Startup VIC’s Retail & E-Commerce Pitch Night

As with the same event last year, this pitch night was again hosted at the Kensington Clik Collective. Going by the audience numbers, the retail tech and e-commerce start-up sector continues to generate widespread interest, despite (or because of?) the fragile state of most bricks and mortar retailing in Australia, and the onslaught of global online shopping from the likes of Amazon and eBay.

The four pitches in order of presentation were:

barQode

According to the founder, it all started with a scarf… and how he might have paid more for the item at the time he wanted it (but less than the retail price), compared to the eventual discount price a few months later. If only he had been able to bargain on the spot. Enter barQode – a location-specific app that enables customers to make an offer on an in-store item, and retailers to match or counter the customer offer.

To be clear, this is not (yet) a price comparison tool or even an on-line platform – it’s an app aimed at specific, location-defined, in-store purchases.

While simple in concept, the app does require a huge behaviour change by shoppers. Australians are infamous for being “price sensitive” buyers (not the same as being “cheap”, as one retail consultant once corrected me). Cost plays a huge role in purchasing decisions, especially as choice is often limited in a sector dominated by an oligopoly of brands, and a traditionally restricted market in terms of parallel imports and geo-blocking.

But barQode requires Australians to get comfortable with the notion of haggling, and that is quite a culture shift. Yes, some retail brands offer price matching against their competitors, but as this pitch pointed out, this is all about in-store purchases and prompting a more emotional engagement.

Most of the questions from the panel of judges focused on the competition, customer acquisition and market entry. Using a combination of platform fees and analytics services, barQode claims to be cheaper than the competing platforms, which also risk dis-intermediating retailers from their direct customers. Costs of acquisition were not disclosed, since the app is only in very select beta. The founders appear to be targeting discount retailers rather than selecting a specific category launch. This raises the prospect of only attracting bargain hunters who are already tempted by stock clearance offers (a race to the bottom?) – rather than engaging with select brands who can afford to yield some margin while potentially securing a new customer base.

The team claim to have a patent pending (they are working on image recognition, rather than simply relying on bar codes and other inventory data), and is seeking $350k in seed funding prior to a $1.5m Series A.

Epic Catch

Under the banner, “The social collective – date differently”, Epic Catch claims to be fostering organic connections via shared experiences for singles.

I have seen this start-up pitch couple of times before, where the initial emphasis was on being a new kind of dating service. But now, presumably with more experience and more market research, it claims to be addressing the “loneliness epidemic” – despite all the so-called “connections” people have via social media (and given recent events at Facebook, how much longer will that particular trend run?)  there is actually less and less personal engagement in the world.

According to data cited by the founders, in Australia, 35% of households consist of single people, a figure expected to reach 60% by 2036. At the same time, single people (neither age nor other demographics were defined) each spend an average of $12,000 a year on social activities. (It would have been interesting to see a breakdown of this spending pattern by consumer category, season, age, gender and location?)

The business model relies on a mix of subscriptions, commissions and affiliate fees, via a business partner model, member fees and booking fees. The founders are looking to raise $1.5m, primarily to fund marketing costs, as customer acquisition has mostly been organic, word of mouth, and SEO. To help them on their journey, the founders have appointed a solid advisory board, in their quest to counter the “fast food culture of dating and matching apps”.

Winery Lane

Winery Lane is a curated online market place, servicing independent wineries. Currently engaged on an equity crowd funding program (to raise $900k in return for 18% equity), the founders suggest that the $7.5b wine industry suffers from too many brands. A few large names dominate the market (by supply and by retail consumption), and a long-tail of boutique and specialist wine makers struggle for recognition (even though they often have a superior product). The biggest challenge is: producers can’t control the end distribution, especially small producers.

Winery Land has identified three core personas of wine lovers: geek, aspirational, and seeker. Their goal is to connect independent wine makers with this target audience, by removing the risk for sellers – through enabling them to share their wine-making narratives, and only charging a success-based commission on sales.

The business model is to target 50-60 independent wineries, and charge a 30% sales commission, while offering a 20% discount to customers on 12 or more bottles.

Asked by the panel (which included a representative from Vinomofo) about potential competitor Naked Wine, the founders claim they operate in different segments – in particular, their focus on selling genuine wines (and not running private labels).

