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

Conclusions from the Intersekt Festival

The first Intesekt Festival of FinTech in Melbourne, incorporating the second Collab/Collide Summit, ran from October 27th to November 3rd, and included an academic symposium, a hackathon, various co-working space open days and corporate field trips, a Blockchain Day, a pitch competition, as well as the 2-day Collab/Collide event. Plans are already being made for 2018….

Like all such multi-stream conferences, you have to be selective, and hopefully pick out the most interesting and relevant sessions and events. Overall, the event attracted solid numbers, a great selection of overseas speakers and delegates, and managed to debate some of the hot topics in FinTech today.

First, kudos to the Victorian Government, and in particular Minister Philip Dalidakis and his team for again partnering with FinTech Australia to bring this event to Melbourne (especially after a difficult year, with the LaunchVic and 500 Startups debacle).

Second, respect to the Federal Treasurer, Scott Morrison, for again speaking at the conference. Last year, he announced his open banking data policy; this year, he announced the comprehensive credit reporting (CCR) policy. (Needless to say the Treasurer found himself having to discuss Parliamentarians’ genealogy with the press pack outside the conference hall.)

Third, over recent times I have been encouraged by the level of engagement between the FinTech sector, and the Australian regulators, most notably ASIC and its Commissioner, John Price. (Good to see a number of ASIC staff at the conference as well, as it’s critical for them to see and hear what is going on in the industry.)

Some of the overarching and consistent themes of the conference were (understandably): Big Data, AI, machine learning, regulatory oversight, digital disruption, financial literacy, FinTech startup inclusivity, and the future of financial services.

I covered the hackathon and the pitch night previously – as well as the reverse pitch night by some leading VC funds. There were also some engaging presentations from challenger banks and disruptive FinTech brands. Always interesting to hear from other markets.

On the Blockchain day, and at the Collab/Collide conference, there were a number of presentations on ICOs and token issuance programs. Unfortunately, there was a lot of misinformation and confusion about the regulatory and other legal issues associated with this new phenomenon – even among lawyers.

Elsewhere, there were updates on the EY FinTech Australia Census, various regulatory developments, and a session on alternative funding models with the introduction of new equity crowdfunding rules. P2P lending also made an appearance, as did robo-advice and the New Payments Platform.

Finally, the dilemma of the major banks in responding to the new world of financial services was illustrated by the announcement of NAB’s job cuts, in response to technology and automation – which sort of goes to the heart of FinTech.

Next week: Consensus: Invest and Blockchain Expo

 

 

FF18 pitch night – Melbourne semi-final

As part of the Intersekt FinTech festival, Next Money ran the Melbourne semi-final of their 2018 Future FinTech pitch competition.

Ten startups presented, in the following order, in front of a panel of judges representing different parts of the Melbourne startup ecosystem:

BASIQ

Describing itself as “the future of finance”, and quoting the trendy mantra of “Data is the new oil”, BASIQ is an API marketplace for financial data. Designed to counter-balance “the Faustian pact” of big data, social media and search, and to compensate for the information asymmetry of bank-owned data, BASIQ espouses open banking, even though it is backed by two bank-related VC funds (NAB Ventures & Reinventure – see last week’s blog). With a focus on the needs of app developers, the commercial model is based on a licensing fee per user per transaction. Leveraging the AWS security layer (presumably to maintain privacy and data integrity), the pitch also mentioned “screen scraping” – so it wasn’t clear to me whether the data is only coming from publicly available sources? Currently, the platform only connects to financial institutions in Australia and New Zealand.

Breezedocs

A participant in the FF17 Semi-Final earlier this year, Breezedocs is a robotic document processing solution. In short, it can read/scan, sort and extract relevant data from standard documents that need to be presented by customers in support of a loan application. Operating via an API, it can work with multiple document types and multiple formats: data can be structured, semi-structured, or even unstructured. The benefits for lenders and brokers are reduced loan approval times and increased conversion, with much
better CX for the loan applicant as well. The goal is to help the standard loan origination process to go paperless, and could be extended to life insurance, income protection insurance, and immigration and visa applications.

