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ElectroSpit

Mobile talkbox instrument for musicians of any skill level

$35,185

Raised from 100 investors

Min: $25,000

Max: $107,000

Security Offered

Convertible Note

Minimum Investment: $100

  • ESX-1 talkbox has been or will be used in songs by Grammy award-winning artists like Bruno Marsi, David Guettaii, Dua Lipaiii, and Skrillexiv

  • Co-Founder Bosco Kante, is a Grammy Award-winning producer

  • Began shipments of ESX-1 in July 2019

  • Raised $113,000 from Kickstarter campaign in June 2018, reaching funding goal in 48 hours

Executive Snapshot

ElectroSpit seeks to make musical expression easier for artists of all skill levels. The company’s first product, the ESX-1 talkbox enables users to play the talkbox without the cumbersome tubes and equipment necessary for traditional talkboxes. The company will use the funding from the raise primarily to continue manufacturing of the ESX-1 in order to fulfill pre-orders and new orders. The company began shipment in July 2019.

  • The ESX-1 talkbox, featured on songs from award-winning artists such as Bruno Marsv, David Guettavi, and Skrillexvii, will also be featured on an upcoming Dua Lipaviii release.


  • ElectroSpit received 433 pre-orders as part of its June 2018 Kickstarter campaign.


Terms

Investment Terms

Security Type: Crowd Notes

Round Size: Min: $25,000 Max: $107,000

Valuation Cap: $5,000,000

Discount: 20%


Conversion Provisions: In connection with equity financing of at least $1,000,000, the Company has the option to convert the Crowd Note into non-voting preferred shares (Conversion Shares) at a price based on the lower of (A) a 20% discount to the price per share paid for Preferred Shares by investors in the Qualified Equity Financing or (B) the price per share based on a $5,000,000 valuation cap. Please refer to the Crowd Note for a complete description of the terms of the Crowd Note, including the conversion provisions.

Transaction Type: Primary

Perks

$500: Investors will receive one (1) ElectroSpit ESX-1 and one (1) ElectroSpit App download

$1,500: Investors will receive one (1) ElectroSpit ESX-1, one (1) ElectroSpit App download, and one (1) 30-minute video consultation with founder Bosko Kante

$5,000: Investors will receive one (1) ElectroSpit ESX-1 and one (1) ElectroSpit App download, as well as a professionally framed high resolution print of the ESX-1 Industrial Design artwork from the campaign and a one-on-one studio session with founder Bosko Kante at Zoo Labs in Oakland

$6,000: Investors will receive one (1) ElectroSpit ESX-1 customized with their name or logo by acclaimed visual artist Pete Miser, one (1) ElectroSpit App download, one (1) master class provided by talkboxers/producers Byron Chambers “Mr. Talkbox”, Fingaz, creator of the TalkStar talkbox and ElectroSpit founder Bosko, at Zoo Labs in Oakland, California.

$10,000: Investors will have the opportunity to hang with the super-producer Just Blaze and the ElectroSpit team in a fun VIP environment. Investors will receive one (1) ElectroSpit ESX-1 customized with their name or logo by acclaimed visual artist Pete Miser, one (1) ElectroSpit App download

Overview

Opportunity

Playing musical instruments has been scientifically proven to affect the human brain in a myriad of positive ways. Studies have found that playing music improves the long-term memory of players, makes them more mentally alert, and reduces stress and depression.ix However, barriers exist to unlocking the positive effects provided by music creation. In a survey conducted by JaJak, of those who have not learned an instrument, 46% cited that they were too busy to learn, 29% didn’t think they were musically talented enough, and 28% couldn’t afford to buy or rent an instrument.x In addition, some instruments may require multiple pieces of equipment that can be confusing or expensive for novices wanting to start the learning process.

The talkbox instrument is no exception to the above barriers. Popularized by musicians such as Peter Frampton, the talkbox allows artists to shape and change the frequency of sound using their mouths, with the help of a tube and amplifier. However, the traditional talkbox can take time to master and requires a synthesizer and speaker in addition to an amplifier and tube, making it potentially unappealing for those who view time commitment and affordability as hindrances to expressing themselves musically.

