Yearly Archives: 2021

News: Bird shows improving scooter economics, long march to profitability

  • August 20, 2021
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Newly reported financial data from Bird, an American scooter sharing service, shows a company with an improving economic model, and a multi-year path to profitability. However, that path is fraught.

Newly reported financial data from Bird, an American scooter sharing service, shows a company with an improving economic model, and a multi-year path to profitability. However, that path is fraught unless a number of scenarios all work out, in concert and without a glitch.

Bird, well-known for its early battles with domestic rival Lime, is pursuing a SPAC-led deal that will see it go public and raise fresh capital. The former startup is merging with Switchback II Corporation in a deal that values it at around $2.3 billion, including a $160 million PIPE (private investment in public equity) component. (Note: The group purchasing TechCrunch’s parent company from its own parent company, is part of the Bird PIPE.)

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COVID-19 hasn’t been kind to Bird and similar companies around the world. As many around the world stayed home, usage of shared-asset services and ride-hail applications fell sharply. Bird saw rides decline. Airbnb took a temporary hit. Uber and Lyft saw ride demand fall.

Responses to the crisis were varied. Airbnb cut costs, and raised external capital. Lyft cut expenses and focused on its core model, while Uber grew its food delivery business, which saw transaction volume soar as demand fell for its traditional business.

Meanwhile, Bird flipped its entire business model. That decision has helped the scooter outfit improve its economics markedly, giving it a shot at generating profit in the future — provided its forecasts prove achievable.

This morning, let’s talk about how Bird has changed its business, their impacts on its operating results, and how long the company thinks its climb to profitability is.

Fleet management → Fleet managers

In their initial forms, Bird and Lime bought and deployed large fleets of electric scooters. Not only was this capital intensive, the companies also wound up with costs that were more than sticky — charging wasn’t simple or cheap, moving scooters around to balance demand took both human capital and vehicles, and the list went on.

Throw in vehicle depreciation — the pace at which scooters in the wild degraded from use or abuse — and the businesses proved excellent vehicles for raising capital and throwing that money at more scooters, costs, and, as it turned out, losses.

Results improved somewhat over time, though. As scooter-share companies increasingly built their own hardware, their economics improved. Sturdier scooters meant lower depreciation, and better battery tech could allow for more rides per charge. That sort of thing.

But the model wasn’t incredibly lucrative even before COVID-19 hit. Costs were high, and the model did not break even even on a gross margin basis, let alone when considering all corporate expenses. You can see the financial mess from that period of operations in historical Bird results.

News: Men are a niche demographic

  • August 20, 2021
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Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines. Danny was back, joining Natasha and Alex and Grace and Chris to chat through the week’s coming and goings. But, before we get to the official news, here’s some personal news: Danny is stepping back from his role as co-host of the Friday show! Yes, Mr.

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

Danny was back, joining Natasha and Alex and Grace and Chris to chat through the week’s coming and goings. But, before we get to the official news, here’s some personal news: Danny is stepping back from his role as co-host of the Friday show! Yes, Mr. Crichton will still take part in our mid-week, deep dive episodes, but this is the conclusion of his run as part of the news roundup. We will miss him, glad that his transitions and wit will continue to be part of the Equity universe.

Who will take the third chair? Well, stay tuned. We have some neat things planned.

Now, the rundown:

Equity drops every Monday at 7:00 a.m. PDT, Wednesday, and Friday morning at 7:00 a.m. PDT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

News: Cardiomatics bags $3.2M for its ECG-reading AI

  • August 20, 2021
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Poland-based healthtech AI startup Cardiomatics has announced a $3.2M seed raise to expand use of its electrocardiogram (ECG) reading automation technology. The round is led by Central and Eastern European VC Kaya, with Nina Capital, Nova Capital and Innovation Nest also participating. The seed raise also includes a $1M non-equity grant from the Polish National

Poland-based healthtech AI startup Cardiomatics has announced a $3.2M seed raise to expand use of its electrocardiogram (ECG) reading automation technology.

The round is led by Central and Eastern European VC Kaya, with Nina Capital, Nova Capital and Innovation Nest also participating.

