Americans are rapidly becoming less religious. Weekly church attendance is falling, congregations are getting smaller or even closing and the percentage of Americans identifying as “religiously unaffiliated” has spiked.
Despite all this, now might be the perfect time for church tech companies to thrive.
A combination of COVID-19-induced adoption, underrated demographic trends and pressure to innovate is setting the stage for new successes in the previously sleepy church tech space. Venture dollars are flowing in, and Silicon Valley is slowly showing serious interest in the sector. Hot new startups are finding creative growth hacks to penetrate a difficult market. Major challenges remain for companies in this space, but their odds seem better than ever.
Less religion, more spirituality
Yes, Americans are going to church less often, but that doesn’t mean they’re not staying spiritual. In fact, the percentage of Americans identifying as “spiritual but not religious” has grown faster than any other group in this Pew survey on religiosity. This fact is reflected in other data. For example, the percentage of Americans that pray daily or weekly has stayed fairly flat even as overall religiosity declined. This opens up two distinct opportunities, as well as two challenges.
Opportunities:
- What tools do the growing “spiritual but not religious” crowd need?
- Churches are realizing they need to innovate or die. What tools do they need to reach out to their members and gain new congregants?
Challenges:
- Two demographics: young, tech-savvy and more willing to try a new product, but less involved in church tradition versus older, not as tech-savvy and harder to reach.
- Very byzantine market: as documented in part one of this series, the market is dominated by small companies waging a turf war with one another. In addition, because churches are so local and hard to sell to, all of the companies to date have been smaller land-grabs rather than anything with scale or accumulating advantage.
Rapidly growing startups in the space are deftly navigating this landscape and taking advantage of these trends.
Pray.com
Pray.com, which raised a $14 million Series A led by TPG Growth, is another startup providing services to the faithful outside of a traditional church setting. Starting out as an interfaith “Facebook for churches,” it has instead chosen to monetize through audio and video content like guided prayers narrated with a British accent, podcasts from faith leaders and Bible bedtime stories. Because of COVID-19, it has seen tremendous growth. Founder and CEO Steve Gatena said Pray’s monthly active users grew 50% from February to March, that the company is expecting more than 1 million total monthly active users in April and that they’ve seen significant upticks in time spent on the app, as well as revenue (Pray.com Answers Call for the Digital Faithful).
What’s especially interesting about Pray is its method of growth. Traditionally, companies in church tech monetize by charging churches, not congregations. Pray instead offers all of its services — analytics on members, the ability to form social groups like on Facebook and digital giving services — free for religious institutions. Religious leaders then recommend Pray to their congregants, who sign up for the free social media and eventually pay for the audio and video content. This way, they’re able to take advantage of the powerful network of a church community while not relying on “closing a sale” with churches directly. This also empowers them to serve the “spiritual but not religious” cohort that might not be attached to a specific church, but still wants faith-based content and connections.
Pray is also technically nondenominational, allowing different religious communities to adopt the platform for their needs. Almost all of their content is Christian-based, but it does serve a wide variety of Christian denominations.
All of its founders are religious, with some having served in ministry and in religious nonprofits. Pray’s CEO, Steve Gatena, founded one of the world’s largest stock video manufacturers before founding Pray.
Flocknote
“Reach your sheep in an instant!” Flocknote, led by solo founder and former rodeo rider/software engineer Matthew Warner, provides email and messaging services for churches. In 2019 it landed at number 1,520 on Inc.’s list of 5,000 fastest-growing companies, with a YoY revenue growth of 57%. The company was almost entirely bootstrapped, with the founder just taking one small loan and paying it back in full. The service is free up to 40 people, then you pay-as-you-go.
Flocknote’s marketing emphasizes one thing: they will help you keep your members engaged, donating and continuing to attend Sunday service. In a blog post, Matt Warner, says the problem of declining church membership was what kept him up at night. “It became quite clear that the reason people were drifting away from the Church was not that the Church didn’t have anything to offer them. It was because we were doing a really poor job communicating that fact to them!” (How Flocknote Started).
Flocknote is a top example of how the pressure churches feel to innovate their model in order to reverse their decline in membership is inspiring new startups to provide these tools. Warner and his team built Flocknote after extensive conversations with church leaders to understand what outreach tools they wanted, kept the user-interface very simple for ease of adoption and even created pre-made templates with graphics for more advanced messages.
