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Zip acquisition of Payflex means Africa is ripe for BNPL disruption

By Tage Kene-Okafor

Australian buy now, pay later (BNPL) company Zip this week acquired South Africa-based BNPL player Payflex for an undisclosed amount.

It’s a piece of news that once again highlights the hype around BNPL services and the quest for global dominance among the leading players.

This year we have covered BNPL services from the likes of Afterpay, Klarna and Affirm. And tech and payments giants Apple, Square, PayPal and Visa have joined in the action, too, massively funneling cash to their respective BNPL initiatives (for one, Square acquired Afterpay).

Australia, the U.K. and the U.S. are key markets for BNPL services. The U.S. market is so big that the number of BNPL service users is expected to hit 45 million by year’s end, representing an 81% growth from last year. But despite its Western focus, BNPL is exploding in other markets driven by a collective effort from local and global players.

For instance, in the Middle East, companies like tabby and Tamara have raised millions in debt and equity financing to provide BNPL services. Also, Checkout is a significant shareholder in Tamara; Afterpay is one in PostPay, while Zip acquired Spotii for $26 million after initially investing in the company in December 2020.

Spotii isn’t the only acquisition Zip has made this past year. The Australian company also bought U.S.-based QuadPay and Twisto, a BNPL service in the Czech Republic, to expand footprints in both regions.

Payflex is the latest addition to that list. The company, founded in 2017, claims to be the first and largest BNPL player in South Africa with more than 1,000 merchants and 135,000 customers. Before fully acquiring Payflex, Zip had a 25% stake when it invested in the South African BNPL service six months ago.

Zip’s entry to Africa is important for several reasons. First, the continent is a largely untapped market that has enormous growth potential.

Credit appetite on the continent is very much in its infancy compared to Western markets, but it is growing rapidly. These days, people take loans to finance their needs at ridiculous interest rates while lending companies report low NPL ratios. Think of what happens when these consumers get a taste of low or no-interest alternative financing options that BNPL players like Zip provide: adoption rates will be off the charts.

Second, there’s a lack of infrastructure and BNPL innovation that only new entrants like Zip can execute because it has a large monetary chest.

And with the absence of credit cards and data on the continent, Zip can provide a competitive advantage with its technology, gather alternative data and build creditworthiness for customers in South Africa and other markets it plans to expand “with sizable underbanked, digitally savvy populations.”

Two of those markets are Egypt and Nigeria. If Zip expands to these regions, it will face competition from local players like Carbon, Shahry, M-Kopa, CredPal and CDCare, which are already pulling their weight. African e-commerce giant Jumia is also rumored to be revamping its BNPL service; it started one years ago but was discontinued after gaining little traction.

That said, Africa doesn’t have a concrete market leader yet since most of these products are yet to reach mass scale. On the other hand, Zip has been quite aggressive with its expansion into other markets — evident in some of its numbers.

The company currently serves 51,000 merchants and 7.3 million customers across 12 markets. This fiscal year, June 2021, a period when most of its acquisitions have occurred, Zip hit $5.8 billion in total transaction volume, up 176% year-over-year (YoY).

Zip numbers are impressive, but if there’s anything we’ve learnt from the BNPL business it’s that it isn’t a winner-takes-all market. If Zip makes significant headway and cracks the market, expect more global BNPL players to bring the heat. Also, local players will be encouraged to step up their game because global players have surplus cash to burn if they move into Africa, which is a win-win for the market.

Cajoo raises $40 million for its instant grocery delivery service

By Romain Dillet

French startup Cajoo is raising some money in order to compete more aggressively in the new and highly competitive category of food delivery companies. Interestingly, the lead investor in today’s funding round is Carrefour, the supermarket giant. Headline (formerly e.ventures) is also participating in the round as well as existing investors Frst and XAnge.

Carrefour’s investment isn’t just a financial investment. Cajoo will take advantage of Carrefour’s purchasing organization. This way, Cajoo will be able to offer more products to its customers.

Cajoo is part of a group of startups that try to create a whole new category of grocery deliveries. The company operates dark stores and manages its own inventory of products. Customers can then order items without having to think whether they’ll be home when the delivery happens. Around 15 minutes later, a delivery person shows up with your groceries.

The startup competes with Getir, Gorillas, Flink, Zapp and a few others. It also indirectly competes with traditional retailers and their online ordering systems.

“It’s a category that is incredibly capital intensive,” co-founder and CEO Henri Capoul told me. “We own the entire value chain. If we want to expand, we have to launch hubs, we have to buy products.”

With $40 million on its bank account, Cajoo now wants to solidify its strong market position in its home country. The service is currently live in 10 French cities — Paris, Neuilly-sur-Seine, Levallois-Perret, Boulogne-Billancourt, Lille, Lyon, Toulouse, Bordeaux and Montpellier.

And yet, the company is already facing some competition in Paris for instance. But Henri Capoul sees it as market validation. “There are a lot of players that have raised a lot of money. But it’s a regulated market. We own all our products and we have to comply with regulation. We can’t sell everything at a loss,” he said.

While Henri Capoul expects some sort of consolidation down the road, the company is doing everything to remain a big, independent company. “European champions will be national champions first. Right now, some players can overcome a lack of products with discounts. I’m convinced that the future of this category will be represented by three or four local players that are strong in other countries.” Henri Capoul said.

Cajoo is currently the only French company operating at this scale in this category. So it’s clear that the company sees itself as a market leader in France first. But the company is already looking at other markets as well — Belgium, Italy, Spain, maybe Portugal or Eastern Europe countries.

But first, the company wants to grow its team. The number of employees working in the HQ is going to double by the end of the year. Operations and delivery teams will also grow quite drastically. The company expects a fivefold increase by the end of the year on this front.

Some delivery people are directly hired by Cajoo. But the company is also relying on partners — both contracting companies and freelancers. So the company faces some of the challenges that Deliveroo and Uber Eats also face.

Cajoo might be a great business idea, but users will have to ask themselves whether it really solves an important need or they’re just using it because it exists. Instant delivery companies could have a real impact on brick-and-mortar shops over the long run.

Berlin Brands Group, now valued at $1B+, raises $700M to buy and scale merchants that sell on marketplaces like Amazon

By Ingrid Lunden

Berlin Brands Group — one of the new wave of e-commerce startups hoping to build lucrative economies of scale around buying up smaller brands that sell on marketplaces like Amazon and using technology to run and scale them more efficiently — has picked up a big round of funding to fill out that mission. The startup has closed a round of $700 million, comprising both equity and debt, which it will use in part to continue building its fulfillment and logistics infrastructure, as well as its tech platform, and in part to buy more companies.

BBG confirmed that the investment — one of the biggest to date in the space — boosts its valuation to over $1 billion.

Bain Capital is leading the equity portion of this round. The deal will also see it buy out a previous investor, Ardian, for an undisclosed amount that is separate to the $700 million raise.

This funding round is the second announced by BBG this year. In January it announced it would be investing $302 million off its own balance sheet for M&A, and in April it announced a debt round of $240 million. This latest $700 million is different in that it includes the equity component alongside the equity.

BBG got its start initially developing its own products and selling them on Amazon and other marketplaces — founder and CEO CEO Peter Chaljawski was a DJ in a previous life and started with a focus on audio equipment he developed for himself.