The seed raise also includes a $1M non-equity grant from the Polish National Centre of Research and Development.

The 2017-founded startup sells a cloud tool to speed up diagnosis and drive efficiency for cardiologists, clinicians and other healthcare professionals to interpret ECGs — automating the detection and analyse of some 20 heart abnormalities and disorders with the software generating reports on scans in minutes, faster than a trained human specialist would be able to work.

Cardiomatics touts its tech as helping to democratize access to healthcare — saying the tool enables cardiologists to optimise their workflow so they can see and treat more patients. It also says it allows GPs and smaller practices to offer ECG analysis to patients without needing to refer them to specialist hospitals.

The AI tool has analyzed more than 3 million hours of ECG signals commercially to date, per the startup, which says its software is being used by more than 700 customers in 10+ countries, including Switzerland, Denmark, Germany and Poland.

The software is able to integrate with more than 25 ECG monitoring devices at this stage, and it touts offering a modern cloud software interface as a differentiator vs legacy medical software.

Asked how the accuracy of its AI’s ECG readings has been validated, the startup told us: “The data set that we use to develop algorithms contains more than 10 billion heartbeats from approximately 100,000 patients and is systematically growing. The majority of the data-sets we have built ourselves, the rest are publicly available databases.

“Ninety percent of the data is used as a training set, and 10% for algorithm validation and testing. According to the data-centric AI we attach great importance to the test sets to be sure that they contain the best possible representation of signals from our clients. We check the accuracy of the algorithms in experimental work during the continuous development of both algorithms and data with a frequency of once a month. Our clients check it everyday in clinical practice.”

Cardiomatics said it will use the seed funding to invest in product development, expand its business activities in existing markets and gear up to launch into new markets.

“Proceeds from the round will be used to support fast-paced expansion plans across Europe, including scaling up our market-leading AI technology and ensuring physicians have the best experience. We prepare the product to launch into new markets too. Our future plans include obtaining FDA certification and entering the US market,” it added.

The AI tool received European medical device certification in 2018 — although it’s worth noting that the European Union’s regulatory regime for medical devices and AI is continuing to evolve, with an update to the bloc’s Medial Devices Directive (now known as the EU Medical Device Regulation) coming into application earlier this year (May).

A new risk-based framework for applications of AI — aka the Artificial Intelligence Act — is also incoming and will likely expand compliance demands on AI healthtech tools like Cardiomatics, introducing requirements such as demonstrating safety, reliability and a lack of bias in automated results.

Asked about the regulatory landscape it said: “When we launched in 2018 we were one of the first AI-based solutions approved as medical device in Europe. To stay in front of the pace we carefully observe the situation in Europe and the process of legislating a risk-based framework for regulating applications of AI. We also monitor draft regulations and requirements that may be introduced soon. In case of introducing new standards and requirements for artificial intelligence, we will immediately undertake their implementation in the company’s and product operations, as well as extending the documentation and algorithms validation with the necessary evidence for the reliability and safety of our product.”

However it also conceded that objectively measuring efficacy of ECG reading algorithms is a challenge.

“An objective assessment of the effectiveness of algorithms can be very challenging,” it told TechCrunch. “Most often it is performed on a narrow set of data from a specific group of patients, registered with only one device. We receive signals from various groups of patients, coming from different recorders. We are working on this method of assessing effectiveness. Our algorithms, which would allow them to reliably evaluate their performance regardless of various factors accompanying the study, including the recording device or the social group on which it would be tested.”

“When analysis is performed by a physician, ECG interpretation is a function of experience, rules and art. When a human interprets an ECG, they see a curve. It works on a visual layer. An algorithm sees a stream of numbers instead of a picture, so the task becomes a mathematical problem. But, ultimately, you cannot build effective algorithms without knowledge of the domain,” it added. “This knowledge and the experience of our medical team are a piece of art in Cardiomatics. We shouldn’t forget that algorithms are also trained on the data generated by cardiologists. There is a strong correlation between the experience of medical professionals and machine learning.”