Behind the platform is a data acquisition component – by “pooling” their mailing lists, participating wine makers can actually reach a larger (pre-qualified) audience. The judges felt that marketplace models for wine are still to be proven, and wine makers are naturally very protective of their customer lists, to whom they can usually pre-sell their normally small vintages.

[As a piece of random market research, the next day I spoke to one wine-seller representing a boutique producer at a pop-up market in the lobby of a CBD office building. He claimed that by participating in a growing number of these pop-up markets around Melbourne over the past 12 months, he had increased the size of their customer list 10-fold. When I asked whether his sales and marketing strategy included using platforms such as Naked Wine, his opinion was these services were often more like marketing software. They may also require producers to discount too heavily, that they resemble something of a bulk distribution model, and that it was akin to a “pay to publish” model for wine makers – based on the cost of getting stock on to the inventory. And while it isn’t perfect, MailChimp was good enough tool for building, engaging with and growing their customer lists.]

Postie

This SME marketing platform highlights a major paradox:  small brands engage better than big brands, but social media and e-mail engagement are both declining.

Using Instagram-based campaigns, Postie has doubled average campaign engagement to around 42%, and tripled typical click-thru rates to 6%. Postie has also reduced the time to create a campaign from 5 hours to 8 minutes.

While there is some template flexibility, there are limited options, as Postie draws on the Instagram design aesthetic.

According to the founders, there are 15 million brands on MailChimp, and 8 million brands on Instagram. What makes Postie different is that it owns its e-mail campaign client, and brands get to control their own retail inventory management.

Despite some of the challenges in SaaS marketing solutions, Postie has seen success with some specific verticals such as hairdressing, but admits that is hasn’t quite got the right product-market fit. As a result, and as a means to scale growth, Postie is starting to train users, to become more of a self-serve solution.

Somewhat surprisingly, the judges voted Epic Catch the winning pitch – I guess it is hard to ignore the founder passion, and the decision to pivot away from being a “traditional” dating platform. Meanwhile, the people’s choice (based on Twitter votes) was for Postie, and by a large margin – I suspect because many start-up founders, entrepreneurs and SME owners in the audience would welcome such a service for their own business.

Next week: The fate of the over 50s….

Startup Vic’s Professional Services Pitch Night

For the first of Startup Vic’s monthly pitch nights for 2018, professional services were put under the spotlight. There is a public dialogue on the types and numbers of roles that will disappear due to automation (the professions are no different) and here were four startups seeking to engage in that conversation. Assuming that every industry and every occupation is vulnerable to disruption (and should be alert to the potential opportunities that presents), why should accountants and lawyers feel left out?

Image sourced from Startup Vic Meetup page

Myaccountant

With the promise of enabling users to lodge their BAS return from a smart phone, this app is aimed at micro businesses that struggle with bookkeeping and accounting tasks. Since accounting software packages do not support direct BAS lodgement (although expect this to change…), the app charges $39 per BAS, with no bookkeeping or accounting fees, and shares the fee with the accountants who do the lodgement.

The app is able to extract data from vendor APIs such as Expert360, Airtasker, Uber, etc., and connect to users’ bank accounts. Since launching in January, the app has generated 200 sign ups, with very little direct marketing or paid acquisition so far. The app is also aiming to achieve ISO 27000 (information security).

The panel of judges would have liked to have heard more about the acquisition strategy, and how the app deals with income and expense categorisation, different tax rates, zero rated items, and export sales etc. They also wondered about the competition, and overseas markets

Contractprobe

Developed by Neural Contract, this product uses machine learning to review contracts in 60 seconds. Using a scoring model, it rates documents according to established best practice and bench-marking, suggest sample text for missing clauses, and identifies problems found.

The service is available for ad hoc use, under a monthly subscription, or as custom packages.

According to the founders, the service can save 40% of the time usually spent on contract reviews. It offers a high level of privacy – the uploaded contract, report and transaction ID is deleted upon completion (although it wasn’t clear what records are retained for the purposes of clause analysis, data and analytics – including client profiling and user context.)

