& meet dozens of singles today!
User blogs
If the rise of direct-to-consumer businesses has been one of the big e-commerce trends of the last decade, then the growth of startups raising huge rounds to consolidate D2C players, to bring more economies of scale to the model, has definitely been a related theme of the past year.
In the latest move, a startup out of Germany called the Berlin Brands Group has announced that it plans to invest €250 million (about $302 million at today’s rates) to buy up smaller companies and bring them into its fold.
While a lot of the company’s would-be competitors in the consolidation race are focusing primarily on the Amazon Marketplace — leaning on fulfillment by Amazon (FBA) to carry out the distribution and logistics — Peter Chaljawski, the founder and CEO, tells us that it’s a different story in its existing target market of Europe.
“In the M&A market, one big difference between the U.S. and Europe is that the latter is more fragmented,” he said. “In the U.S., D2C sellers do a lot on Amazon. In Europe, there are still lots of alternatives. And in some markets like France, consumers don’t even like Amazon.” This is in addition, of course, to selling directly to consumers and bypassing marketplaces altogether, an area that Chaljawski said will continue to be a big focus for BBG. In all, BBG today says it uses some 100 channels to sell its products.
BBG is not your typical e-commerce startup, in that up to now it’s managed to build a big and profitable business largely on its own steam. And despite being a big e-commerce player in Berlin, BBC has no connection to Rocket Internet, the famous incubator of e-commerce businesses founded in the city.
The $302 million earmarked for acquisitions is coming off the startup’s own balance sheet. And from what we understand, it’s also coming ahead of BBG raising a significant round of outside funding to continue its growth. Although BBG has raised money (of an undisclosed amount, per PitchBook) in the past, this would be its first significant equity round when it closes.
BBG itself has built its own profitable direct-to-consumer business from the ground up. Founded in 2005 first focused on audio equipment (Chaljawski had ambitions to be a DJ in a past life) it has some 14 brands today, covering 2,500 items, that it has hatched and grown itself, which it sells in 28 markets.
The conglomerate model that BBG has taken covers a variety of categories, mostly in consumer electronics (including audio gear, fitness equipment and home appliances), and are sold under a range of different brands like auna, Klarstein and Capital Sports. To date, it says it has sold more than 10 million products, and it is profitable, making €300 million (around $363 million) in revenues in 2020.
Its focus for new acquisitions will include more brands and products in garden, home and living goods, sports, electronics and household appliances, with targets generating anything from €500,000 to €30 million in revenues.
While BBG has mostly been about organic growth, it started taking its first foray into inorganic expansion last December, with the acquisition of home goods brand Sleepwise, which Chaljawski describes as making “a very nice blanket.”
The comfort of a nice blanket might come in handy. Despite its success to date, a number of challenges lie ahead for BBG.
First of these are competitors. BBG’s strategy shift and acquisition plans come at a time when consolidators in the space are starting to emerge, armed with fistfuls of dollars to consolidate smaller brands that have emerged with success on marketplaces like Amazon’s (in fact, primarily the Amazon marketplace) but perhaps without obvious paths to scaling.
They include the likes of Thrasio (which most recently raised $500 million in debt to use to buy companies), SellerX, Heyday, Heroes, Perch and more.
This story from December in the FT (before that most recent debt round of Thrasio’s) estimated that there has been at least $1 billion raised collectively by these companies to build out new online consumer empires based on this model.
The vision for all of them is very clear: they want to create the next Unilever, P&G, or Sony, and they are leveraging new economic models and technology to bring in manufacturing, logistics, economies of scale, sales analytics and new innovations in marketing to do it.
Another challenge is how successful and efficient a company, which has up to now taken a very deliberate and organic path, will be in integrating lots of new brands, with the cultures and business partnerships relationships that exist with those, in tow.
The third is the sourcing of quality brands themselves. As we’ve pointed out before, taking just Amazon as one example, there is a ton of junk sold there, including a whole industry of those who buy off wholesale sites and resell on Amazon, which is one reason why so many merchants sell what look like identical products in specific categories. These marketplace sellers leverage things like SEO and armies of reviews to get their products sifting to the top of huge piles of search results, and they can often sell well, even if they are not great buys for you the consumer. That means misleading signals for a potential consolidator looking for hot companies to snap up.
The balance between how marketplaces are leveraged versus how much brands and their owners try to build these things on their own will be an interesting one to watch in the coming years. Amazon and its ilk have only continued to grow and become more efficient, although this sometimes means they are too powerful rather than more useful for third parties:
On the other hand, we’re seeing another persistent theme to help them: the presence of startups and bigger companies continuing to make tools to help the smaller players stay in the game on their own terms. They include biggies like Shopify, but also newer players like GoSite, Shogun and Xentral.