Over time, it saw an opportunity to diversify that into a wider consolidation play, where BBG would also acquire and merge third party brands into its business, tapping into the opportunity to provide the owners of the third-party businesses an exit route and bring those smaller brands more scale, more marketing nous, and more tech to improve the efficiency of their operations.

Today the mix totals 3,700 products and 14 own brands, including Klarstein (kitchen appliances), auna (home electronics and music equipment), Capital Sports (home fitness) and blumfeldt (garden). BBG says it has access to some 1.5 billion e-commerce customers across various marketplaces where it sells goods in Europe, the UK, the U.S. and Asia. Notablym unlike many others in the same space as BBG, it is focused on more than Amazon, with some 100 channels in 28 countries.

That list of “many others in the same space” is a long one and seemingly growing by the day. Yesterday, two of them — Heroes and Olsam — respectively raised $200 million and $165 million. Others leveraging the opportunity of consolidating merchants that sell via Fulfillment by Amazon include  Suma Brands ($150 million); Elevate Brands ($250 million); Perch ($775 million); factory14 ($200 million); Thrasio (currently probably the biggest of them all in terms of reach and money raised and ambitions), HeydayThe Razor GroupBrandedSellerXBerlin Brands Group (X2), Benitago, Latin America’s Valoreo and Rainforest and Una Brands out of Asia.

As more startups enter the fray, all battling to buy the best of the third-party brands will become more of a challenge, and so the backing of Bain should help BBG shore up against that competition.

“With Bain Capital’s commitment and the additional funding secured, we have set our next milestone on our path to building a global house of brands,” said Chaljawski in a statement. “This allows us to tackle strategic goals of acquiring and developing brands globally, as well as the operational and logistical expansion. Bain Capital’s experience working with founders worldwide will help us continue our evolution as a leading e-commerce company in scaling brands.”

“BBG is a disruptive leader in the rapidly changing consumer goods space. Their ability to develop and scale brands that meet current consumer trends through their highly efficient e-commerce platform gives the company tremendous growth potential in a fast-growing market,” added Miray Topay, MD at Bain Capital Private Equity. “We have partnered with many founder-led management teams and look forward to helping Peter and his team achieve their goal of becoming a global leader in consumer e-commerce”.

Forum Brands secures $100M in debt financing to acquire more e-commerce brands

By Mary Ann Azevedo

Forum Brands, an e-commerce acquisition platform, announced today that it has secured $100 million in debt funding from TriplePoint Capital.

The financing comes just just over two months after the startup raised $27 million in an equity funding round led by Norwest Venture Partners.

Brenton Howland, Ruben Amar and Alex Kopco founded New York-based Forum Brands in the summer of 2020, during the height of the COVID-19 pandemic. 

“We’re buying what we think are A+ high-growth e-commerce businesses that sell predominantly on Amazon and are looking to build a portfolio of standalone businesses that are category leaders, on and off Amazon,” Howland told me at the time of the company’s last raise. “A source of inspiration for us is that we saw how consumer goods and services changed fundamentally for what we think is going to be for decades and decades to come, accelerating the shift toward digital.”

Since we covered the company in June, Forum Brands says it has acquired several new brands, including Bonza, a seller of pet products, and Simka Rose, a baby-focused brand specializing in eco-friendly products. Simka sells in the U.S. and the EU and is an example of how Forum is expanding globally, Amar said.

Howland and Amar emphasize that the Forum team continues to focus on quality over quantity when evaluating potential acquisitions. Although they meet with 15-20 founders a week, they are selective in which companies they choose to acquire.

“We continue to be a quality-first buyer, and not quantity-driven,” Amar said, noting that the company will still help a company build its brand even if it does not yet meet Forum’s quality threshold or if the founders are just not yet ready to sell.

The new funds will be used to, naturally, acquire more e-commerce companies. As part of the debt financing, Sajal Srivastava, co-CEO and co-founder of TriplePoint Capital, will be joining Forum’s board of directors.

“We are impressed not only by Forum’s long-term strategy and ability to leverage technology and deep collective e-commerce and M&A experience but also by how Forum cultivates relationships with their sellers both before and after partnering with them,” he said in a written statement.

At the time of its June raise, Forum had about 20 employees. As of today, it has about 40.

Forum’s technology employs “advanced” algorithms and over 100 million data points to populate brand information into a central platform in real time, instantly scoring brands and generating accurate financial metrics.

On August 31, we covered the news that on the heels of Heroes announcing a $200 million raise to double down on buying and scaling third-party Amazon Marketplace sellers, another startup out of London aiming to do the same announced some significant funding of its own. Olsam, a roll-up play that is buying up both consumer and B2B merchants selling on Amazon by way of Amazon’s FBA fulfillment program, closed on $165 million — a combination of equity and debt that it will be using to fuel its M&A strategy, as well as continue building out its tech platform and to hire more talent.

Trustshare runs escrow infrastructure as a service to facilitate online sales

By Romain Dillet

Meet Trustshare, a London-based startup that is working on escrow infrastructure for online classified, B2B marketplaces, trade directories and more. It’s a white-label platform that can be integrated with online marketplaces in just a few lines of code.

If you’ve ever tried to sell something expensive on the web, you know that it’s hard to know for sure that you’re not getting scammed. For instance, that person that is trying to buy your old phone from you — should you send the phone first or ask the buyer to send the money first?

If a marketplace relies on Trustshare for payments, buyers first have to checkout and leave money into a dedicated transaction-based account. Trustshare can also handle identity verification steps, such as KYC and AML checks (Know Your Customer and Anti-Money Laundering). The seller can check the status of the funds. Once the buyer has received the product, they can release funds to the seller.

Behind the scenes, Trustshare generates a dedicated IBAN per transaction. Customers can deposit money using bank transfers or cards. In the U.K. and Europe, Trustshare takes advantage of open banking regulation so that users can connect to their bank account from the checkout flow.

If you don’t want to tweak your site’s code, you can also use Trustshare for offline sales and transactions that happen over email or messaging apps. The company lets you generate QR codes or payment links to initiate a payment.

The startup has raised an angel round from several business angels, such as Cazoo and Zoopla founder Alex Chesterman and Carwow founder James Hind. After that, Trustshare raised a $3.2 million seed round (£2.3 million) led by Nauta Capital.

Many companies could leverage Trustshare to launch their own marketplace as escrow payment is one of the biggest pain points. For instance, you can imagine luxury brands launching their own marketplaces of handbags and watches, new car marketplaces focused on one type of cars in particular, etc.

“Our 5 lines of code branded escrow checkout is taking many marketplaces, brands that consumers know and trust, transactional. Really, this is just the start. Our borderless escrow infrastructure is incredibly powerful, and we plan to launch new products including instant pay-throughs, baskets and projects to make payments as quick and easy as sending an email,” co-founder and CEO Nick Fulton said in a statement.

Trustshare is built on top of existing payment infrastructure. That’s why it supports 180 countries and 30 currencies already. The company’s initial clients include Watchcollecting, Bookabuilder and U.K. trade body FENSA’s Deposit Protection service.

Olsam raises $165M to buy up and scale consumer and B2B Amazon Marketplace sellers

By Ingrid Lunden

On the heels of Heroes announcing a $200 million raise earlier today, to double down on buying and scaling third-party Amazon Marketplace sellers, another startup out of London aiming to do the same is announcing some significant funding of its own. Olsam, a roll-up play that is buying up both consumer and B2B merchants selling on Amazon by way of Amazon’s FBA fulfillment program, has closed $165 million — a combination of equity and debt that it will be using to fuel its M&A strategy, as well as continue building out its tech platform and to hire more talent.