Doshii

Doshii ensures that apps and POS solutions can connect to one another, via a common POS API platform. Apparently, there are 130 different POS providers in Australia, and many merchants use multiple services. Now backed by Reinventure, Doshii has a focus on the hospitality sector. The biggest challenge is physically connecting a POS to the API, so Doshii has developed a SDK. However, so far, only five of the 130 providers have signed up.

egenda

I hope I got this right, but egenda appears to be the new product name for the WordFlow solution for board agendas and meetings. Offering an “affordable web-based solution for every meeting”, the product is currently being trialed by a number of universities. The platform can convert PDF/word files into HTML, transforming and enriching them into a single secure website.
The panel asked how egenda compares to say, Google productivity suite or IntelligenceBank. A key aspect seems to be that egenda is platform agnostic – so it doesn’t matter the source of the document (or where it needs to be published to?). A key challenge in managing board papers is that it’s like herding cats – so a single but highly functional repository would sound attractive?

HipPocket

This US-based app is looking to launch in Australia. A phone-based financial decision app linked to a user’s bank account, it is designed to help with personalised goal-setting, budgeting and financial engagement. Asked whether it can support long-term goals, the pitch referred to data that suggests an increasing number of people are effectively living from pay-day to pay-day, and have no capacity to meet even the smallest of unexpected  bills. Having attracted a grant from the Queensland government, they are currently experimenting with different customer acquisition models, but they hope to prove that with daily engagement, it is possible to build a long-term relationship.

ID Exchange

With a tag line of “privacy protection power”, ID Exchange addresses a key issue of the “consent economy” – how to control who has access to your personal data, and how much, and for what purpose. With the whole notion of “trust” being challenged by decentralised and trustless solutions such as Blockchain applications; the plethora of data connections with the growth of IoT; and the regulatory framework around KYC, AML, CTF, data protection and privacy, there is a need for harmonised solutions. Under an “OptOut/OptIn” solution (from the website, it looks like this is a partnership with digi.me?), the idea is that users take more responsibility for managing their own data. ID Exchange offers a $20 subscription service – but unfortunately, based on the pitch, it was not clear what does this actually meant or included.

Look Who’s Charging

This is a platform for analysing credit and charge card transactions, to identify anomalies and reduce disputed charges. Currently with about 7.5% market penetration (based on merchant volumes?), it can help with fraud checks and spend analysis, by combining AI, crowd-sourcing and data science. But from the pitch, it wasn’t clear where the data is coming from. Also, a key part of the problem might be the data mismatch between card acquirers (merchant services) and card issuers (banks and financial institutions). Given that the growth in credit card fraud is coming from online shopping and CNP (card not present) purchases, it would seem that a better solution is to tighten procedures around these transactions?

Plenty

Plenty describes itself as a “financial GPS”, and is designed to address the issue of poor financial awareness. Only 20% of people see a financial planner, but now with robo-advice tools, even personalised advice can be scalable. Essentially a self-directed financial planning tool, it is free for customers to create a basic financial plan and when searching for a mortgages. For a subscription fee, customers can begin to access other products and advisors, which generates commission-based fees to Plenty.

Proviso

Another of these FinTechs to have featured in this blog before, as well as competing at FF17, Proviso makes “financial data frictionless”, in particular the loan application process. With 250,000 users per month, and 150 financial institutions signed up, their success can be ascribed to the way they standardise the data and the UX. Plus, they can access more data, from more sources, quicker. And then there are the analytics they can offer their institutional clients. In the future, there will be open banking APIs, plus insights, such as the categorisation of transaction types, affordability analysis, and decision-metrics.

Trade Ledger

This is a new platform that supports SME lending based on receivables, that also reduces the effort for SMEs seeking this form of financing. Given that cashflow issues are inextricably linked to insolvency risk, Trade Ledger has developed a unique credit assessment method, and is product-type agnostic. It also aims to offer automated solutions, with an emphasis on the digital UX of products, and use machine learning to generate a predictive probability of default (PPD). Currently the biggest challenge is in the multiple variations of bank credit and lending processes and models that need to be integrated or streamlined.

Of the ten pitches on view, I have to say that none really had a “wow” factor (although if Trade Ledger can scale their PPD model, and if ID Exchange spent a bit more time on defining their key message, both could be huge products). They were mostly worthy ideas, but still defined by current banking and finance procedures. Maybe these platforms need to do more with the transactional and customer data they generate or process, to uncover more opportunities. Or think about what they could do to disrupt adjacent markets? Anyway, on the night, Proviso proved the favourite with the judges.

Next week: Conclusions from the Intersekt Festival