We’re hearing from multiple sources that Down to Lunch has met with investors about a potential financing round.
Down to Lunch became a bit of a darling during its rise thanks to its dead-simple approach: signal to your friends that you’re interested in getting lunch, drinks, or whatever else and figure out who’s up for it. This is a simple concept, but in reality fills a niche that larger companies like Facebook still haven’t quite figured out how to nail down quite yet. The value of that niche is unclear, but then again, other kinds of successful low-touch applications have started off with what seemed like early niche applications.
Details are scarce, and there’s also always a chance that while the company is meeting with investors, it may not elect to raise money.
We’re hearing this all as the app has faced scrutiny for the perception that some people are getting annoyed by text message invites. Since growing like crazy and rocketing to the top of the app store, it’s fallen in both the top free app and top social networking app categories in the past 30 days. The use of aggressive opt-in text message invites isn’t uncommon among social apps, but often doesn’t yield strong retention. It can work better in cases where there is a manifest transactional return — see Uber.
There was also what Down to Lunch described as a “smear campaign” happening on Twitter and the App Store that the app was allegedly being used for human trafficking, which the company has publicly denied. The company said this massively, and negatively, affected its user base and app store rankings.
Down to Lunch has raised previously and the app does not appear to take a lot to run — which is something that could give them more runway. But raising money can help a company scale the service more quickly, which is important to head off potential competition from other startups and larger companies that will target the space if it looks like Down to Lunch will be successful.
“There’s a lot of talk about Down to Lunch right now — unfortunately, most of it is not true,” co-founder Nikil Viswanathan said. “Here’s what is true — we’re super focused on creating the best product to help people hang out with their friends daily. Regarding invites, college students love the app and asked for an easy way to invite friends. We’re constantly striving to make this the best experience possible. Regarding the human trafficking smear campaign — yes, those rumors massively affected us but we’ll bounce back. It’s been an intense journey, and we’re committed to creating a world where your friends are in your daily life because it’s the world we want to live in!”
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Still, it’s not like consumer applications are not attracting attention amid a softening in the venture capital investing ecosystem. Musical.ly is raising $100 million at a colossal $500 million valuation on the strength of its engagement and user base. While that company demonstrated it was able to show a strong amount of engagement, it’s not clear if Down to Lunch can match that kind of swagger.
It’s also not clear if this is just a novel use case that quickly captured a lot of attention before fading away. Yo, another fad, showed a similar fast rise to fame and drop off — and Yo was also able to attract a small amount of funding. But Down to Lunch may prove to fill a big enough use case that it could attract financing and take off like a rocket once again.