Apeiron Investment Group — an investment firm started by German entrepreneur Christian Angermayer (known first for biopharmaceuticals, then investing and crypto, including playing a role in SoftBank investing in Wirecard) — led the Series A equity round, with Elevat3 Capital (another Angermayer firm that has a strategic partnership with Founders Fund and Peter Thiel) also participating. North Wall Capital was behind the debt portion of the deal. We have asked and Olsam is only disclosing the full amount raised, not the amount that was raised in equity versus debt. Valuation is also not being disclosed.

Being an Amazon roll-up startup from London that happens to be announcing a fundraise today is not the only thing that Olsam has in common with Heroes. Like Heroes, Olsam is also founded by brothers.

Sam Horbye previously spent years working at Amazon, including building and managing the company’s Business Marketplace (the B2B version of the consumer Marketplace); while co-founder Ollie Horbye had years of experience in strategic consulting and financial services.

Between them, they had also built and sold previous marketplace businesses, and they believe that this collective experience gives Olsam — a portmanteau of their names, “Ollie” and “Sam” — a leg up when it comes to building relationships with merchants; identifying quality products (versus the vast seas of search results that often feel like they are selling the same inexpensive junk as each other); and understanding merchants’ challenges and opportunities, and building relationships with Amazon and understanding how the merchant ecosystem fits into the e-commerce giant’s wider strategy.

Olsam is also taking a slightly different approach when it comes to target companies, by focusing not just on the usual consumer play, but also on merchants selling to businesses. B2B selling is currently one of the fastest-growing segments in Amazon’s Marketplace, and it is also one of the more overlooked by consumers.”It’s flying under the radar,” Ollie said.

“The B2B opportunity is very exciting,” Sam added. “A growing number of merchants are selling office supplies or more random products to the B2B customer.”

Estimates vary when it comes to how many merchants there are selling on Amazon’s Marketplace globally, ranging anywhere from 6 million to nearly 10 million. Altogether those merchants generated $300 million in sales (gross merchandise value), and its growing by 50% each year at the moment.

And consolidating sellers — in order to achieve better economies of scale around supply chains, marketing tools and analytics, and more — is also big business. Olsam estimates that some $7 billion has been spent cumulatively on acquiring these businesses, and there are more out there: Olsam estimates that there are some 3,000 businesses in the UK alone making more than $1 million each in sales on Amazon’s platform.

(And to be clear, there are a number of other roll-up startups beyond Heroes also eyeing up that opportunity. Raising hundreds of millions of dollars in aggregate,  others have made moves this year include Suma Brands ($150 million); Elevate Brands ($250 million); Perch ($775 million); factory14 ($200 million); Thrasio (currently probably the biggest of them all in terms of reach and money raised and ambitions), HeydayThe Razor GroupBrandedSellerXBerlin Brands Group (X2), Benitago, Latin America’s Valoreo and Rainforest and Una Brands out of Asia.)

“The senior team behind Olsam is what makes this business truly unique,” said Angermayer in a statement. “Having all been successful in building and selling their own brands within the market and having worked for Amazon in their marketplace team – their understanding of this space is exceptional.”

Cheeterz Club wants to make reading glasses hip

By Sarah Perez

Can reading glasses actually be cool? A new eyewear company called Cheeterz Club thinks so. The startup is working to change the perception of reading glasses from being just cheap, disposable items you pick up from a rotating display rack at your local drug store to being something you’d actually be proud to wear. To do so, the company is designing its glasses with quality lenses and frames in a range of styles, while still keeping the pricing affordable.

The startup — whose name is a reference to the slang term for glasses, “cheaters” — was founded by Jennifer Farrelly, whose background includes work in advertising and sales at companies like Uber and Virool.

She said the idea to make a better set of readers came to her because she found herself frustrated by the current options on the market.

“It all started a few years ago. My friends were posting on social media these really depressing comments and posts like: ‘I’m old and turning into my parents, this is awful.’ And I [thought to myself] why does it have to be like that? I feel just as young today as I did 10 years ago,” Farrelly explains. “Why are my friends and I feeling forced to feel old because of something that happens overnight?,” she says, of what felt like the sudden onset of middle age and the hardships it brings.

What’s worse, Farrelly says, is that when you finally make your way to the drugstore to pick out some reading glasses, all you’ll find are bad, plastic pairs that both look and feel cheap.

“That’s even more demoralizing,” she adds.

Image Credits: Cheeterz Club

So Farrelly teamed up with a former Warby Parker and Pair Eyewear head of Product, Lee Zaro, to design a new line of more fashion-forward eyewear.

Zaro, who is based in the LA area, immediately saw the opportunity.

“Drugstore reading glasses are typically poor in quality, and can feel like they are designed with our parents in mind, leaving a huge unmet need for sophisticated eyewear options,” he said. “When Jennifer approached me to help design her first line of eyewear, I knew it was a brilliant idea.”

To differentiate itself from lower-end readers, Cheeterz Club glasses are made with 100% acetate and feature spring hinges and stainless steel. The lenses, meanwhile, offer more clarity than is often found in reading glasses.

Image Credits: Cheeterz Club

Typically, ophthalmic plastic lens materials have an Abbe value — a measure of the degree at which light is dispersed or separated — between 30 and 58. The higher number offers better optical performance. Crown glass can have an Abbe value as high as 59, but polycarbonate readers (like those from Warby Parker, Farrelly notes) would have an Abbe value of 30. Cheeterz Club lenses, which are CR-39 lenses, are at at 58. This is a difference you can tell when trying the glasses on alongside your drugstore readers.

Cheeterz’ lenses also offer 100% UVA/UVB protection, and are oil and water repellent. They can optionally be bought in one of eight fashion tints, from pink to blue, or in two sun shades. Consumers can also opt to add Blue Light coating to help with screen-induced eye fatigue or they can choose Progressive lenses, which combine distance vision with a reading lens.

Tints are an extra $10, Blue Light protection is $25 and Progressive lenses are $40.99 — lower than market rates.

At launch, Cheeterz Club offers 42 different styles ranging from traditional to the more modern, starting at $28.99.

Farrelly says finding the right price was key, because unlike regular glasses, consumers often buy multiple pairs of readers to leave around the house or car, pack in purses and bags, and so on.

“If I break something that costs me a couple hundred dollars, I’d be really upset about it,” she says. “But at a drugstore price of under $30, I can have them in all sorts of colors and different tints.”

For Farrelly, making the startup a success goes beyond bringing higher-quality reading glasses to market. It’s also about serving a demographic that often gets overlooked.

“Founders in their forties do not get representation, and it’s unfortunate. And there are also people in their forties and fifties that have disposable income and are looking for cute things. They’re spending so much money on facial creams and Botox,” she says, “but then you’re forced to put this really ugly pair of glasses on your face that make you feel bad about yourself.”

While Cheeterz Club today is selling direct to the consumer, the company is talking to eye doctors, boutiques and others who may eventually resell for them, as more of a B2B model. It’s also testing selling on Amazon with one pair of Blue Light glasses.

Cheeterz Club plans to start discussing fundraising with seed investors later this fall.

Update, 8/31/21, 5:30 PM ET: Cheeterz Club incorrectly shared the number of frames available at launch. An earlier version of this article said it was 14, it’s actually 42, they said. We’ve updated with the new information. 