News: Greycroft leads $3.5M into Breef, an online marketplace for ad agencies

  • August 20, 2021
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Breef’s platform is democratizing how brands and boutique agencies connect with each other in the process of planning, scoping, pitching and paying for projects.

Breef raised $3.5 million in funding to continue developing what it boasts as “the world’s first online marketplace” for transactions between brands and agencies.

Greycroft led the round and was joined by Rackhouse Ventures, The House Fund, John and Helen McBain, Lance Armstrong and 640 Oxford Ventures. Including the new round, the New York and Colorado-based company has brought in total funding of $4.5 million since its inception in 2019 by husband-and-wife co-founders George Raptis and Emily Bibb.

Bibb’s background is in digital marketing and brand building at companies like PopSugar, VSCO and S’well, while Raptis was on the founding team at fintech company Credible.com.

Both said they experienced challenges in finding agencies, which traditionally involved asking for referrals and then making a bunch of calls. There were also times when their companies would be in high demand for talent, but didn’t necessarily need a full-time employee to achieve the goal or project milestone.

While the concept of outsourcing is not new, Breef’s differentiator is its ability to manage complex projects: a traditional individual freelance project is less than $1,000 and takes a week or less. Instead, the company is working with team-based projects that average $25,000 with a length of engagement of about six months, Raptis said.

Breef’s platform is democratizing how brands and boutique agencies connect with each other in the process of planning, scoping, pitching and paying for projects, Raptis told TechCrunch.

“At the core, we are taking the agency online,” Bibb added. “We are building a platform to streamline a complicated process for outsourcing high-value work and allow users to find, pay for and work with agencies in days rather than months.”

Brands can draft their own brief to articulate what they need, and Breef will connect them to a short list of agencies that match those requirements. Rather than a one- or two-month search, the company is able to bring that down to five days.

Bibb and Raptis decided to seek venture capital after experiencing demand — millions of dollars in projects are being created on the platform each month — and some tailwinds from the shift to remote work. They saw many brands that may have originally utilized in-house teams or agencies of record turn to distributed or smaller teams.

Due to the nature of agency work being expensive, Breef is processing large amounts of money over the internet, and the founders want to continue developing the technology and hiring talent so that it is a secure and trustworthy system.

It also launched its buy now, pay later project funding service, Breef(pay), to streamline payments to agencies and reduce cash flow challenges. Users can construct their own payment terms, mix up the way they are paid and utilize a credit line or defer payments to control external spend.

To date, Breef has more than 5,000 vetted boutique agencies in 20 countries on its platform and is able to save its users an average of 32% in product costs compared with a traditional agency model. It boasts a customer list that includes Spotify, Brex, Shutterstock, Bluestone Lane and Kinrgy.

Kevin Novak, founder of Rackhouse Ventures, said he met Raptis through the Australian tech community. He recently launched his first fund targeting startups in novel applications of data.

“When they were talking to me about what they wanted to do, I got intrigued,” Novak said. “I like finding marketplaces where the idea is well understood by the people involved. Looking at the matching problem, Emily and George have found a unique way to find ad agencies that hasn’t existed before.”

 

News: Rutter comes out of stealth with $1.5M in funding for its e-commerce API

  • August 20, 2021
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Rutter is developing a unified e-commerce API that enables companies to connect with data across any platform.

Rutter, a remote-first company, is developing a unified e-commerce API that enables companies to connect with data across any platform.

On Friday the company announced it was emerging from stealth with $1.5 million in funding from a group of investors including Haystack, Liquid 2 and Basis Set Ventures.

Founders Eric Yu and Peter Zhou met in school and started working on Rutter, which Zhou called “Plaid for commerce,” in 2017 before going through the summer 2019 Y Combinator cohort.

They stumbled upon the e-commerce API idea while working in education technology last year. The pair were creating subscription kits and learning materials for parents concerned about how their children would be learning during the global pandemic. Then their vendor customers had problems listing their storefronts on Amazon, so they wrote scripts to help them, but found that they had to write separate scripts for each platform.

With Rutter, customers only need one script to connect anywhere. Its APIs connect to e-commerce platforms like Shopify, Walmart and Amazon so that tech customers can build functions like customer support and chatbots, Yu told TechCrunch.

