Novel Effect
Novel Effect is a company from Seattle, WA, that has created an app that provides reactions to stories read aloud. It adds a multimedia experience to stories by providing sound effects and music to go along with the words.
The founders, a graphic designer and a patent attorney, were inspired to create Novel Effect by the way a friend would read children's stories. They designed their app to recognize which book is being read and to add dynamic effects and music to the story-time experience at certain key moments. They currently have 75 books in their available library.
The entrepreneurs were originally from elsewhere but moved to Seattle in order to be close to Amazon.
In terms of fundraising, the company has raised $620,000 thus far; $500,000 from a convertible note valued at $4,000,000 and some amount of the difference from Amazon's "Alexa Fund". As part of the Alexa Fund, part of the obligation was to integrate it with Alex for voice control of the experience. They are currently "pre-revenue" though their business model does include a $5 per month subscription fee that they will charge customers.
They claim that because they only provide sound effects, there are no licensing fees or costs associated with the books in their library and that the app is mutually beneficial to both themselves and publishers.
The long term goal is to license the platform to entice other content creators to add additional content through it.
This deal aired on Episode 9.06.
Making A Deal
Novel Effect made a deal with Lori for $500,000 in return for 15% equity. While this represents only 5% more equity than the company originally offered, because of the amount of money, it had an outsized effect on the company's overall value. This resulted in a bite of $1,666,666 off of the original value of $5,000,000.