To reassure any lawyers in the audience, the product stills relies on human input to apply judgment to the choice of clauses, for example. However, a clear value of the review process is ensuring that phrases and key words are properly defined in the contract.

The judges wondered where this product fits in with open source documentation and pre-drafted documents, whether there are specific verticals more suited to this service, and what trust and liability issues might arise. Is it more of a “clause-spotter” rather than an expert system? How does it address statutory clauses, and the question of whether clauses are actually enforceable?

The service has about 40 clients, including law firms, and is now moving into corporate clients.

Businest

This product is designed to help with cashflow management, which the founders describe as an “iceberg” issue. They point to data that suggests 87% of SMEs have issues with cashflow.

Claiming to use AI to coach SMEs and accountants, the goal is to allow business owners to focus on what they do best, and move accountants from “compliance to advisory”. Applying its own algorithm to cashflow analysis, the service also provides training content to advisors.

Offering both SME and advisor pricing models, the founders have launched a pilot with MYOB. They also point to market research and commentary (CEDR, AFR, CPA, CA…) that indicates the market wants it.

The judges felt that the banks won’t rush to endorse the service (although under the open banking data protocol, they won’t be able to prevent customers linking their accounts) because they are used to the interest they charge on overdraft facilities and credit cards.

Brandollo

This is a marketing tech start-up, aimed at SMEs that struggle to access tailored advice. Targeting B2B clients, in the professional services sector,  with less than 80 staff.

Briefly referring to the use of AI and ML, the service claims to reduce marketing costs by 80%. It offers a brand gap analysis and makes recommendations, that can be implemented without external help. The process looks at execution issues, content requirements, and actual solutions.

Aiming for 200,000 clients in 5 years (currently standing at 200+), the main competitor is Benchmarketing. Brandello offers a freemium model, with a 3-tier paid-for service. They can connect clients to experts, provide a quote to execute and then take a commission on the resulting solution.

 

Based on the judges’ verdict, the winner was Myaccountant. While the people’s choice was a tie between Myaccountant and Contractprobe.

Next week: The General Taxonomy for Cryptographic Assets

Spaceship launches the future of superannuation

Backed by some stellar names in the tech and startup worlds, Spaceship describes itself as a superannuation fund designed to “invest where the world is going, not where it’s been”. Squarely aimed at 18-35 year-olds (and savvy people in their 40s and 50s….), it is the brainchild of Paul Bennetts (a Partner at AirTree Ventures), Andrew Sellen (ex-Marketing Manager at Australian Ethical Investments) and two tech co-founders, Dave Kuhn and Kaushik Sen. Their central thesis is that global tech stocks are the future, and that these assets should form a greater part of a fully diversified portfolio, with a 10-year plus investment horizon.

spaceship-logo-03I first connected with Paul a couple of years ago, when I was working with a legal technology startup that was an early graduate of the Melbourne Accelerator Program. He was interested in what we were doing at Ebla, but the company was at too early a stage for him to invest in. But I’ve kept an eye on what Paul has been doing since, and have followed the Spaceship story quite closely. We last caught up very briefly during a recent roadshow event in Melbourne, as part of the Spaceship beta launch.

Any new superannuation brand, especially if it is neither an industry fund nor a retail fund backed by a major financial institution, is going to struggle to attract members: the industry and public sector funds have the benefit of workplace incumbency (sometimes backed by industrial awards), and the big retail funds have extensive distribution channels via advisor platforms, dealer groups and financial planners. As for corporate superannuation funds, in my experience, many of these employer-run funds are often a re-badged or customised version of an existing retail fund, or a highly outsourced business that retains the company name for brand recognition among employees.

Spaceship is challenging the market by using technology (and very targeted marketing) to streamline the recruitment and on-boarding process. As evidence of its marketing success, Spaceship claims to have built a waiting list of 12,000 prospective members in just 30 days, mostly through social media and word-of-mouth. And as evidence of its success in attracting “smart” money, witness some of the big names who have backed the venture as investors, or joined as members themselves.*

Not surprisingly, Spaceship is also developing some interesting content marketing and social media tactics to drive member engagement. This includes thought leadership on portfolio diversification, understanding investment horizons, accessing investments in early-stage tech companies, and investing in tech brands that its members love and use.