Lan Xuezhao, founding and managing partner of Basis Set Ventures, said via email that she was “super excited” about Rutter first because of the founders’ passion, grit and speed of iteration to a product. She added it reminded her of another team that successfully built a business from zero to over $7 billion.

“After watching them (Rutter) for a few years, it’s clear what they built is powerful: it’s the central nervous system of online commerce,” Xuezhao added.

As the founders see it, there are two big explosions going on in e-commerce: the platform side with the adoption of headless commerce — the separating of front end and back end functions of an e-commerce site, and new companies coming in to support merchants.

The new funding will enable Yu and Zhou to build up their team, including hiring more engineers.

Due to the company officially launching at the beginning of the year, Yu did not disclose revenue metrics, but did say that Rutter’s API volume was doubling and tripling in the last few months. It is also supporting merchants that connect with over 5,000 stores.

Some of Rutter’s competitors are building one aspect of commerce, like returns, warranties and checkouts, but Yu said that since Shopify represents just 10% of e-commerce, the company’s goal is to take merchants beyond the marketplace by being “that unified app store for merchants to find products.”

“We think that in the future, the e-commerce stack of a merchant will look like the SaaS stack of a software company,” Zhou added. “We want to be the glue that holds that stack together for merchants.”

 

News: Communication software startup Channels takes on event management with text workflow

  • August 20, 2021
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Three University of Michigan students are building Channels Inc., a communication software tailored for physical workers, and already racking up some big customers in the event management industry.

Three University of Michigan students are building Channels Inc., a communication software tailored for physical workers, and already racking up some big customers in the event management industry.

Siddharth Kaul, 18, Elan Rosen, 20, and Ibrahim Mohammed, 20, started the company after finding some common ground in retail and events. The company’s customer list boasts names like Marriott Hotels, and it announced a $520,000 seed round, led by Sahra Growth Capital, to give it nearly $570,000 in total funding.

Kaul grew up going to a lot of events in Kuwait and Dubai, but started noticing there was a delay in things that should happen and many processes were being done on pen and paper.

“The technology that was available was inharmonious and made it hard for physical workers to fulfill tasks,” Kaul told TechCrunch. “We saw it happening in the event management space, forcing workers to coordinate across technologies.”

Legacy communication platforms like Slack are aggregating communications, but are better for remote workers; for physical workers, they rely more on text communication, he said. However, the disadvantage with texting is that you have to keep scrolling to get to the new message, and old communication is lost amid all of the replies.

They began developing a platform for small hotels to help them transition to digital and provide communication in a non-chronological order that is easier to access, enables discussion and can be searched. Users of the SaaS platform can build live personnel maps to see where employees are and what the event floor looks like, prioritize alerts and automate tasks while monitoring progress.

Marriott became a customer after one of its employees saw the Channels platform was being tested at an event. He saw employees pulling out their phones and asked the manager why they were doing that, and was told they were testing out the product and referred him to Kaul.

“What they thought was helpful was that it was communication, and though the employees were checking their phones, it was quick and they remained attentive,” Kaul said.

Channels provides a solid platform in terms of analytics and graphical representation, which is a major selling point for customers, leading to initial traction and revenue for the company that Rosen said he expects can occur at the convention level the company is striving for.

The new funding will be used to grow in development and bring additional engineering talent to the team. In addition, it will allow Kaul and Rosen to continue with their studies, while Mohammed will be doing more full-time work. They want to increase their recurring revenue in the Middle East while building up operations in the United States.

Jamal Al-Barrak, managing partner of Sahra Growth Capital, said Channels was on his firm’s radar ever since they won the 2020 Dubai X-Series competition it sponsors. As a result of winning the competition, he was able to see the founders on multiple occasions and hear their growth.

Sahra doesn’t typically invest in companies like Channels, but the firm started a “seed sourcing effort” to make investments of between $200,000 and $800,000 into early-stage companies, Al-Barrak said. Channels is one of the first investments with that effort.

