,300 ($210B/33M) per year on corporate events. Note: Due to 99% of businesses in the US being SMB, this number is likely diluted.
The annual revenue to Happied on an average customer would break down like this:
SaaS ACV: $5,200
Vendor Commission: $630 (10% of $6,300 annual event spend)
Using the assumptions above, you come to a customer LTV of $58,300. The vendor commission ends up juicing LTV by about 12% for minimal incremental cost. Assuming an LTV/CAC ratio of 3:1 (the sweet spot), this indicates that they can spend up to $19,400 to acquire a customer. This is a lot of wiggle room to scale into a green pasture and represents a tremendous economical equation from which to operate.
Traction:
Most companies at a pre-seed stage tend to have little traction from both a customer acquisition and revenue standpoint. It’s very rare to check both of those boxes, and be profitable. In two years of operating their services-based business, Happied has hit the trifecta. In addition, the quality of their current customer-base is marquee, setting them up with a healthy pipeline as they launch the beta version of their SaaS product:
Summary
I haven’t been this excited about a company in quite some time. April, Sharon and the rest of the Happied Team have amassed tremendous unfair advantages in a widely unchartered area by being scrappy and prudent in the early days. Couple that with unstoppable forces such as feeding the human desire to belong, in turn increasing large corporation’s profitability, and you have the recipe for a multi-billion dollar business. Dollars aside, I have a deep passion for building amazing cultures which is perfectly aligned with the Happied Team. Whether we like to admit it or not, we spend most of our adult lives working. It gives us meaning beyond our family & friends, supplies us an opportunity to contribute to society, and to provide for those that we love.
Everyone deserves to be Happy in the pursuit of Happiness, and I am beyond humbled to be a small part of Happied’s mission to do just that.
A company finally Delivering Happiness.