But while much of the media coverage for Spaceship has been positive, it has already drawn detractors (almost in the same breath…). Some of the latter reckon that it won’t achieve necessary scale to be sustainable (in light of APRA moves to drive consolidation among smaller funds), it will be highly concentrated in its exposure to tech stocks (which have a tendency to be more volatile), and without face-to-face contact with members, it will be harder to drive customer engagement.

Given that, following some delays, Spaceship does not launch to the general public until the end of this month (it is still running a waitlist), it’s probably a bit churlish to say it is doomed to failure before it has even really begun. Equally, having worked in financial market research myself, I have met with a number of industry, public sector, retail and corporate superannuation funds who cite member engagement and retention as one of their biggest challenges. The main issue is this: how do you interest an 18-year old in something from which they won’t derive any benefit for at least 40 years?  And once you have got their attention, how do you sustain that interest over the lifetime of their membership and into retirement?

Now technology is having a larger part to play in disrupting the superannuation industry, and changing the way members interact with their fund. As the COO of a major industry fund said recently at a FinTech Victoria event, “consolidating your super balances is only three clicks away” (to which Spaceship, replied “it’s now only one click!”). But it’s not enough to have a smart phone app to check your balances, switch investment options or make voluntary contributions. Members are looking for other services, such as financial education, estate planning, insurance, loans and mortgages, and tailored advice. Plus, they expect much more streamlined processes and pro-active member support.

I suspect that a key factor that will likely contribute to Spaceship’s potential success is the growth of the gig economy:

First, with more people working as freelancers, contractors or becoming self-employed, they will have no ties to a fixed workplace or a single employer – so they will be drawn to a fund product that appeals to their independence and flexibility.

Second, much of the gig economy lies in the tech and startup sectors, so again, prospective members might well be looking for a fund that invests in what they are interested and involved in themselves.

Third, if we are all expected to live and work longer, and if we are going to have to rely more on our own accumulated retirement assets, a fund that fully aligns with this long-term investment philosophy is hopefully going to be better placed to help us meet our financial goals.

Of course, it’s worth remembering that the Australian superannuation industry is both large ($2.1tn in assets as at September 2016, and the 3rd largest pool of pension funds in the world), and highly regulated (for very good reason). Equally, it has been slow to adapt to a changing economy and to different market factors, and is increasingly dominated by just a few big funds. Among some large industry funds, there is almost a cosy, symbiotic relationship between their members (who work in say, construction, energy, mining) and some of the assets the funds invest in (infrastructure, buildings, utilities). (But that may prove to be Spaceship’s USP – representing members who work in the tech sector?)

Although the Australian superannuation and managed funds sectors have established strong capabilities in administration, trustee, custody and asset management services, many of these back-office operations run on legacy IT systems which are potentially ripe for disruption. Plus, while government initiatives look for ways to attract more offshore institutions to place their assets with Australian fund managers, under various financial passport arrangements Australian institutions can invest in offshore funds domiciled and managed in key investment centres such as Luxembourg and Singapore.

Finally, new entrants to the superannuation industry are less likely to be reliant on incumbent and legacy service providers, and more able to take advantage of emerging technologies such as blockchain solutions (distributed ledger platforms), and fully integrated end-to-end CX (mobile apps and tools).

* Declaration of interest and disclaimer: I was successful in signing up to Spaceship in beta/waitlist, and have allocated a small portion of my own super to the fund. I do not have any other commercial connection with Spaceship or its founders. I have not been paid to write this article, nor should it be construed or interpreted as financial advice – it has been provided for general information only. BE SURE TO SEEK YOUR OWN INDEPENDENT FINANCIAL ADVICE BEFORE MAKING ANY FINANCIAL INVESTMENT.

Next week: Gaming/VR/AR pitch night at Startup Victoria

#StartupVic launches new-look #pitch event

The team at Startup Victoria have been working hard over the summer: not only have they brought on a whole bunch of new commercial sponsors, but they have also launched a new format for their pitch nights. The idea is to invite startup founders to register their interest in pitching to a panel of judges. The contestants get the opportunity to compete in front of a live audience, for a chance to win face time with local VC’s, along with some other startup goodies.

global_446720634It’s not Shark Tank (there’s no hard cash on offer), nor is it an open mic night (there is a pre-screening and audition process) – but it does enable entrepreneurs to test their pitch, get some early exposure, and receive some great feedback and advice. It also doesn’t matter what stage the startups are at, although businesses that already have some market traction or have built and tested an MVP are probably in a better position to compete.