“Channels is one of our first investments in this initiative and they look very promising so far even compared to our investments before we started this initiative,” Al-Barrak said. He liked the founders’ work ethic and their focus on the event industry, which he called, “historically outdated and bereft of technological innovation.”

“Sid, Elan and Ibrahim are some of the youngest yet brightest entrepreneurs I have come across to this day and I have invested in over 25 technology startups,” he said. “Additionally, I enjoyed that they had proof of concept with a prior customer base and revenue. I was most impressed by their vision past their current industry and bounds as they want to encapsulate communication for all physical workers, whether it is events, retail or more.”

 

News: Apple launches a new iOS app, ‘Siri Speech Study,’ to gather feedback for Siri improvements

  • August 20, 2021
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Apple recently began a research study designed to collect speech data from study participants. Earlier this month, the company launched a new iOS app called “Siri Speech Study” on the App Store, which allows participants who have opted in to share their voice requests and other feedback with Apple. The app is available in a

Apple recently began a research study designed to collect speech data from study participants. Earlier this month, the company launched a new iOS app called “Siri Speech Study” on the App Store, which allows participants who have opted in to share their voice requests and other feedback with Apple. The app is available in a number of worldwide markets but does not register on the App Store’s charts, including under the “Utilities” category where it’s published.

According to data from Sensor Tower, the iOS app first launched on August 9 and was updated to a new version on August 18. It’s currently available in the U.S., Canada, Germany, France, Hong Kong, India, Ireland, Italy, Japan, Mexico, New Zealand, and Taiwan — an indication of the study’s global reach. However, the app will not appear when searching the App Store by keyword or when browsing through the list of Apple’s published apps.

The Siri Speech Study app itself offers little information about the study’s specific goals, nor does it explain how someone could become a participant. Instead, it only provides a link to a fairly standard license agreement and a screen where a participant would enter their ID number to get started.

Reached for comment, Apple told TechCrunch the app is only being used for Siri product improvements, by offering a way for participants to share feedback directly with Apple. The company also explained people have to be invited to the study — there’s not a way for consumers to sign up to join.

Image Credits: App Store screenshot

The app is only one of many ways Apple is working to improve Siri.

In the past, Apple had tried to learn more about Siri’s mistakes by sending some small portion of consumers’ voice recordings to contractors for manual grading and review. But a whistleblower alerted media outlet The Guardian that the process had allowed them to listen in on confidential details at times. Apple shortly thereafter made manual review an opt-in process and brought audio grading in-house. This type of consumer data collection continues, but has a different aim that what a research study would involve.

Unlike this broader, more generalized data collection, a focus group-like study allows Apple to better understand Siri’s mistakes because it combines the collected data with human feedback. With the Siri Speech Study app, participants provide explicit feedback on per request basis, Apple said. For instance, if Siri misheard a question, users could explain what they were trying to ask. If Siri was triggered when the user hadn’t said “Hey Siri,” that could be noted. Or if Siri on HomePod misidentified the speaker in a multi-person household, the participant could note that, too.

Another differentiator is that none of the participants’ data is being automatically shared with Apple. Rather, users can see a list of the Siri requests they’ve made and then select which to send to Apple with their feedback. Apple also noted no user information is collected or used in the app, except the data directly provided by participants.

WWDC 2021 on device privacy

Image Credits: Apple WWDC 2021

Apple understands that an intelligent virtual assistant that understands you is a competitive advantage.

This year, the company scooped up ex-Google A.I. scientist Samy Bengio to help make Siri a stronger rival to Google Assistant, whose advanced capabilities are often a key selling point for Android devices. In the home, meanwhile, Alexa-powered smart speakers are dominating the U.S. market and compete with Google in the global landscape, outside China. Apple’s HomePod has a long way to go to catch up.

But despite the rapid progress in voice-based computing in recent years, virtual assistants can still have a hard time understanding certain types of speech. Earlier this year, for example, Apple said it would use a bank of audio clips from podcasts where users had stuttered to help it improve its understanding of this kind of speech pattern. Assistants can also stumble when there are multiple devices in a home that are listening for voice commands from across several rooms. And assistants can mess up when trying to differentiate between different family members’ voices or when trying to understand a child’s voice.