ElectroSpit, a California-based music technology company, makes musical expression easier for musicians of all skill levels, starting with their first product, the ESX-1 mobile talkbox. This reinvention of the traditional talkbox requires only the device and an instrument or mobile phone to operate, enabling increased portability. Beyond the ESX-1, the company plans to create a suite of musical hardware and software to facilitate collaborative, expressive music creation augmented by technology.

Press

Bosko's Story

Bosko conceived the idea of a mobile, portable talkbox in 2004, when he was asked to perform with Kanye West at the American Music Awards. It was Bosko’s first time performing in the national spotlight, but he was forced to lip sync because the talkbox he was “playing” was too cumbersome to actually play. In light of the performance, Bosko knew he needed to improve on traditional talkbox options and bring the talkbox to the front of the stage. After coming to this realization, Bosko, who is also Mechanical Engineer, began designing a talkbox that would help musicians - ranging from novice to world-class skills – create impactful art. He has designed and assembled numerous prototypes of the talkbox and has leveraged his influential history in the music and entertainment industry and engineering expertise to create the ElectroSpit ESX-1.

Product

ElectroSpit ESX-1

ElectroSpit’s first product is the ESX-1, a mobile talkbox. The device works by first connecting a mobile phone using the ESX-1 companion app, or any guitar, synthesizer, or keyboard through an audio input. The ESX-1, using its built-in amplifier and magnetic vocal projectors, sends sound in the pitch of the user’s choosing through the neck of the user, allowing them to control the shape and frequency of the sound with their mouth. The lightweight, durable device does not require the cumbersome tube or additional amplifier of legacy talkboxes.

Additional features of the ESX-1 include:

  • Monophonic or Polyphonic sound
  • Compatibility with any digital audio workstation (DAW)
  • Built-in battery with USB charging
  • Connectivity with a standard audio cable via its 1/8” audio in port
  •  8” x 2” x 2” dimensions

Use Cases

"West Side Jam" Part 1

Co-Founder and CEO Bosko uses the ESX-1 to create vocals with a keyboard and synthesizer

"West Side Jam" Part 2

Bosko teams up with DJ Teeko to perform a live remix using the vocals created using the ESX-1, while Bosko adds new freestyled lyrics using the ESX-1

Ron Avant Polyphonic Mode Demo

Ron Avant, Grammy-nominated keyboardist for Anderson .Paak and the Free Nationalsxi demos the ESX-1

Diamond Ortiz Guitar Demo

Musician Diamond Ortiz demos the ESX-1 hooked up to an electric guitar

ElectroSpit Talkbox App

ElectroSpit has also created a mobile companion app for the ESX-1. The ElectroSpit talkbox app allows users to play the ESX-1 without the need for an instrument, by simply plugging the ESX-1 into an iPhone to begin creating music. Though created for the ESX-1, the app works with traditional talkboxes as well. The user interface of the app is designed in a keyboard layout, featuring 30 keys for the user to utilize. Users can also add vibrato, modulation, or pitch bends by dragging their fingers side to side after selecting a key, or with the on screen pitchbend and modulation wheels. The app also features a “Jam Stack” that allows users with no musical training to simply slide their finger across nine popular musical scales to improvise in any key. Currently, the app is available for iOS and Android and hopes that providing a mobile application of its service that it can encourage aspiring musicians without instruments to use the ESX-1.

Use of Proceeds

Should the company raise the minimum of $25,000, it plans to use 60% of the proceeds towards manufacturing, 20% for campaign marketing reimbursements, and 20% for general marketing capital. Should it reach the maximum goal of $107,000, the company plans to allocate 71.96% for manufacturing, and the remaining proceeds equally between general working capital, general marketing, and campaign marketing reimbursements.

Manufacturing

Proceeds allocated to manufacturing will go towards the continued production of the ESX-1 to fulfill pre-orders generated from the company’s Kickstarter campaign, as well as pre-orders made through the company’s website. The company began shipping the ESX-1 in July 2019.

General Marketing & Campaign Marketing

Proceeds allocated to general marketing will be used to market the ESX-1. ElectroSpit plans to do this through connections with music influencers. The company has already allowed music influencers to use the ESX-1 to create music, capturing videos of the influencers using the product. ElectroSpit hopes to utilize these influencers to reach music fans who would be inclined to purchase the ESX-1 and future ElectroSpit products. For the portion of proceeds allocated towards campaign marketing, the company plans to reimburse itself for any marketing expenses incurred in relation to the crowdfunding campaign.

