Startup Exchange, Chicago

As part of its annual FinTech Exchange event in Chicago last month, Barchart* ran the Startup Exchange pitch competition, where 16 hopefuls competed in front of a stellar panel of judges.

The presentations in order of appearance were:

Mercaris – A market data and trading platform for niche agri-products e.g., organic, non-GMO, certified and other niche food products and commodities where identity preservation (IP) is critical.

KTS Operations – A configurable software development solution for data handling and trading. It aims to automate redundant data tasks, such as putting CPU processing on a Blockchain.

HALO – Is a platform for trading structured notes. Currently working with 10 banks and 5,000 financial advisors.

UCX – Offers a consolidated market place and platform for buying Cloud services.

Demand Derivatives Corp – Allows clients to design new derivative instruments for listing on futures exchanges, as compared to standard futures and options contracts. As well as supporting unique instrument design, the service focuses on IP protection, exchange listing and liquidity.

UpTick Technology – Identifying the in-house talent gap at many firms, this spreadsheet-based analytical tool integrates with any data set, multiplies internal development capacity and supports data distribution within the client organization.

MaterialsXchange – Is a raw commodities exchange offering a B2B e-marketplace to digitize and automate trading data. It features a live, two-sided (bid/offer) venue with full execution and delivery, plus connectivity to ancillary services. First product is a lumber market place.

Coinifide – Has launched a P2P crypto trading and auction market place, combining elements of a social trading platform with an emphasis on providing investor education, It features key influencers and subject-matter experts and a simulator to replicate trading strategies.

Upper Room Technology – Is a new analytics solution for professional bond traders, with algo-based modelling and trade execution services.

Tipigo – A decision-support and information tool aimed at self-directed investors and day traders. It combines machine learning and fundamental research (450+ data sources tracking 8,300 US companies) to screen and funnel investment strategies, with trade execute via 8 traditional brokers.

TrendyTrade – Designed to encourage millennials to invest, it aggregates 400+ data sources, as well as Twitter, StockTwits and traditional media. An AI-based algo model makes recommendations, and explains why a specific stock might be moving. Currently has 30,000 users (under a freemium model) and boasts 79% accuracy.

Peak Soil Indexes – Aiming to “democratize farmland”, this is all about so-called “precision agriculture” – financializing farmland, creating a new asset class and offering a passive investment product, tracked by their own farmland index. It recognizes the demand for farmland, while offsetting some of the inherent risks of highly volatile crop prices.

SixJupiter – This is text-based robo advice platform. Focuses on liquidity, diversification and aggressive growth. Data suggests that 36% of the US population don’t get financial advice.

FreightWaves – A trucking futures marketplace, developed in response to a lack of market transparency and the corporate headwind of freight costs. Combines insights from market trends, regulatory factors and the impact of new technology. Primarily a content site, the service has achieved 1 million paid views per month.

PanXchange – An OTC marketplace for physical commodities – agri, energy, food and metals. Provides Instant access to realtime and historic data, for price discovery and for
trading futures and derivatives. Live data includes bid/offer spreads and trades (as opposed to traditional price reporting agencies. Its first key product has been a weekly benchmark price for Frac Sand.

Matrix Execution Technologies – Trading solution for active traders in equities, futures and options. Includes order management and executions services, especially for trading spot markets against listed contracts (such as CME and CBOE Bitcoin futures). Aimed as family offices and HNWIs.

Based on the judges’ verdict, the winners were:

1. PanXchange
2. Coinified
3. FreightWaves

* Declaration of interest: Barchart syndicates Brave New Coin news and technical analysis content

Next week: FinTech Exchange, Chicago

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

Equity crowdfunding comes to town

Earlier this month, the Australian Securities and Investments Commission (ASIC) announced it had approved the first seven crowdsourced funding platforms (CSFs). It seems that after much debate, equity crowdfunding is finally open for business.

Image: Aaron Pruzaniec, sourced from Wikimedia Commons

Although not named in the ASIC media release, the seven successful applicants are:

There are significant limitations to the CSF legislation – namely:

  • the type of eligible companies (only smaller, public unlisted companies);
  • the amounts individual investors can invest (up to $10,000 per company per 12 month period); and
  • how much companies can raise (no more than $5m in any 12 month period)

Also, there is no indication as to whether other CSF license applications are still pending, or which applications may have been rejected. It may also be difficult to assess the relative merits of each platform, since there only appears to be one class of license.

Meanwhile, legislation is already in the pipeline to extend the CSF regime to proprietary companies – which would significantly expand the potential number of issuers.

Compared to some of the largest initial coin offerings (ICOs) over the past 18 months, a $5m capital raise looks like small change. If anything, ICOs took the decade-old crowdfunding experience and supercharged it with Blockchain, cryptocurrency and decentralized issuance platforms. But then, regulators tend to lag markets and technology; plus, their primary focus is protecting the interests of less sophisticated retail investors (as well as market stability).

It’s also worth remembering that a limited crowdsourced funding model has been available in Australia for several years, almost as long as crowdfunding itself: Enable Funding (formerly ASSOB) was established in 2007, but with a much more restricted license than the latest CSF legislation. (And in other countries, early-stage companies have been able to more easily raise equity capital via market listings on secondary boards of the main exchanges – e.g., Mothers in Japan, GEM in Hong Kong, and AIM in London.)

The new CSF regime (and whatever else comes in its wake) does raise a few interesting points:

1. Although expressly confined to equity issuance in the form of common shares, by giving it a more generic name, does this mean CSF will be used for other types of securities (bonds, structured finance)?

2. What expectations has ASIC placed on the number of raises, and the total amounts to be raised, over the next 3-5 years – how will it measure or define the success of CSF?

3. More importantly, where is investor money expected to come from – will investors switch from property or other assets?

4. How will the increasing practice of issuing digital tokens as traditional securities (and potentially vice versa) add to the demand for CSF platforms and services?

It’s very early days, of course, and very small scale, but judging by the response so far to one of the first companies to take advantage of the CSF legislation, investors like what they are seeing.

Next week: Australia Post and navigating the last mile