In other words, there are still many avenues a speech study could pursue over time, even if these aren’t its current focus.

That Apple is running a Siri speech study isn’t necessarily new. The company has historically run evaluations and studies like this in some form. But it’s less common to find Apple’s studies published directly on the App Store.

Though Apple could have published the app through the enterprise distribution process to keep it more under wraps, it chose to use its public marketplace. This more closely follows the App Store’s rules, as the research study is not an internally-facing app meant only for Apple employees.

Still, it’s not likely consumers will stumble across the app and be confused — the Siri Speech Study app is hidden from discovery. You have to have the app’s direct link to find it. (Good thing we’re nosy!)

News: China passes data protection law

  • August 20, 2021
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China has passed a personal data protection law, state media Xinhua reports (via Reuters). The law, called the Personal Information Protection Law (PIPL), is set to take effect on November 1. It was proposed last year — signalling an intent by China’s communist leaders to crack down on unscrupulous data collection in the commercial sphere

China has passed a personal data protection law, state media Xinhua reports (via Reuters).

The law, called the Personal Information Protection Law (PIPL), is set to take effect on November 1.

It was proposed last year — signalling an intent by China’s communist leaders to crack down on unscrupulous data collection in the commercial sphere by putting legal restrictions on user data collection.

The new law requires app makers to offer users options over how their information is or isn’t used, such as the ability not to be targeted for marketing purposes or to have marketing based on personal characteristics, according to Xinhua.

It also places requirements on data processors to obtain consent from individuals in order to be able to process sensitive types of data such as biometrics, medical and health data, financial information and location data.

While apps that illegally process user data risk having their service suspended or terminated.

Any Western companies doing business in China which involves processing citizens’ personal data must grapple with the law’s extraterritorial jurisdiction — meaning foreign companies will face regulatory requirements such as the need to assign local representatives and report to supervisory agencies in China.

On the surface, core elements of China’s new data protection regime mirror requirements long baked into European Union law — where the General Data Protection Regulation (GDPR) provides citizens with a comprehensive set of rights wrapping their personal data, including putting a similarly high bar on consent to process what EU law refers to as ‘special category data’, such as health data (although elsewhere there are differences in what personal information is considered the most sensitive by the respective data laws).

The GDPR is also extraterritorial in scope.

But the context in which China’s data protection law will operate is also of course very different — not least given how the Chinese state uses a vast data-gathering operation to keep tabs on and police the behavior of its own citizens.

Any limits the PIPL might place on Chinese government departments’ ability to collect data on citizens — state organs were covered in draft versions of the law — may be little more than window-dressing to provide a foil for continued data collection by the Chinese Communist Party (CCP)’s state security apparatus while further consolidating its centralized control over government.

It also remains to be seen how the CCP could use the new data protection rules to further regulate — some might say tame — the power of the domestic tech sector.

It has been cracking down on the sector in a number of ways, using regulatory changes as leverage over giants like Tencent. Earlier this month, for example, Beijing filed a civil suit against the tech giant — citing claims that its messaging-app WeChat’s youth mode does not comply with laws protecting minors.

The PIPL provides the Chinese regime with plenty more attack surface to put strictures on local tech companies.

Nor is it wasting any time in attacking data-mining practices that are common place among Western tech giants but now look likely to face growing friction if deployed by companies within China.

Reuters notes that the National People’s Congress marked the passage of the law today by publishing an op-ed from state media outlet People’s Court Daily which lauds the legislation and calls for entities that use algorithms for “personalized decision making” — such as recommendation engines — to obtain user consent first.

Quoting the op-ed, it writes: “Personalization is the result of a user’s choice, and true personalized recommendations must ensure the user’s freedom to choose, without compulsion. Therefore, users must be given the right to not make use of personalized recommendation functions.”

There is growing concern over algorithmic targeting outside China, too, of course.

In Europe, lawmaker and regulators have been calling for tighter restrictions on behavioral advertising — as the bloc is in the process of negotiating a swathe of new digital regulations that will expand its power to regulate the sector, such as the proposed Digital Markets Act and Digital Services Act.