General Working Capital

The company plans to use the general working capital allotment to cover operating expenses such as regular office expenses.

Product Roadmap

Over the next two years, the company has set three major product roadmap goals:

  • Release the ElectroJam App (2020)
  • Release the ElectroDJ-1 (2021)

ElectroJam App

In 2020, the company hopes to develop the ElectroJam app, which will allow users to find, create, and share electronic instrument jam sessions. The company also hopes to create and partner with “Premium Influencers,” consisting of popular musicians or creators who will host meetups and events to allow fans to interact and collaborate with their favorite artists. The app will also include the ElectroJam game, which enables users to compete to create 30-second songs using both free and premium sounds. Premium sounds will be available through a monthly subscription service.

ElectroDJ-1

The ElectroDJ-1 is a smart electronic instrument that pairs with a user’s mobile phone to allow them to access an interactive DJ experience. The company hopes that the ElectroDJ-1 will make DJ-ing mobile and easy for both pros and inexperienced DJs, much like the ESX-1 does for talkboxes.

Business Model

The ESX-1 talkbox retails for $499 and is currently available for pre-order via the company’s website. The ElectroSpit mobile app comes free with the pre-order but is also available for purchase separately via the App Store for $24.99.

In the future, ElectroSpit plans to offer its ElectroJam game via a software as a service (SaaS) model, in which users pay a monthly subscription for access to the feature. The company anticipates charging $8.99 per month for this service.

User Traction

In June 2018, ElectroSpit launched a Kickstarter campaign. Within 48 hours of launch, the campaign was funded, closing in July 2018 after raising $112,999 (282% of its goal) and securing 433 pre-orders.

ElectroSpit’s ESX-1 has been or will be used in the following songs:

  • “Drum Machine” – Big Grams ft. Skrillex
  • “Versace on the Floor” – Bruno Mars & David Guetta
  • An upcoming release from Dua Lipa

Big Grams ft. Skrillex

"Drum Machine"

 

Bruno Mars & David Guetta

"Versace on the Floor"

 

Dua Lipa

 

The ESX-1 has also been demoed by several musicians and music producers, including:

  • David Guetta (Grammy, Billboard Music, and American Music Award winning DJ/producerxii)
  • Just Blaze (Grammy-nominated hip-hop producerxiii)
  • Teddy Riley (music producer for Michael Jackson, Mary J. Blige, and Keith Sweatxiv)
  • Chromeo (Grammy-nominated electro-funk duoxv)


Historical Financials

Since inception in November 2017, ElectroSpit has generated over $3,000 from app and ESX-1 prototype sales and has just begun recognizing deferred revenue based on the starting shipment of the ESX-1 in July 2019. As of June 2019, the company has roughly $130,000 in deferred revenue from Kickstarter and website pre-orders of the ESX-1.

ElectroSpit has incurred expenses totaling $217,356 since December 2017. In the first half of 2019, the company incurred expenses of $47,880, a decrease of 49% from 2018 expenses of $93,648 over the same period. In 2018, the company’s expenses totaled $168,667. In 2018 and 2019, the company experienced the following spikes in expenses:

  • January 2018 – The company incurred expenses from multiple trips to film the video used for its Kickstarter campaign, including meet-ups with the artists featured in the video.
  • August 2018 – The company inadvertently double-paid an invoice to its Kickstarter campaign marketing firm. ElectroSpit was reimbursed the amount in October 2018, which decreased total expenses to zero.

ElectroSpit’s expenses can be broken down into the following categories:

2018 (Full Year)

  • Advertising & Marketing – 23%
  • Professional Fees – 19%
  • Hardware/R&D – 31%
  • Travel – 17%
  • Other – 11%

2019 (Jan. through Jun.)

  • Advertising & Marketing – 26%
  • Professional Fees – 6%
  • Hardware/R&D – 24%
  • Travel – 12%
  • Other – 32%

Since inception, the company has incurred a net loss of $211,495. In the first half of 2019, the company has incurred a net loss of $45,878, an improvement from its 2018 net loss of $93,648 over the same period. As of June 2019, the company has roughly $26,000 on hand, with an average monthly burn rate in 2019 of $8,953.