UK-based Heroes raises $200M to buy up more Amazon merchants for its roll-up play

By Ingrid Lunden

Heroes, one of the new wave of startups aiming to build big e-commerce businesses by buying up smaller third-party merchants on Amazon’s Marketplace, has raised another big round of funding to double down on that strategy. The London startup has picked up $200 million, money that it will mainly be using to snap up more merchants. Existing brands in its portfolio cover categories like babies, pets, sports, personal health and home and garden categories — some of them, like PremiumCare dog chews, the Onco baby car mirror, gardening tool brand Davaon and wooden foot massager roller Theraflow, category best-sellers — and the plan is to continue building up all of these verticals.

Crayhill Capital Management, a fund based out of New York, is providing the funding, and Riccardo Bruni — who co-founded the company with twin brother Alessio and third brother Giancarlo — said that the bulk of it will be going toward making acquisitions, and is therefore coming in the form of debt.

Raising debt rather than equity at this point is pretty standard for companies like Heroes. Heroes itself is pretty young: it launched less than a year ago, in November 2020, with $65 million in funding, a round comprised of both equity and debt. Other investors in the startup include 360 Capital, Fuel Ventures and Upper 90.

Heroes is playing in what is rapidly becoming a very crowded field. Not only are there tens of thousands of businesses leveraging Amazon’s extensive fulfillment network to sell goods on the e-commerce giant’s marketplace, but some days it seems we are also rapidly approaching a state of nearly as many startups launching to consolidate these third-party sellers.

Many a roll-up play follows a similar playbook, which goes like this: Amazon provides the marketplace to sell goods to consumers, and the infrastructure to fulfill those orders, by way of Fulfillment By Amazon and its Prime service. Meanwhile, the roll-up business — in this case Heroes — buys up a number of the stronger companies leveraging FBA and the marketplace. Then, by consolidating them into a single tech platform that they have built, Heroes creates better economies of scale around better and more efficient supply chains, sharper machine learning and marketing and data analytics technology, and new growth strategies. 

What is notable about Heroes, though — apart from the fact that it’s the first roll-up player to come out of the U.K., and continues to be one of the bigger players in Europe — is that it doesn’t believe that the technology plays as important a role as having a solid relationship with the companies it’s targeting, key given that now the top marketplace sellers are likely being feted by a number of companies as acquisition targets.

“The tech is very important,” said Alessio in an interview. “It helps us build robust processes that tie all the systems together across multiple brands and marketplaces. But what we have is very different from a SaaS business. We are not building an app, and tech is not the core of what we do. From the acquisitions side, we believe that human interactions ultimately win. We don’t think tech can replace a strong acquisition process.”

Image Credits: Heroes

Heroes’ three founder-brothers (two of them, Riccardo and Alessio, pictured above) have worked across a number of investment, finance and operational roles (the CVs include Merrill Lynch, EQT Ventures, Perella Weinberg Partners, Lazada, Nomura and Liberty Global) and they say there have been strong signs so far of its strategy working: of the brands that it has acquired since launching in November, they claim business (sales) has grown five-fold.

Collectively, the roll-up startups are raising hundreds of millions of dollars to fuel these efforts. Other recent hopefuls that have announced funding this year include Suma Brands ($150 million); Elevate Brands ($250 million); Perch ($775 million); factory14 ($200 million); Thrasio (currently probably the biggest of them all in terms of reach and money raised and ambitions), HeydayThe Razor GroupBrandedSellerXBerlin Brands Group (X2), Benitago, Latin America’s Valoreo and Rainforest and Una Brands out of Asia. 

The picture that is emerging across many of these operations is that many of these companies, Heroes included, do not try to make their particular approaches particularly more distinctive than those of their competitors, simply because — with nearly 10 million third-party sellers today on Amazon globally — the opportunity is likely big enough for all of them, and more, not least because of current market dynamics.

“It’s no secret that we were inspired by Thrasio and others,” Riccardo said. “Combined with COVID-19, there has been a massive acceleration of e-commerce across the continent.” It was that, plus the realization that the three brothers had the right e-commerce, fundraising and investment skills between them, that made them see what was a ‘perfect storm’ to tackle the opportunity, he continued. “So that is why we jumped into it.”

In the case of Heroes, while the majority of the funding will be used for acquisitions, it’s also planning to double headcount from its current 70 employees before the end of this year with a focus on operational experts to help run their acquired businesses. 

Data scientists: don’t be afraid to explore new avenues

By Ram Iyer
Ilyes Kacher Contributor
Ilyes Kacher is a data scientist at autoRetouch, an AI-powered platform for bulk-editing product images online.

I’m a native French data scientist who cut his teeth as a research engineer in computer vision in Japan and later in my home country. Yet I’m writing from an unlikely computer vision hub: Stuttgart, Germany.

But I’m not working on German car technology, as one would expect. Instead, I found an incredible opportunity mid-pandemic in one of the most unexpected places: An ecommerce-focused, AI-driven, image-editing startup in Stuttgart focused on automating the digital imaging process across all retail products.

My experience in Japan taught me the difficulty of moving to a foreign country for work. In Japan, having a point of entry with a professional network can often be necessary. However, Europe has an advantage here thanks to its many accessible cities. Cities like Paris, London, and Berlin often offer diverse job opportunities while being known as hubs for some specialties.

While there has been an uptick in fully remote jobs thanks to the pandemic, extending the scope of your job search will provide more opportunities that match your interest.

Search for value in unlikely places, like retail

I’m working at the technology spin-off of a luxury retailer, applying my expertise to product images. Approaching it from a data scientist’s point of view, I immediately recognized the value of a novel application for a very large and established industry like retail.

Europe has some of the most storied retail brands in the world — especially for apparel and footwear. That rich experience provides an opportunity to work with billions of products and trillions of dollars in revenue that imaging technology can be applied to. The advantage of retail companies is a constant flow of images to process that provides a playing ground to generate revenue and possibly make an AI company profitable.

Another potential avenue to explore are independent divisions typically within an R&D department. I found a significant number of AI startups working on a segment that isn’t profitable, simply due to the cost of research and the resulting revenue from very niche clients.

Companies with data are companies with revenue potential

I was particularly attracted to this startup because of the potential access to data. Data by itself is quite expensive and a number of companies end up working with a finite set. Look for companies that directly engage at the B2B or B2C level, especially retail or digital platforms that affect front-end user interface.

Leveraging such customer engagement data benefits everyone. You can apply it towards further research and development on other solutions within the category, and your company can then work with other verticals on solving their pain points.

It also means there’s massive potential for revenue gains the more cross-segments of an audience the brand affects. My advice is to look for companies with data already stored in a manageable system for easy access. Such a system will be beneficial for research and development.

The challenge is that many companies haven’t yet introduced such a system, or they don’t have someone with the skills to properly utilize it. If you finding a company isn’t willing to share deep insights during the courtship process or they haven’t implemented it, look at the opportunity to introduce such data-focused offerings.

In Europe, the best bets involve creating automation processes

I have a sweet spot for early-stage companies that give you the opportunity to create processes and core systems. The company I work for was still in its early days when I started, and it was working towards creating scalable technology for a specific industry. The questions that the team was tasked with solving were already being solved, but there were numerous processes that still had to be put into place to solve a myriad of other issues.

