Subscription management platform RevenueCat has made its first acquisition following a $12 million funding round, and it's an unusual one: Rather than buying a company to add more tools to its platform, it's acquiring Dipsea, an app that offers “inspirational” audiobook subscriptions.
No, this isn't a huge shift for the popular platform used by over 30,000 app developers, including Notion, VSCO, Ladder, Photoroom, and Buffer.
Instead, the novel idea here is to bring the subscription-based app in-house to act as a testing ground for new features and functionality for RevenueCat, the company said. Additionally, this will be part of RevenueCat's “build in public” philosophy.
Dipsea's app works with writers and narrators (and ElevenLabs' AI voice technology) to create a variety of romantic fictional stories that focus on the female perspective. Currently, Dipsea is doing pretty robust business with 93,847 paid subscribers and nearly $6 million in ARR. For example, last month the app generated $505,920 in revenue.
While the app has been going well, the venture-backed startup has struggled to find an exit in today's highly regulated environment, so this was a rare opportunity for the company, a longtime RevenueCat customer.
“I know Faye [Keegan, CEO and co-founder of Dipsea] “We've been together since the early days of RevenueCat,” says co-founder and CEO Jacob Eiting, “and as we've gotten to know each other well over the years, we felt it would be hard to find someone who could understand RevenueCat's customers' problems as deeply as someone who's experienced them firsthand.”
Image credit: RevenueCat
Eiting says that when the opportunity to acquire Dipsea came up, he saw it as a chance to actually run a live app using RevenueCat's tools so he could get up to speed on the real challenges of subscription apps in the App Store today.
“The App Store has completely changed since we started,” he says. “The whole strategy has completely changed.”
Today, app developers face the typical problems of user acquisition, conversion, and retention, but the subscription economy itself has grown at least tenfold since RevenueCat began operations, Eiting said. Competition is also growing: every popular app category has at least seven competitors. In addition, Apple's user privacy measure ATT (App Tracking Transparency) has also impacted developers' user acquisition efforts.
“It's definitely getting harder and more sophisticated,” Eitting says, “and RevenueCat is part of that, democratizing it. It's taking the techniques that different apps have come up with on their own and making them available to everyone right out of the box.”
Image credit: RevenueCat
Still, running a subscription-based audiobook app would be new territory for RevenueCat.
To help with this, the acquisition will bring on board Keegan and her small team of five to continue updating the app and integrating any new tools RevenueCat wants to test.
Having its own app allows RevenueCat to try out new technology before convincing paying customers that it's worth the risk. In addition to being a testing tool, the app also serves as a demo for potential customers who want to try out RevenueCat's dashboard before signing up.
“Joining forces opens up new possibilities for Dipsea,” Keegan said in a statement shared with TechCrunch. “We'll leverage our deep subscription growth experience in-house and partner with them to continue building great features that enable developers to drive more revenue while providing Dipsea users with their favorite content. I'm excited to join the team.”
Image credit: RevenueCat
Dipsea is backed by investors including Bedrock, Thrive Capital, Powerhouse Capital, Lemonade Capital, Riverside Ventures, Amboy Street Ventures, Jackalope Ventures, Bossanova Investimentos and Niche Capital, as well as seed-stage VC firms and angel investors. According to Pitchbook, it has raised $13.63 million to date. With its acquisition of Dipsea, RevenueCat has bought out all investors on the app's cap table, while allowing the app to continue operating and fulfilling its mission.
Terms of the deal were not disclosed, but we understand that this is an all-cash acquisition and has been in the works since March of this year. From a financial perspective, this is likely not a huge win for Dipsea's investors, as it's unlikely that RevenueCat spent all of its Series C funding on the app.
Going forward, RevenueCat hopes to prove its own success by expanding Dipsea's subscription business and use that as an example to its existing customers.
“Once the demo environment is up and running, people can log in and see what's going on, and we can give them subscriber and revenue numbers,” says Rik Haandrikman, vice president of marketing at RevenuCat.
“So if I check back a year later and we have 50,000 subscribers, that means we screwed up,” he says, laughing. “Something went horribly wrong.”
Keegan is due to take up his new role at RevenueCat overseeing the Dipsea subsidiary in the coming weeks, but the company says it will prepare a demo environment ahead of that.