Regulating the Internet is clearly the new geopolitical battleground as regions compete to shape the future of data flows to suit their respective economic, political and social goals.

News: Facebook launches program to help small Indian businesses secure loans

  • August 20, 2021
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Facebook is launching a new program in India to help small and medium-sized businesses secure loans in the South Asian market as the company makes further push to expand its presence among merchants. The social conglomerate said its new program, called Small Business Loans Initiative, addresses some of the biggest pain points small businesses face

Facebook is launching a new program in India to help small and medium-sized businesses secure loans in the South Asian market as the company makes further push to expand its presence among merchants.

The social conglomerate said its new program, called Small Business Loans Initiative, addresses some of the biggest pain points small businesses face when securing loans.

The company, which last year announced a $4.3 million grant for small businesses in India, said the program will allow its lending partners to grant small ticket loans — between 500,000 Indian rupees ($6,720) to 50,00,000 ($67,200) — at a predefined interest rate of 17%-20% per annum and won’t require the businesses to provide any collateral at the time of applying.

At the time of launch, company’s pilot lending partner is CDC Group-backed Gurgaon-headquartered Indifi, which will disburse the loan amount within five working days of the borrower completing all documentation formalities after acceptance of the offer by Indifi.

Facebook said it’s working in “arm’s length” with its lending partners, but those partners will be handling all the risks of loan payments and determining the eligibility criteria.

Facebook, on its part, is making businesses aware of the lending program and has worked to improve the underlying lending framework such as boundaries for interest rate, engagement responsiveness between the lending partner and businesses (there will be an on-call support system within one day of applying) and ticket size of the credit amount.

In a call with reporters on Friday, Facebook India head Ajit Mohan said the small businesses in 200 Indian cities can apply for the loan.

Businesses wholly or partially run by women will be able to secure the loan at a special 0.2% reduction rates per annum.

This is the first time Facebook has launched a program of this kind in any market, the company told TechCrunch.

According to a survey conducted by Facebook in collaboration with OECD and the World Bank last year, almost a third of operational small and medium-sized businesses on Facebook in 2020 said that they expected cash flow to be one of their primary challenges.

The company is not monetizing this program. “We believe it is in our self-interest for there to be massive growth in the small business ecosystem in India because as a company we are playing this for the long term. We will disproportionately benefit because a lot of these small business activity happens on our apps as they grow,” said Mohan.

“We are not looking to make money from this program. We don’t have any revenue sharing agreement. We are not putting any constraint on how this money is spent,” he said. “Frankly, we are also hoping that on the back of a program like this other companies will also create programs so that there is more access to credit in the market. That will be good for us all. There is no transactional objective here.”

This is a developing story. More to follow…

News: Alerzo raises $10.5M Series A to bring Nigeria’s informal retail sector online

  • August 20, 2021
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The process of digitizing the operations of mom and pop stores in Nigeria is serious business right now. In fact, it might be the second-best thing after fintech at the moment. Today’s news is from Alerzo, a little-known B2B e-commerce retail startup based in Ibadan, Nigeria. The company is announcing a $10.5 million Series A

The process of digitizing the operations of mom and pop stores in Nigeria is serious business right now. In fact, it might be the second-best thing after fintech at the moment.

Today’s news is from Alerzo, a little-known B2B e-commerce retail startup based in Ibadan, Nigeria. The company is announcing a $10.5 million Series A round led by New York-based Nosara Capital. FJ Labs and several family offices from the U.S., Europe and Asia, including Michael Novogratz’s, participated in the round.

In total, Alerzo has raised more than $20 million since its launch. Early investors include the Baobab Network, an Africa-focused accelerator based in London, and Signal Hill, a Singapore-based fund manager that participated in its $5.5 million seed round last year. The company also said it closed a $2.5 million working capital facility to serve its customers.

Adewale Opaleye founded Alerzo in 2018 as a last-mile distribution platform that helps retailers stock inventory directly from manufacturers. Its business, officially launched in 2019, is centered on helping street-side vendors and shops in Nigeria’s south-western cities access household supplies quicker and efficiently.