Our year-long efforts to automate bulk image editing taught me that as long as the AI you’re building learns to run independently across multiple variables simultaneously (multiple images and workflows), you’re developing a technology that does what established brands haven’t been able to do. In Europe, there are very few companies doing this and they are hungry for talent who can.

So don’t be afraid of a little culture shock and take the leap.

Stipop offers developers and creators instant access to a huge global sticker library

By Taylor Hatmaker

With more than 270,000 stickers, Stipop’s library of colorful, character-driven expressions has a little something for everyone.

The company offers keyboard and social app stickers through ad-supported mobile apps on iOS and Android, but it’s recently focused more on providing stickers to developers, creators and other online businesses.

“We were able to gather so many artists because we actually began as our own app that provided stickers,” Stipop co-founder Tony Park told TechCrunch. The team took what they learned from running their own consumer-facing app — namely that collecting and licensing hundreds of thousands of stickers from artists around the world is hard work — and adapted their business to help solve that problem for others.

Stipop was the first Korean company to go through Yellow, Snapchat’s exclusive accelerator. The company is also part of Y Combinator’s Summer 2021 cohort.

Stipop’s sticker library is accessible through an SDK and an API, letting developers slot the searchable sticker library into their existing software. The company already has more than 200 companies that tap into its huge sticker trove, which offers a “single-day solution” for a process that would otherwise necessitate a lot more legwork. Stipop launched a website recently that helps developers integrate its SDK and API through quick installs.

“They can just add a single line of code inside their product and will have a fully customized sticker feature [so] users will be able to spice up their chats,” Park said.

Park points out that stickers encourage engagement — and for social software, engagement means growth. Stickers are a playful way to send characters back and forth in chat, but they also pop up in a number of other less obvious spots, from dating apps to ecommerce and ridesharing apps. Stipop even drives the sticker search in work collaboration software Microsoft Teams.

The company has already partnered with Google, which uses Stipop’s sticker library in Gboard, Android Messages and Tenor, a GIF keyboard platform that Google bought in 2018. That partnership drove 600 million sticker views within the first month. A new partnership between Stipop and Coca-Cola on the near horizon will add Coke-branded stickers to its sticker library and the company is opening its doors to more brands that understand the unique appeal of stickers in messaging apps.

Park says that people tend to compare stickers and gifs, two ways of wordlessly expressing emotion and social nuance, but stickers are a world unto themselves. Stickers exist in their own creative universe, with star artists, regional themes and original casts of characters that take on a life of their own among fans. “Sticker creators have their own profession,” Park said.

Visual artists can also find a lot of traction releasing stickers, even without sophisticated illustrations. And since they’re all about meaning rather than refinement, non-designers and less skilled artists can craft hit stickers too.

“Stickers are great for them because it [is] so easy to go viral,” Park said. The company has partnered with 8,000 sticker creators across 25 languages, helping those artists monetize their creations and generate income based on how many times a sticker is shared.

Stickers command their own visual language around the world, and Park has observed interesting cultural differences in how people use them to communicate. In the West, stickers are often used in place of text, but in Asia, where they’re used much more frequently, people usually send stickers to enhance rather than replace the meaning of text.

In East Asia, users tend to prefer simple black and white stickers, but in India and Saudi Arabia, bright, golden stickers top the trends. In South America, popular stickers take on a more pixelated, unique quality that resonates culturally there.

“With stickers, you fall in love with [the] characters you send… that becomes you,” Park said.

Porsche expands online marketplace to include US inventory of new cars

By Kirsten Korosec

Porsche Cars North America has added its entire U.S. inventory of new cars to its online marketplace as the company seeks to keep up with customer demands and the industry’s shift to digital commerce.

When the online marketplace Porsche Finder launched in May 2020, customers were only able to search for pre-owned and certified pre-owned vehicles using the tool. That platform, which lets customers search by vehicle model and generation as well as price, equipment, packages and colors, now includes all new vehicle inventory from its 193 U.S. dealerships.

The platform, which was developed by automaker’s Porsche Digital subsidiary and PCNA, also includes features that let customers estimate a trade-in value and a payment calculator to compare leasing and financing options from Porsche Financial Services.

Online platforms that allow customers to search for products are not new. As customers shift their shopping to online — a trend that accelerated during the COVID-19 pandemic — digital platforms have become a critical tool for companies.

Established automakers like Porsche, however, have had to balance the demand of its customers and dealership network. Porsche doesn’t have a direct sales model like Tesla and new entrants Lucid Group and Rivian.

“The dealership is still at the center of everything we do,” PCNA President and CEO Kjell Gruner said in a recent interview. “At the dealership, we believe very much in personal interaction — in looking somebody in the eye, reading their body language. And, of course, our products are very physical.”

While all 193 dealers are participating in the Porsche Finder tool, Gruner acknowledged that this large group includes those who have been more cautious about the move toward digital commerce.

“You always have some more innovative people, some more cautious,” he said. “COVID … really prompted a willingness to go digital and to use those tools for their own advantage.”

Europe’s quick-commerce startups are overhyped: Lessons from China

By Annie Siebert
Alexander Kremer Contributor
Alexander Kremer is partner and head of China at venture capital firm Picus Capital.

More than 10 companies currently compete across Europe with an instant grocery delivery business model. Half of them were established in 2020, the year of the pandemic. These companies have raised more than $2 billion to date.

Existing and well-funded online food-delivery service players like Delivery Hero are also joining the race by launching dedicated grocery offerings. However, if lessons from the world’s largest online grocery market, China ($400 billion), matter, then it’s clear that instant delivery is not the magic bullet to crack the dominance of Europe’s incumbent supermarket chains in the overall $2 trillion-plus flat market.

Instead, China’s quick-commerce equivalents (like Dingdong Maicai, Miss Fresh and Meituan Maicai) compete alongside a wealth of other online grocery models (such as Pinduoduo, JD’s Super and Alibaba’s Taoxianda), which have helped bring total market penetration to 20% and beyond.

Quick commerce suffers from narrower profit margins compared to competing models and is addressing lower consumer demand in China than anyone in the West is expecting it to achieve in Europe and the U.S. If the performance of online grocery platforms in China (a market five to seven years ahead of Europe in terms of online retail) is anything to go by, a range of B2C business models would be more likely to displace the traditional grocery retailers.

Third-time luck for quick commerce?

The idea of ordering groceries online and having them delivered to consumers in less than an hour is nothing new. Back in the heyday of the dot-com bubble, a company attempted to do just that: Kozmo.com. Founded in 1998, it raised more than $250 million (around $400 million in today’s dollars) from investors, promising to deliver food, among other items, to consumers within an hour, while charging no delivery fees.

In 1999, it had revenues of $3.5 million and a loss of $1.8 million. However, in 2001, the business was shut down by its board after the company could not make the business model work at scale.

Some 15 years later, another company had a go. Gopuff was established in Philadelphia in 2013 and originally targeted students. What started out as a hookah delivery service soon expanded into a much broader convenience store offering and delivered to customers in approximately 30 minutes.

Gopuff was most recently valued at $15 billion after raising a total of $3.4 billion — 75% of which occurred in the past 12 months. Last year, Gopuff grew revenues from around $100 million to $340 million.

Kozmo.com went out of business after just three years. Meanwhile, Gopuff was turned down by several VCs in its early days, and it wasn’t until the pandemic that it saw a rapid acceleration in fundraising. Little did teams at either company know that they would later become the inspiration for a whole generation of founders in Europe.