Industry

The global musical instruments market is projected to reach a value of $4.3 billion in 2019, growing at a compounded annual growth rate (CAGR) of 3.2% to reach a projected value of $4.9 billion by 2023. As a subsector, parts and accessories for musical instruments are the largest contributors to the industry’s market value, accounting for 57% of the projected value in 2019. The second largest subsector, electronic and electromechanical musical instruments, is expected to account for $567 million, or 13% of projected value in 2019, growing to $615 million by 2023.xvi

In a survey conducted by JaJak, roughly 4 in 5 people who wanted to play an instrument have learned to play one before. The most popular types of instruments people wanted to learn are strings, percussion, and choral/vocal. 55% of respondents cited wanting to develop discipline as the reason they wanted to play, while 29% and 28% wanted to learn a specific instrument or wanted a new hobby, respectively. As for obstacles preventing one from playing an instrument, 46% cited being too busy, 37% didn’t know where to find a teacher, 35% couldn’t afford lessons, 29% didn’t think they were musically talented, and 28% couldn’t afford to rent or purchase an instrument.xvii

In 2018, a record $1.09 billion of venture capital was invested in audio technology companies. Across 124 deals, 2018 investments grew by 36% over 2017 investment of $798 million. From 2008 to 2014, deal count in the sector increased steadily, reaching a peak of 249 deals in 2014. Since 2014, deals have declined year over year in three of the last four years. Since 2008, audio technology companies have received $5.85 billion in venture capital investment across 1,494 deals.xviii

ElectroSpit’s first product, the ESX-1, seeks to disrupt the traditional talkbox instrument. The talkbox dates back to at least 1939, when the big band musician Alvino Rey used an early version of the instrument. In 1964, guitarist Pete Drake used the talkbox to create his Gold record hit “Forever.” It was Drake who introduced Peter Frampton to the instrument, which Frampton eventually used on hits such as “Show Me the Way” and “Do You Feel Like I Do” from his breakout solo album “Frampton Comes Alive,” further popularizing the talkbox. Artists such as Aerosmith, Big Boi, Guns n’ Roses, Bon Jovi, and Metallica have utilized the talkbox in hit songs.xix

Competitors

Rocktron

Founded in 1983, Rocktron manufactures innovative products for guitar players. As part of its collection of product offerings, the company offers the Banshee and Banshee 2 talkboxes. The Banshee Talk Box contains its own internal preamp, amplifier, and horn driver, as well as the tube used to transfer the talk box sound to the mouth of the user. The Banshee 2 comes equipped with more features, including the ability to let the guitar signal feed the amplifier at the same time that the talkbox effect is turned on; this allows the normal guitar signal to feed through an amp while the talkbox effect runs through a mic (and sound system). On Amazon, the Banshee can be purchased for $170,xx while the Banshee 2 retails for $259.xxi

Dunlop Manufacturing

Founded in 1965, Dunlop produces various musical accessories, specializing in audio effects units. Through its brand MXR, the company offers a talkbox containing an amplifier and speaker driver for convenience. The talkbox features volume, tone, and gain controls for added customization. The company also offers the Heil Talk Box, which was popularized by musicians and groups such as Peter Frampton, Slash, Aerosmith, and Alice in Chains. Both talkboxes are available to consumers via Dunlop’s website, with the MXR Talk Box retailing for $169.99xxii and the Heil Talk Box retailing for $179.99.xxiii

Smule

Founded in 2008, Smule is a social media app for iOS, Android, and Apple TV that allows users to discover and create music. Through the app, users can sing and make music solo, a capella, or with a group. Users can also sing live to friends or fans. Through the app, users can add audio effects or video filters while singing songs. In October 2018, Smule raised $20 million from Time Bridge to expand its operations in India. The company also raised a $54 million round in May 2017.xxiv

Team

Bosko (Bosco Kante)

Co-Founder and CEO

Bosko is a Grammy winning producer and talk box artist. His vast network of music influencers and intimate knowledge of the tech and customer value propositions provide ElectroSpit with a unique advantage in crafting innovative music creation hardware/software. Bosco holds his bachelor’s degree in Mechanical Engineering from the University of Southern California (USC).