Their deep understanding of the market — and how to advertise to church leaders — has helped them win adoption with almost 160,000 church leaders and counting.
Hallow
Hallow is a prayer app that provides guided Catholic meditation sessions. (Note: The author is an investor in the company.)
Growth is challenging for content subscription businesses. So the Hallow team tried taking advantage of an uncommon growth-hack in the early days: getting buy-in from the Bishop of the Diocese of Fort Wayne-South Bend. Because Catholicism has a more formal, organized hierarchy than most sects, Catholic entrepreneurs can build trust with users by getting support from clergy, as well as prominent spiritual authors and faith leaders.
Also noteworthy is the app’s integration with annual events: Hallow’s content course includes special sequences during important periods like Lent, for example. This helps with retention metrics, as it’s more compelling to do a “40 days of Lent” habit-forming pattern than it is to do a “month of meditation challenge” that secular competitors like Headspace or Calm might try.
COVID-19 drove years of adoption in weeks
Hallow, Pray and Flocknote are all poised to capitalize on their existing successes, because the COVID-19 pandemic has finally forced churches to go digital. Pray has already seen significant growth in downloads since March, when churches started to shut down for social distancing. Flocknote has also logged huge growth in their users. Their services went from nice-to-have to essential, and older church members — traditionally less tech-savvy — have been forced to become adopters of the tech.
At the same time, many churches are currently using free services they’re more familiar with, like YouTube and Facebook, to conduct their services online. However, there’s incredible opportunity for church tech companies to out-compete the secular incumbents and win over these users.
Church tech companies have always been great at knowing their audience. For example, Pray knows that a church probably won’t integrate with Stripe to handle its payments, so they step in with a platform built for their needs and marketing that emphasizes their values. There are a lot of ways to send money online, but Stripe won’t send holy messages when you do it. Or consider how the makers of Hallow recognized that their Catholic audience might be interested in meditation, but wouldn’t identify with “eastern meditation” based apps like Headspace. The fact is, religion has specific rituals, needs and values that secular companies just aren’t prepared to cater to, as well as products built for the sector. It seems reasonable to think that now that congregations have been forced to go more digital, they’re going to want the best tools to do so, and church tech companies can fill that void, not just in the U.S., but around the world.
There are still challenges
There’s a lot of positive tailwind boosting church tech right now. However, there are a number of challenges companies in this space will have to learn to navigate. Here are a few:
- It’s hard to have content or provide services for “religion” as a category without offending some group, be it investors/LPs of a different religion (or none at all), or your audience. This is especially true for startups involved in religious content. For example, PureFlix, a kind of Netflix for religious content, has been criticized jointly by conservative and liberal Christians. Liberals disliked the right-wing documentaries, and conservatives disagreed with a series that presented alternative interpretations of the Bible and Christian doctrine. Pray.com tried to advertise a “Worldwide Day of Prayer” on TikTok and was rejected for “religious content.” Church tech companies have to deftly toe this tightrope, and may struggle with advertisers too.
- Related to the above issue, there is a unique conflict between mission and margin for a lot of church tech companies. Many founders are religious themselves, and don’t want to be seen as taking advantage of churches with limited IT budgets by charging a premium for their services. Matt Warner, the founder of Flocknote, has spoken to this point in interviews. Even if it made financial sense to do so, would a founder dedicated to building a product for his/her religion be willing to expand it to another?
- Church tech is a turf war. As our previously published market analysis shows, the sector is pretty crowded for a niche market, and the biggest player, Ministry Brands, has grown primarily through small-cap M&A rather than any particularly innovative product or business model. Not only that, but the market is very fragmented and local, making it hard to sell to churches directly. Companies that focus more on monetizing through consumers, like Hallow and Pray, are likely best equipped to navigate this.
Looking ahead
Despite these challenges, there are good reasons to go long on church tech. Religious institutions are realizing they need to innovate or face decline, COVID-19 has forced adoption and new habits and the rising wave of religious but not spiritual Americans presents new opportunities by offering tools for faith outside of a church setting.
The three companies profiled here, Hallow, Pray.com and Flocknote, are all led by exceptional founders with a deep understanding of how to build the right product for their market. Not only that, but there are opportunities to grow outside of Christianity as well. Islam, for example, is the world’s second largest and fastest-growing major religion. Could we see a new church tech (or mosque tech) unicorn minted in the next few years? It’s starting to seem more and more likely.