Europe’s $2B instant-grocery gamble

Has anything fundamentally changed in the 20 years since Kozmo.com? Indeed, we’ve seen little technological progress that would hugely affect the operations of an instant commerce business. However, there have been much larger shifts in consumer habits.

Firstly, the number of global internet users has skyrocketed (from below 500 million to beyond 4 billion), and mobile internet has taken over. Secondly, demand for online grocery delivery has grown significantly due to the COVID-19 pandemic, as consumers have preferred to make retail purchases from home for safety reasons. Thirdly, consumers are now accustomed to paying fees for delivery services, typically around $2 per order, which Kozmo notoriously did not do.

While many online grocery business models exist, the instant grocery, quick-commerce approach has been the favorite of European entrepreneurs and VCs over the past 18 months. The model itself, also referred to as q-commerce, is not that hard to understand.

Companies maintain a small product offering of around 1,000–2,000 SKUs that consumers would otherwise find in convenience or drug stores. These products are purchased directly from brands or through distributors and are stored in self-operated microwarehouses close to customers’ locations.

Marketing tactics are aggressive, often employing vouchers for first-time users of up to $12 (50% of an average shopping basket), and many startups offer their products at supermarket price or even at a discount of 10%–15%. Delivery usually happens by bicycle, e-bike or scooter, within 10-30 minutes of an order being placed, for a fee of around $2 with no minimum order value.

Companies like Getir from Istanbul (total funding: $1 billion, last valuation: $7.5 billion) and Gorillas from Berlin (total funding: $335 million, last valuation: $1 billion) are leading the way. When Gorillas announced its $290 million Series B in March 2021, it became the fastest European startup to achieve unicorn status (nine months after launch). The company is already rumored to be seeking Series C financing at a $2.5 billion valuation.

There are more than 10 companies across Europe with more or less the same business model. Those include the 2020-established Flink (Germany-based, $300 million raised), Zapp (U.K.-based, $100 million raised), Dija (U.K.-based, $20 million raised and just acquired by Gopuff), Jiffy (U.K.-based, $7 million raised) and Cajoo (France-based, $6 million raised).

There is also JOKR, which was started by the founder of Foodpanda. JOKR was only established in Q1 2021, but right after incorporation raised one of the largest ever initial seed rounds (rumored to be $100 million) and subsequently a $170 million Series A in July to bring the model to Europe, Latin America and the U.S.

Likewise, companies coming from food delivery have pushed further into this space and received additional funding in recent months, notably Delivery Hero through Dmart and Glovo through SuperGlovo, following role models in the U.S., such as DoorDash.

Does instant grocery stand a chance of becoming profitable?

As these companies approach later-stage financing sometime in the future, questions will be asked about the path to profitability in an industry of notoriously thin margins. Indeed, this is an uncomfortable truth that hasn’t changed since the early days of Kozmo.com.

The available figures show that old patterns are repeating. Gopuff recently reported an EBITDA of negative $150 million on $340 million in revenue (EBITDA margin: -45%). Furthermore, an analysis by the German business monthly Manager Magazine concluded that Gorillas was operating at negative unit economics of -6%. Additional costs, such as overhead and technology, might push this number up significantly further.

Cannabis e-commerce startup Jane Technologies raises $100M after stellar growth

By Matt Burns

Don’t call Jane Technologies the Amazon of weed. Instead, think of Jane Technologies as the Shopify of weed, and it’s an important distinction. While other startups attempt to build a destination marketplace like Amazon, Jane Technologies is trying something more powerful. The company is building the backends for dispensaries that are quickly taking their cannabis offerings online, and the company accounts for 20% of all legal cannabis sales in the United States. To Jane Technologies, the future of cannabis isn’t a single destination like Amazon; the future of cannabis is the neighborhood dispensary that sells weed online, and Jane wants to power their online store.

Today, the company is announcing a $100m Series C financing round, bringing the total amount raised since its founding in 2015 to $130 million. Honor Ventures lead the round, and Founding Managing Partner Jeffery Housenbold joined Jane Technologies’ board of directors.

Jane Technologies expects to use the additional capital to grow its digital footprint and its teams across multiple areas of operations. The company intends to build new features and expand its product offering for large and small cannabis operations.

Online cannabis retail sales are quickly becoming the norm as consumers’ expectations change, and Jane offers a turn-key solution to build a robust online presence quickly.

Socrates Rosenfeld, Jane Technologies co-founder and CEO, is quick to point out Jane’s current positioning is a long time in the making. In an interview with TechCrunch, he says that this was a bet the company made in 2015 that the future of e-commerce is not a marketplace, but the complete digitization of all commerces.

“I think we are really seeing the next chapter of what the future of E-commerce will look like,” Rosenfeld said, “not just in the cannabis industry perhaps across the world with various retail verticals like alcohol, convenience goods, restaurants, and groceries. Local establishments [now have] some digital connective tissue to their local community, and I don’t think there’s a more challenging environment than the cannabis industry. I’m very proud of the team that we’ve come this far and still have a long way to go, but I think that’s the direct result of us being able to raise this [100 million].

It’s often cited that cannabis was one of the winners of the COVID-19 pandemic. Sales lit up as the world shut down. Jane Technologies’ internal numbers lend more supporting evidence. According to their data, only 17% of legal cannabis sales were done online before the pandemic. However, during the height of the pandemic, online sales reached a high of 52%, and now, halfway through 2021, Jane Technologies says online sales account for 38% of all legal cannabis sales.

According to Rosenfeld, in 2019, Jane saw $100 million in total transactional volume with one million people on the platform and worked with 1,000 dispensaries. In 2021, the company forecasts it will reach $3.5 billion in total transactional volume and is now working with 2,100 dispensaries, including in Canada. Even more impressive, the company has nearly doubled the number of products listed on its product database, with 700,000 items up from 350,000, showing a dramatic increase in cannabis products available to the consumer.

“We feel extremely fortunate to be born from the cannabis industry where there was no direct consumer ecosystem,” Rosenfeld said. “And we had to go and figure out a way to connect and tie the consumer to the brand and the retailer. We couldn’t do that by shipping products directly to the consumer, and we couldn’t do that by competing against the retailer; we had to work in partnership with our retail partners to provide them with powerful e-commerce enablement tools.”

Last month Jane Technologies partnered with its first Canadian retailer, High Tide. Then, two months ago, the company launched Jane Roots, a powerful all-in-one e-commerce platform that allows dispensaries to focus mainly on the front-end design while Jane takes care of the retail integrations.

“Over the last 25 years I’ve spent working with e-commerce companies, few have become enduring global platforms,” said Jeffrey Housenbold, Founding Managing Partner of Honor Ventures, in a released statement. “Jane has all the right ingredients to become the next eBay or Shopify. They are creating a win-win for all constituents in the ecosystem – brands, retailers and consumers all benefit from their platform and trust Jane to be the go-to service provider to build the future of cannabis commerce on a global basis. I’m excited to watch Socrates and his team build an amazing company, a great place to work and a trusted brand.”

Balance raises $25M in a Ribbit Capital-led Series A to grow its ‘consumer-like B2B checkout platform’

By Mary Ann Azevedo

Balance, a payments platform aimed at B2B merchants and marketplaces, has raised $25 million in a Series A funding round led by Ribbit Capital.