Speaking with TechCrunch, Opaleye said he started Alerzo to empower the millions of women who are the backbone of consumer commerce in Nigeria’s $100 billion informal retail sector.

The need to solve this problem stemmed from observing firsthand the challenges his mom faced while operating two mom-and-pop stores.

“Growing up in Ibadan, I watched my mother operate two informal retail stores to raise my three siblings and me. Seeing the many challenges she faced running her stores, and I decided to start a business that uniquely catered to the needs of retailers just like her,” he told TechCrunch in an interview. 

These retailers are beholden to an inefficient distribution system that results in inconsistent inventory availability, opaque pricing and limited access to formal financial and banking services.

The founder says Ibadan was the ideal market to establish its headquarters because informal retailers in the region experience these challenges more than those in Lagos.

Alerzo

Adewale Opaleye (Founder & CEO, Alerzo)

Alerzo’s core business distributes FMCG goods using a first-party relationship platform which allows suppliers to clear inventory faster and lets Alerzo control the supply chain and delivery.

Given the lack of trust in the marketplace and the requirement to pay on delivery, Opaleye says this was the most inclusive business model where the economics made sense for the company.

Alerzo claims to have built up a network of up to 100,000 small businesses, 90% of which are women-led. The company exclusively serves the country’s tier-2 to tier-4 cities in Southwest Nigeria — Ibadan, Ekiti and Abeokuta, to name a few. It connects retailers to local and multinational distributors of consumer brands, like Unilever, Nestlé, Procter & Gamble, Dangote, and PZ.

“Without Alerzo, these retailers need to take a day off from the store to visit a central market, pay for transportation and haul a large amount of inventory back to the store. Alerzo replaces this stressful experience by not only reducing costs and time spent running a retail shop but also improving the livelihood of these working women,” said the founder about the company’s growth.

About one-third of the total retailers on Alerzo use the platform monthly. According to its website, retailers can order products via SMS, voice and WhatsApp and deliver them to their stores in less than 10 hours. The company claims to have processed over 1 million orders this past year.

Alerzo owns and operates its full-stack tech-driven supply chain and logistics to process these orders. The company provides warehousing and fulfillment solutions to suppliers and storefront delivery to informal retailers. It currently owns over 200 vehicles and 20 warehouses to serve its thousands of customers.

The last couple of years have seen a rise in last-mile delivery and distribution companies with a large increase in on-demand services across many sectors. While most players in Nigeria tend to focus on Lagos and Nigeria’s capital city Abuja, Alerzo’s approach to covering other cities has seemingly paid off so far.

But though Alerzo has enjoyed almost a first-mover advantage in less crowded markets, stiff competition will play out as other key players look to come in. Omnibiz, for instance, has Ibadan in its sights, and TradeDepot is setting up a presence in 10 to 15 cities, aiming to cover all major cities in the country by the end of the year.

Nevertheless, Alerzo’s investors remain bullish on the company’s potentials.

“We’ve studied informal retail marketplaces globally over the last couple of years and Alerzo really stood out to us due to a strong management team led by a founder with a unique understanding of his customer and an attractive business model with exceptional unit economics,” said Ian Loizeaux, the managing partner at Nosara Capital, in a statement. “The company is at the beginning of a compelling multi-decade opportunity to streamline and digitize Nigeria’s retail supply chain.”

Seed investor Kevin Jung of Signal Hill cites Alerzo’s focus on the informal retail market outside Lagos as one of the reasons why he backed Alerzo earlier on. He also referred to the company’s orientation toward Asia (a playbook Opaleye adopted when he went to China for studies in 2016), as the best reference point for the emerging business model of digitizing informal retail markets. 

Alerzo has an office in Singapore that the CEO says serves as a regional hub to identify best practices among similar high-growth businesses operating across Southeast Asia and India and adapt them to the Nigerian market. Likewise, to expand its digital footprint, the company recently launched an office in Lagos.   

The proceeds from this Series A round will be used to expand geographically to northern Nigeria. Alerzo also plans to launch AlerzoPay, the company’s cashless payments and lending platform, as well as a portfolio of new business support services.

  


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