The launch night saw pitches from four startups, who are at various stages of development. In no particular order they were:

Ad Hoc Media with Passenger Pad, a digital Out Of Home advertising medium for taxis, using interactive touch screens inside the cab. To date, there has been a low take-up rate of this technology by the taxi industry in Australia, mainly due to regulatory issues, but the landscape is changing. With a background in taxi electronics and hardware, the founders are about to launch with 400 taxis in Melbourne, and plan to expand to other cities. There is no doubt that using a combination of passenger, location and fare data (duration, time of day, pick-up and drop-off points), the screens will be able to offer brands and their media buyers targeted audiences and in-depth customer analytics. The challenge will be to offer advertisers a competitive rate card, especially as this is essentially a new medium: it offers viewer choice like TV, can serve up targeted content like web or mobile, and is ideal for special offers linked to location and time of day.

Global Patient Portal offers a free platform for e-health records. Having already launched in Kolkata, India with 40,000 users signed up in 11 weeks, GPP is aiming at lower socio-economic communities and emerging markets. The initial business goal is simple: to support ownership of e-health records by users. Using a combination of bootstrapping and NGO funding, GPP has been able to hire a team of “scribes” in India who sit in on patient consultations and capture the medical notes, which can then be referred to at the next consultation. (Currently, a lot of time and resource is wasted because patient records are captured on paper, which is easily lost once the patient leaves the clinic.) Commercial revenue will come from selling anonymized patient data (subject to legal compliance, privacy obligations and data accuracy) for research and policy planning purposes. In choosing to launch in Kolkata, GPP was aware that in some more affluent urban communities in India, the favoured means of patient communication is WhatsApp?, so they would be less likely to adopt a separate platform. Also, in Australia, having talked to GPs about the various government attempts to establish the e-health system for patient records, I am aware of a reluctance within the medical profession to buy in to the scheme: first, there is no financial incentive for them to capture patient data via a common e-health platform; second, why would they want to share patient data with their competitors?

prevyou is aiming to disrupt a large part of the recruitment and job ad market, by directly connecting students with job opportunities at SMEs. The two-sided market effectively crowdsources available jobs from SMEs, who typically do not have access to the hiring market or to full-time and dedicated HR resources. The goal is to streamline the hiring process, and to offer a mix of standard and premium services (e.g., video resumes, applicant screening, skills matching, personality profiling etc.) and later to add validation of applicant credentials and qualifications. In return, the business will take a commission once a job has been offered and/or candidate hired. While the focus is initially on capturing the market for casual and part-time jobs, the judges urged them to look at the enterprise HR market (under an outsourcing or white label model?). Looking ahead, there is the opportunity include student internships (although, like the legal issues with Year 10 work experience, internships and placements present additional challenges such as achieving student learning outcomes and other employment law issues).

OurHome is an app to help families manage, share and track household chores, so that children learn to take some responsibility around the house, and they can get rewarded for their contribution. It emerged out of an earlier app, Fairshare, that was aimed at shared houses. Apparently, people living in shared houses don’t care enough about whose turn it is to clean the bathroom, or are happy with paper charts and lists on the fridge door. Describing itself as “an integral household tool with indirect network effects (i.e., like Google, not Facebook)”, OurHome also claims to be the #1 chores app. Using advanced algorithms, and other features such as customisation and Dropbox integration, the app also introduces an element of gamification through rewards (intrinsic and extrinsic). For busy families, it replaces those fridge notes and task charts (although, as the judges noted, there’s no calendar yet). Of particular interest is the very positive feedback the team have had from families who have children with ADD.

Despite a few technical glitches (concerning mics and audio quality), the first new-look pitch night was a success, and Global Patient Portal won the on-line audience vote. I was luck enough to meet with one of the teams a few days later. They thought it was a useful experience, but they hadn’t quite known what to expect, and they had anticipated more of a grilling from the judges and tougher questions from the audience.

Next week: More In The Moment