Avid Ventures participated in the financing, in addition to existing backers Lightspeed Ventures, Stripe, Y Combinator Continuity Fund, SciFi VC and UpWest. Other individual investors that put money in the round include early employees and executives from Plaid, Coinbase, Square, Stripe and PayPal, such as Jaqueline Reses, formerly head of Square Capital. The financing comes just over six months after Balance announced a $5.5 million seed round.

The motivation for starting the company was simple, said CEO and co-founder Bar Geron: “We wanted to create an online B2B experience that doesn’t suck.” He and Yoni Shuster, both former PayPal employees, started the company in early 2020.

B2B payments, he said, have historically differed from B2C primarily in that they have not taken place at the moment of purchase (or at the point of sale) but rather within 30 days and with an invoice. This is not an efficient process for merchants or vendors alike, the company maintains.

Meanwhile, most businesses have avoided paying for their supply with credit cards, because cards can quickly max out, Geron said.

“The only element that keeps many merchants offline is payments,” he told TechCrunch. “It’s a process that is stuck in the flow of those marketplaces and keeping them from scaling. We got fascinated with the problem.”

After starting out at Y Combinator, Balance has developed what it describes as a “consumer-like B2B checkout platform for merchants and marketplaces,” or a “self-serve digital checkout experience company for B2B businesses.”

What that means is that Balance has built a B2B payments platform that allows merchants to offer a variety of payment methods, including ACH, cards, checks and bank wires, as well as a variety of terms, including payment on delivery, net payment terms and payment by milestone. Behind the scenes, Balance underwrites the terms of those transactions requiring financing by evaluating the risk of the customer, the merchant and the specific payment terms selected. Balance is built on top of Stripe and offers all of Stripe’s credit card payment options, but then extends far beyond them.

Balance, according to Geron, invested “a lot” in APIs for marketplaces.

“We have a very robust API platform so that these businesses can manage the entire payment flow without being exposed to the risk and regulation of payments,” he told TechCrunch. “And this is all happening without them even touching the funds.”

The plus for merchants is the ability to get immediate payout that is always reconciled like credits. Marketplaces are equipped with automated vendor disbursement, a full compliance umbrella and reconciliation management, Balance says.

“We want to make the online payments experience for businesses as seamless as it is for consumer payments, and we want to do it globally,” Geron told TechCrunch.

The startup has already partnered with e-commerce giants such as BigCommerce and Magento and will soon also work with Salesforce, according to Geron. Its customers range from startups to publicly traded marketplaces to e-commerce enterprises across a variety of industries such as steel, freight, hardware, food ordering, medical supply and apparel. They include Bryzos, Choco, Zilingo and Bay Supply, among others.

It’s early days yet, but Balance has seen growth of about 500% to 600% since the time of its last raise in February, Geron said. The company, which has offices in Tel Aviv and New York, has about 30 employees.

Jordan Angelos, a general partner at Ribbit and former head of M&A and investment at Stripe, believes the fact that Balance has built its platform specifically for “rapidly scaling” B2B marketplaces and merchants is reflective of a “well-placed” focus.

“B2B marketplaces, for example, have a very particular set of payments and capital markets-related needs that can be much more holistically and elegantly solved with Balance’s flexible toolkit than alternatives,” he wrote via email. “Payments and checkout are two sides of the same coin, and Balance’s products allow users to address them together to better serve their customers as well as their own margins.”

Ramp and Brex draw diverging market plans with M&A strategies

By Ryan Lawler

Earlier today, spend management startup Ramp said it has raised a $300 million Series C that valued it at $3.9 billion. It also said it was acquiring Buyer, a “negotiation-as-a-service” platform that it believes will help customers save money on purchases and SaaS products.

The round and deal were announced just a week after competitor Brex shared news of its own acquisition — the $50 million purchase of Israeli fintech startup Weav. That deal was made after Brex’s founders invested in Weav, which offers a “universal API for commerce platforms.”

From a high level, all of the recent deal-making in corporate cards and spend management shows that it’s not enough to just help companies track what employees are expensing these days. As the market matures and feature sets begin to converge, the players are seeking to differentiate themselves from the competition.

But the point of interest here is these deals can tell us where both companies think they can provide and extract the most value from the market.

These differences come atop another layer of divergence between the two companies: While Brex has instituted a paid software tier of its service, Ramp has not.

Earning more by spending less

Let’s start with Ramp. Launched in 2019, the company is a relative newcomer in the spend management category. But by all accounts, it’s producing some impressive growth numbers. As our colleague Mary Ann Azevedo wrote:

Since the beginning of 2021, the company says it has seen its number of cardholders on its platform increase by 5x, with more than 2,000 businesses currently using Ramp as their “primary spend management solution.” The transaction volume on its corporate cards has tripled since April, when its last raise was announced. And, impressively, Ramp has seen its transaction volume increase year over year by 1,000%, according to CEO and co-founder Eric Glyman.

Ramp’s focus has always been on helping its customers save money: It touts a 1.5% cash back reward for all purchases made through its cards, and says its dashboard helps businesses identify duplicitous subscriptions and license redundancies. Ramp also alerts customers when they can save money on annual versus monthly subscriptions, which it says has led many customers to do away with established T&E platforms like Concur or Expensify.

All told, the company claims that the average customer saves 3.3% per year on expenses after switching to its platform — and all that is before it brings Buyer into the fold.

OnlyFans’ explicit content ban should spark a conversation about a creators’ bill of rights

By Ram Iyer
Bremner Morris Contributor
Bremner Morris is CMO/CRO of Rally, a crypto platform that allows creators and artists to launch their own digital currency and build sustainable, independent economies with their fan communities. Previously, he was head of global go-to-market and revenue at Patreon.

OnlyFans’ decision to ban sexually explicit content is reigniting an important and overlooked conversation around tech companies, content guidelines and sex work. However, the implications of this discussion go beyond just one platform and one marginalized group.

It’s indicative of a broken ecosystem for content creators where platforms have outsized control over the ways in which creators are allowed to share content and engage with their followers and fans. In response, creators are decentralizing, broadening their reach to multiple platforms and taking their audiences with them.

In doing so, creators also have the opportunity to define what rights they want to be built into these platforms.

History repeats itself

Creators being shut out of the individual platforms is nothing new. Many are comparing OnlyFans’ policy change to Tumblr’s move to ban adult content in 2018. This has been an ongoing issue for YouTube as well — several communities, including a group of LGBTQ YouTubers, have accused the platform of targeting them with their demonetization algorithm.

Many of these platforms, including OnlyFans, point to their payment partners’ policies as a barrier to allowing certain forms of content. One of the earliest major controversies we saw in this arena was when PayPal banned WikiLeaks in 2010.

While each of these events have drawn the ire of creators and their followers, it’s indicative of an ecosystemwide problem, not necessarily an indictment of the platforms themselves.

After all, these platforms have provided the opportunity for creators to build an audience and engage with their fans. But these platforms have also had to put policies in place to shield themselves from regulatory and reputational risk.

The core of the issue is that creators are beholden to individual platforms, always vulnerable to changing policies and forced to navigate the painful migration of their audiences and monetization from platform to platform.

That doesn’t mean that that all guidelines and policies are bad — they play a role to foster and govern a positive and safe community with thoughtful guidelines — but it should not come at the cost of harming and de-platforming the creators who fuel these platforms with content and engagement. The core of the issue is that creators are beholden to individual platforms, always vulnerable to changing policies and forced to navigate the painful migration of their audiences and monetization from platform to platform.