Google has updated and broadened its Play Store policy on gaming loyalty programs to help developers better understand the practices that are permitted, months after confusion about the guidance prompted some backlash in India, the biggest Android market by users.
The company said on Thursday that it now specifies guidance on gamified loyalty programs that are based on a qualified monetary transaction in an app and offer prizes of cash or other real-world cash equivalent perks.
Scores of apps run gamified loyalty programs in their apps to appease and win users. Last year, the company sent notices to several Indian startups including Paytm, Zomato, and Swiggy whose in-app gamifying techniques, the company said at the time, resembled gambling. Google had asked the firms to withdraw from engaging in such gamifying techniques. The new policy covers developers worldwide, the company said.
“App developers in India are actively building uniquely Indian features and services. One example is the use of mini games, quizzes and other gamification techniques to delight users and convert them into loyal customers. These experiences are often launched during important festivals and sporting events, and getting it right within the specific time window is critically important,” wrote Suzanne Frey, Vice President, Product, Android Security and Privacy, in a blog post.
The company still does not permit real gambling apps in India, but said developers globally now will have better clarity on rules so they can inform their strategies.
“This is one of the things we discussed when we spoke to several startup CEOs in India and around the world in the past few months. And, as part of the very first policy update of 2021 we are clarifying and simplifying the policies around loyalty programs and features,” wrote Frey.
A Google spokesperson told TechCrunch that the company will be outlining the full guidelines later today.
As part of the update, the company said it is also launching How Google Play Works, a repository of useful information and best practices to help developers. “It also contains India-specific details on programs that local developers can leverage to find success and scale. For users, this site helps to demystify key aspects of the Google Play platform, and explains how user security and protection remains at the heart of everything we do,” wrote Frey.
In a virtual event on Thursday, Sameer Samat, VP of Android and Google Play at Google, said today’s update is the first of many the company plans to issue this year and it is committed to listening to more feedback from the industry.
More on Google and Jio Platform’s upcoming smartphones
In a wide-range discussion at the event organized by startup network TiE, Samat also talked about the efforts Google is putting into bringing Android-powered smartphones to more people in India. Last year, Google announced an investment of $4.5 billion into Indian telecom operator Jio Platforms. As part of the partnership, the two firms have said they will work on low-cost Android smartphones.
“While India is the fastest growing smartphone market in the world, there are a lack of devices priced in a certain range that prevents a number of consumers from purchasing,” he said. “We have been optimizing Android for entry level devices with Android Go. The point of that project is to enable Android to run on entry level hardware that hopefully brings the price down. There are more than 100 million Android Go smartphones in the market today, but we need to go further than that.”
Samat said the company is trying to bring the set of services that higher-end smartphones feature to “entry-level” handsets it is building with Jio Platforms. “More affordable phones cannot mean lower quality phones.” He suggested that these phones will have a different consumer interface that is directly aimed at users who have not previously used a smartphone.
This is a developing story. More to follow…
Catalyst Fund, a global accelerator managed by BFA Global, announced the 8th cohort for its Inclusive Fintech Program today.
The accelerator, backed by the JP Morgan Chase and Bill & Melinda Gates Foundation, runs the flagship program annually. With a focus on Kenya, Nigeria, South Africa, Mexico and India, selected startups receive £80,000 (~$100,000) in grant capital, six months of support and connections with follow-on investors.
In 2020, all five countries had representatives in the accelerator. However, the selected six startups this year are from Kenya, Nigeria, and South Africa. These startups offer embedded finance solutions; Maelis Carraro, Catalyst Fund MD, explains the thought process behind this selection in a statement.
“Today, fintech is rapidly evolving to the point where it’s no longer a standalone vertical. Embedded finance offerings have the potential to improve the value of products in adjacent sectors significantly while finding new ways to better reach and serve low-income individuals via touchpoints they already know and trust,” she said.
Here are the startups in the 8th cohort. First off, from Kenya, Koa enables users to save and invest, gaining control over their finances. Lami is an insurance platform and API that enables more individuals and businesses to access insurance coverage. Power allows gig and salaried workers access to earned wages and other financial services, and contribute to savings via partner banks.
From Nigeria, Indicina facilitates lending for individuals and small businesses through AI-powered digital credit infrastructure. Jetstream allows businesses to export goods across borders and access trade financing in Nigeria and Ghana.
Representing South Africa, Kandua connects skilled home service professionals with access to customers, professional tools and digital financial services.
What is interesting about the companies in this cohort is that they are predominantly led or co-founded by women as all startups except Kandua have a female founder.
