Elevator Pitch: Guitar Affair
The Pitch: "High-end guitar enthusiasts are like high-end car enthusiasts. They adore the instrument for its craftsmanship as much as how well it plays. We sell and rent high-end guitars online to people who want a chance to play their dream instrument. Unlike most stores, we set up all our guitars to professional specifications. Customers go to our website to reserve the guitar of their choice. We run credit and background checks on first-time renters and charge a $50 application fee. We ship the guitar in a plastic protective case with a return label, so they can easily send it back. We also have a demo program. If customers rent a demo guitar and want to keep it, they can purchase it. Most customers are amateur musicians, but we're getting more inquiries from bands, which often have difficulty transporting instruments on flights."
OWNER: Jim Basara
LOCATION: Dulles, Virginia
EMPLOYEES: One full time; seven part time
FOUNDED: March 2007; launched service January 2009
2008 REVENUE: None
2009 PROJECTED REVENUE: $350,000
REVENUE BREAKDOWN: 60 percent instrument sales; 30 percent instrument rentals; 10 percent accessory sales
CONVERSION RATE OF RENTERS TO BUYERS: 10 percent
PROJECTED GROSS PROFIT MARGIN: 30 percent
AVERAGE RENTAL PRICE: $125 a week or $35 a day (for a $2,500 guitar)
The Investors Weigh In
Shoot for the Stars
Guitar Affair is not very scalable, but I like that Basara has a clear focus. If this sales channel works, he will have a valuable list of customers, and he may be able to gradually expand to other instruments or products. However, there are low barriers to entry for instrument retailers. Basara needs something to give his brand personality. He should get famous guitarists to use the service and give testimonials. And he should seek investment from people who are really into music. For example, Dave Matthews Band, which has made a lot of money off of music-related ventures.
Managing partner, New Vantage Group
Build a Distribution Network
Guitar Affair serves a slim portion of the music market. There's no indication of how strong demand will be, and the market doesn't seem large enough to provide good returns for investors. If Guitar Affair can reduce the hassle of transporting instruments for musicians, it could make for a worthwhile service. But it's not clear how the company plans to get guitars to different locations without eating up a lot of dollars. Perhaps it can broker deals through the Internet with local guitar shops.
Co-founder and managing partner, Virginia Active Angel Network
Position to Sell
This company is Web based, which opens up the possibility of a national market. Although there are large companies in guitar retail, such as Guitar Center, they focus on sales and sell lower-end guitars. Guitar Affair could serve a good niche in the industry and eventually become an acquisition for a music-store chain. It may be a good deal for an angel investor. The online marketing strategy, which isn't detailed here, will be an important factor. Will Guitar Affair rely on buying search-engine terms, or will it form alliances with other music sites?
David S. Rose
Chairman, New York Angels
New York City