Maya Kante

Co-Founder and CMO

Maya is a business strategist and Certified Spiritual Life Coach who has led online, offline, and live-event marketing campaigns for lifestyle brands, top-selling beer and wine makers, and musical artists. She built ElectroSpit’s online presence, developed branding and collateral, and drove their hugely successful Kickstarter campaign, achieving their goal in the first 48 hours. Maya holds her bachelor’s degree in Sociology from the University of California, Berkeley.

Past Financing

ElectroSpit has engaged in the following financing rounds:

  • ZooLabs Residency Startup Agreement: In exchange for admittance into ZooLabs’ residency program in 2014, ElectroSpit agreed to allocate 2% of fully-diluted equity upon completion of Series A funding, or 2.5% fully-diluted equity upon acquisition, initial public offering (IPO), or another form of exit or change in control
  • Simple Harmonious Agreement for Revenue and Equity (SHARE): Between February and March 2018, the company received $65,000 in SHAREs from various investors. Each agreement had a valuation cap of $2 million, with varying revenue percentages between 0.3% and 0.75%. Each agreement had a maximum revenue multiple of 3.


Discussion

Risks

The information provided herein is not intended to be, nor should it be construed or used as, investment, tax or legal advice, a recommendation to purchase, or an offer to sell securities of the company. You should rely on the offering statement and documents attached as exhibits to the offering statement when making any investment decision. An investment in the company is not suitable for all investors.

Investment Risk

An investment in the company is speculative, and as such is not suitable for anyone without a high tolerance for risk and a low need for liquidity. You should invest only if you are able to bear the risk of losing your entire investment. There can be no assurance that that investors will receive any return of capital or profit. Investors should have the financial ability and willingness to accept the risks (including, among other things, the risk of loss of their entire investment and the risks of lack of liquidity) that are characteristic of private placement investments. There will be no public market for the securities being offered, applicable securities laws will restrict any transfer of the securities, and the securities will not be transferable without the company’s consent.

Company Risk

The company’s industry is highly competitive, and the company may not be able to compete effectively against the other businesses in its industry. The company is subject to a number of significant risks that could result in a reduction in its value and the value of the company securities, potentially including, but not limited to:

  • Rapidly changing consumer preferences and market trends,
  • Inability to expand and maintain market acceptance for the company’s services and products,
  • Inability to gain access to international markets and comply with all applicable local laws and regulations,
  • Inability to achieve management’s projections for growth, to maintain or increase historical rates of growth, to achieve growth based on past or current trends, or to effectively manage rapid growth,
  • Inability to develop, maintain and expand successful marketing relationships, affiliations, joint ventures and partnerships that may be needed to continue and accelerate the company’s growth and market penetration,
  • Inability to keep pace with rapid industry, technological and market changes that could affect the company’s services, products and business,
  • Technological problems, including potentially widespread outages and disruptions in Internet and mobile commerce,
  • Potential costs and business disruption that may result if the company’s customers complain or assert claims regarding the company’s technology,
  • Failure to adequately address data security and privacy concerns in compliance with U.S. and international laws, rules and policies,
  • Performance issues arising from infrastructure changes, human or software errors, website or third-party hosting disruptions, network disruptions or capacity constraints due to a number of potential causes including technical failures, cyber-attacks, security vulnerabilities, natural disasters or fraud,
  • Inability to adequately secure and protect intellectual property rights,
  • Potential claims and litigation against the company for infringement of intellectual property rights and other alleged violations of law,
  • Difficulties in complying with applicable laws and regulations, and potential costs and business disruption if the company becomes subject to claims and litigation for legal non-compliance,
  • Changes in laws and regulations materially affecting the company’s business,
  • Liability risks and labor costs and requirements that may jeopardize the company’s business,
  • Dependence on and inability to hire or retain key members of management and a qualified workforce,
  • Ongoing need for substantial additional capital to support operations, to finance expansion and/or to maintain competitive position,
  • Issuance of additional company equity securities at prices dilutive to existing equity holders,
  • Potential significant and unexpected declines in the value of company equity securities, including prior to, during, and after an initial public offering, and
  • Inability of the company to complete an initial public offering of its securities, merger, buyout or other liquidity event.

Endnotes

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