“It was a conscious decision to make this cohort more inclusive for women given the gap in funding and support to women founders, particularly in emerging markets,” Carraro said to TechCrunch. “For example, founders in our previous cohort were all male. We are consciously making an effort to support as many women founders as we can going forward.”
According to an IFC report, only 11% of seed funding capital in emerging markets goes to companies with at least a woman on their founding team. The numbers are lower for later-stage funding despite evidence that investing in gender-diverse teams leads to more substantial business outcomes.
These startups will join the Catalyst Fund’s existing portfolio of 37 companies, which have raised over $122 million in follow-on funding since 2016.
Lami CEO Jihan Abass says her insurance company will use the investment to enhance its platform features, get more third-party integrations, and put data security and ISO certifications in place. For Indicina and CEO Yvonne Johnson, the capital from Catalyst Fund will enable the company to expand its platform, which will include new AI capabilities to improve credit in Africa.
This cohort, which is all-African, represents Catalyst Fund’s continued effort to support fintech startups on the continent. It adds to the growth of a sector that has consistently received most of the VC money coming into the continent. Last year, fintechs accounted for 31% of the total funding raised by African startups per Briter Bridges data.
Catalyst Fund has the backing to keep this going. Last year, it announced $15 million in additional funding from the UK Foreign, Commonwealth and Development Office (FCDO) and JPMorgan Chase & Co., to accelerate 30 new inclusive fintech startups by 2022.
Since then, the fund has financed 12 startups and will need to add 18 between now and next year to achieve that objective. But having funded Chipper Cash, Turaco, Sokowatch, Cowrywise, which just closed a $3M pre-seed round, among others, the total number of startups in its portfolio sits at 43.
Tokopedia, Lazada, Shopee, and other firms created an e-commerce market in Indonesia in the past decade, making it possible for consumers to shop online in the island nation. But as is true in other Asian markets, most small retailers and mom-and-pop stores in the Southeast Asian country still face a myriad of challenges in sourcing inventory and working capital, and continue to rely on an age-old supply chain network.
Nipun Mehra, a former executive of Flipkart in India, and Derry Sakti, who oversaw consumer goods giant P&G’s operations in Indonesia, began to explore opportunities to address this in 2019.
“Much like India, much of the Indonesian retail market is unorganized. In the food and vegetable category, for instance, there are lots of farmers who sell to agents, who then sell to mandis (markets). From these mandis, the inventory goes to small wholesalers, and so on. There are lots of players in the chain,” said Mehra, whose previous stints include working at Sequoia Capital India, in an interview with TechCrunch.
Mehra and Sakti co-founded Ula in January of 2020. With Ula, they are trying to organize this sourcing and supply chain for small retailers so that there is a one-stop shop for everybody.
Despite the pandemic, Ula made inroads in the Indonesian market last year and today serves more than 20,000 stores. And naturally, investors have noticed.
From left to right: Derry Sakti, Nipun Mehra (screen), Riky Tenggara, Ganesh Rengaswamy (screen), Alan Wong, and Dan Bertoli. Photo credit: Ula
On Thursday, Ula announced it has raised $20 million in a Series A financing round. The round was led by existing investor Quona Capital and B Capital Group. Other existing investors including Sequoia Capital India and Lightspeed — that financed Ula’s $10.5 million Seed round in June last year — have also participated in the Series A.
“If you look at the whole retail value chain, especially for essential goods, FMCG, staple, and fresh produce, it’s significantly fragmented,” said Ganesh Rengaswamy, Managing Partner at Quona Capital, in an interview. “Whereas the market has moved on in terms of being able to more efficiently consolidate, demand and supply. Ula is trying to redo the retail distribution ecosystem with a significant technology overlay. It’s connecting some of the largest players in the supply side to the smallest retailers and consumers.”
Additionally, Ula is providing these micro retailers, who usually operate from small shops that are extensions of their homes, with working capital so that they don’t have to wait to be paid by their customers to buy the new batch of inventory. (It’s a serious challenge that micro-retailers face in Asian markets. These shops have strong bonds with their customers, so often they sell them items without getting paid upfront. Collecting this payment often takes longer than it should.)
“Frictionless payment and offering credit to retailers so that they can more efficiently manage their cashflow are critical components of modern digital commerce,” said Rengaswamy. For Quona, which has backed several e-commerce and fintech startups in Asia, Ula checks both the boxes.
Mehra said last year was largely about expanding the Ula team and building the technology stack. The startup now plans to deploy the capital to reach more small retailers and expand within the nation.
Indonesia will remain Ula’s focus market. The opportunity in the region itself is very large. The retail spend is expected to surpass $0.5 trillion over the next 4 years, said Kabir Narang, Founding General Partner at B Capital Group, in a statement. Traditional in-store retail accounts for nearly 80% of the total retail market, according to some estimates.
Ula currently operates in the FMCG and food and vegetable spaces, but it intends to broaden its offerings to include apparel and eventually electronics.
A few more things from my notes:
- Like many other startups in Asia, Ula largely relies on feet-and-street sales people to spread the word out about its offerings and onboarding new shops. The key to growing, said Mehra, is to get a few retailers who are very happy with the services and see its value and then tell their friends about it. It’s a learning he credited to Indian business-to-business e-commerce platform Udaan co-founders Amod Malviya, Vaibhav Gupta and Sujeet Kumar, whom he worked at Flipkart back in the day. Udaan co-founders have backed Ula.
- Electronics is a category that is very popular among B2C and B2B e-commerce platforms. Mehra said he has always known that the startup could expand to electronics, so it has chosen to focus on other categories first that test the supply chain network.
- Indonesia comprises of more than 17,000 islands, but only a handful of islands including Java and Sumatra contributes most to the GDP.
- I asked Quona’s Rengaswamy to draw parallels between e-commerce and payments markets of India and Indonesia. He said India has made more inroads with creating frictionless payments. But on the flip side, this has created potential for startups in Indonesia to solve additional challenges.
The media licensing business is a massive market, but much of the work involved is still handled manually through emails and spreadsheets. A startup called Flowhaven is working to change that. The company, which has now closed on $16 million in Series A funding, helps brands to manage their licensing partnerships, including the account management aspects, the individual product information, the financial information, and more.
The new round was led by Sapphire Sport, the part of Sapphire Ventures that specializes in sports, media and lifestyle brands. Existing investors Global Founders Capital and Icebreaker.vc also returned, bringing Flowhaven’s total raise to date to $21.5 million.
Image Credits: Flowhaven
The idea to modernize the media licensing business comes from a founder who had direct experience in the industry.
Flowhaven CEO Kalle Törmä previously worked on licensing for the Angry Birds mobile game franchise while at Rovio, starting back in 2012. While there, he created the global blueprint for managing the merchandising side of the business, which later expanded to include partnerships for the Angry Birds Star Wars and Angry Birds Transformers games.
“It was evident that the workflows were very broken — from managing the commerce, or the agreements, the product approvals, and financials. The information was very siloed. Also, there were a lot of things that fell through the cracks,” explains Törmä.
In addition, it was time consuming and difficult to pull together data that would allow management to understand how the business was doing.
The challenges Törmä faced at Rovio led him to understand what would be needed to create a solution like Flowhaven — particularly, the difficulty of managing tricky licensing workflows and timetables through manual methods.
He left Rovio in 2016 and founded Flowhaven, where he’s joined by university pal and CCO Timo Olkkola, whose background is in sales.
Image Credits: Flowhaven
Today, the Flowhaven licensing management platform automates the brand licensing workflow process, including the planning and strategy, account and agreement management, content distribution, design approvals, royalty reporting, and more.
It also helps to keep teams on schedules that can often be tight in the media and entertainment businesses.
“There’s always a timeframe that they follow — whether it’s a film release or game release,” Törmä says. “There are lot of moving pieces in closing all the agreements and then moving the products through the approvals [so when], let’s say, a film comes out, a couple of months prior, the merchandise hits the retail shelves,” he says.
“If you don’t have the products approved and ready, then you didn’t really seize the momentum,” Törmä adds.
Image Credits: Flowhaven
Flowhaven pitches that its software isn’t just saving time, it also saves money. The company estimates that licensing professionals waste 50 hours per month at $70 per hour on work that could be automated. This equals approximately $42,000 per year wasted for a single professional.
As of its new funding, Flowhaven’s software-as-a-service platform has been adopted by close to 100 companies, ranging from smaller business to Fortune 100 companies in markets like media, entertainment, sports, fashion, and by corporate and consumer brands Though some customer names can’t be shared, Flowhaven says it’s working with Nintendo, LAIKA, Games Workshop, Acamar Films, and Crunchyroll.
Its pricing is based on how many users will be on the platform. This doesn’t include those with guest access outside the organization, who are always free of charge.
The company also reports 400% year-over-year growth and says it’s expecting that trend to continue, but declines to share its current revenue figures.
The additional funding will help Flowhaven fuel its growth, expand its product and platform, and aid in hiring, Törmä says. Today, the company’s staff is split between offices in Helsinki, London and L.A. but says it’s seeing the most growth in the latter two.
In terms of the product itself, the plan is to further develop Flowhaven’s analytics and speed up the process of exchanging information between the brand owners and their licensees.
Already in 2021, Flowhaven is growing. It began the year with a team of 30 and is now 43 people. Throughout the year, Törmä says the team will grow to nearly 100.