And, at the end of the day, it takes away from their ability to create meaningful content, engage with their communities and earn a reliable living.

As creators have lost more and more control to platforms over time, some have begun exploring alternative options that allow independent and direct monetization from their audience in a distributed way.

Decentralizing, monetizing

The direct-to-fan monetization model is already displacing the traditional ad-based, platform-dictated model that creators relied on for years. During my time at Patreon, I saw how putting control and ownership in the hands of creators builds a more sustainable, fair and vibrant creator economy. Substack has given writers a similarly powerful financial tool, and over the past few years, there has been an ever-growing number of companies that serve creators.

The challenge is that many of these companies rely on the existing systems that hamstrung the platforms of the past, and have business models that require take rates and revenue shares. In many ways, the creator economy needs new infrastructure and business models to build the next phase of creator and fan interaction.

With the right application, crypto can help rewrite the playbook of how creators monetize, engage with their fans and partner with platforms. Its peer-to-peer structure reflects the direct-to-fan relationship and allows creators to own the financial relationship with their audience instead of relying on tech giants or payment partners as middlemen. Beyond that, crypto allows creators to maintain ownership and control over their brands and intellectual property.

Additionally, many crypto projects allow participants to have a voice in the value proposition, strategic direction, operational functions and economic structures of the project via DAOs or governance tokens. In this way, creators can join projects and set the direction in a way that aligns with how they want to engage with their communities.

Creators are especially positioned to benefit from community-governed projects given their ability to motivate and engage their own communities. We are in the early phases of crypto adoption, and creators have a huge opportunity to shape the future of this paradigm shift. With social tokens, creators can mint their own cryptocurrencies that allow for a shared economy that creators and fans can grow together and use to transact directly across different platforms.

NFTs are another category that have exploded in popularity this year, but the industry is just scratching the surface of the utility that they will have. Creators and crypto projects are figuring out ways to make NFTs go beyond collectibles; NFTs provide an engaging and functional digital tool for creators to give their fans their time (through video calls or AMAs) or access to other exclusive benefits.

Creators are just beginning to discover the power that crypto provides. As the user experience of crypto-based platforms continues to become more intuitive, crypto will become ubiquitous. Before that point, creators should think about what rights they need (and can demand) from the decentralized services they use.

A creators’ bill of rights

Be it within crypto or not, creators finally have the leverage to determine their rights. While I believe that creators should be the ones leading this conversation, here are a few jumping off points:

  • Ability to move freely across platforms: Reliance on individual platforms is at the heart of many of the issues that creators face. By allowing creators to take their fans with them wherever they go, many of the problems we’ve seen even with direct-to-fan monetization can be solved.
  • Direct financial relationships between creators and fans: At the heart of the OnlyFans matter is creators’ inability to own their financial relationships with fans. Even if direct financial relationships aren’t feasible on every platform, creators should have options to own those relationships and dictate their own terms.
  • Creator-led decision-making: Historically, platforms have given creators minimal control over platformwide decisions and policies. Creators should have direct input and even be able to vote on various platformwide measures.
  • Quality over quantity: Platforms and their algorithms are structured to reward quantity and force creators down a path of burnout and hyperspeed content creation. Both creators and fans are looking for a more deep and engaging interaction and incentivizing this behavior will ensure a more vibrant and sustainable creator ecosystem.
  • Low (or zero) take rates: Big tech platforms take nearly 100% of revenue from creators. Creators (and their fans) should be earning the majority of platform revenue.
  • Equity access or revenue sharing: Big tech platforms have built empires on the labor of creators. Instead of dictating ad revenue payout to creators, decentralized platforms should allow creators to have true “skin in the game” by being able to own a piece of the pie outright or benefit from the overall growth of the ecosystem. This alignment of interests will be a major shift from the capital-labor split we see today.
  • Transparency and consultation: Creators should have full view into what they can or can’t do and a seat at the table as policies are being created and adapted. Platforms’ content moderation decisions and the algorithms behind demonetization are often opaque, broadly applied and decided without consulting the creators they will impact. They should also have visibility into the size of the overall revenue pie and their share.
  • Ability for reform and rehabilitation: We are all human, and there might be moments that a creator knowingly or unknowingly goes outside of the guidelines set by a platform. Creating a space for creators to rehabilitate their content will create a more trusting and collaborative relationship between creators and platforms.

We’ll leave it to creators to dictate their terms — they’ve been cut out of this conversation for far too long. That said, I’m confident that Rally and many other key participants in the Web 3.0 ecosystem would be open to supporting this effort to create an environment that works for creators and their fans.

Givz raises $3M in seed funding to make donations a marketing tool for businesses

By Mary Ann Azevedo

Givz, which has developed an API-powered platform that gives brands a way to convert discounts into donations, has raised $3 million in seed funding.

Eniac and Accomplice co-led the financing for the New York-based startup. Additional investors include Supernode Ventures, Claude Wasserstein of Fine Day, Phoenix Club and Dylan Whitman.

Givz was founded in 2017 to make charitable giving more accessible and convenient for the masses. In March 2020, right before the COVID-19 pandemic hit, the company pivoted from B2C to B2B and used the technology rails it had built to create the e-commerce marketing platform that Givz is today.

The company aims to drive “full-price purchasing behavior” by giving consumers the ability to convert the money they would be saving if getting a discount, and donating it to their favorite charities. 

Prior to the funding, Givz had been working with more than 80 enterprise, mid-market and SMB retail and e-commerce clients such as H&M, Tom Brady’s TB12, Seedlip and Terez, and accumulated more than 40,000 individual users. Since the shift last year, the company has helped drive more than $1 million to 1,100 charities, according to CEO and founder Andrew Forman.

It just launched on Shopify, which Forman says will give the startup access to the 1.7 million retailers that use Shopify as their e-commerce platform.

Givz operates under the premise that “donation-driven marketing” consistently outperforms discounts and costs less, “making it an attractive addition” to corporate marketing.

“We are creating a new marketing category and generating the largest sustainable charitable giving platform in the process,” he told TechCrunch. 

An example of a company using Givz can be found in Tervis, which offered customers “For every $50 you spend, you’ll receive $15 to give to the charity of your choice.” 

“They used Givz technology to allow consumers to choose the charity of their choice and make a turnkey disbursement to hundreds of charities,” Forman explained. “They saw a 20% lift in website conversion and a 17% increase in average order value as a result of this offer.”

Image Credits: Givz

Currently, Givz has eight employees with plans to more than double that number over the next year.

The company plans to use the new capital toward that hiring, and to do some marketing of its own.

“We also want to explore the full potential around the consumer behavior data we collect,” Forman said.

In the short term, Givz is focused on “Shopify growth” with direct to consumer brands.

“But we have successful use cases and huge potential with enterprise retailers and financial institutions,” Forman told TechCrunch. “In the future, we have our sights set on restaurants, the gaming industry and global expansion. I believe that using personalized donations to incentivize consumer behavior has endless application across industries, verticals and continents.”

Eniac partner Vic Singh said that there’s been a trend of brands experimenting with different ways to target the socially conscious consumer. 

“We believe Givz’s donation-driven marketing platform offers brands the best way to attract the socially conscious consumer while elevating their brand, moving more inventory and driving increased order value rather than simplistic traditional discounting,” he added.

Accomplice’s TJ Mahony said that both he and Singh believed SMS would emerge as a new marketing category, which led to early investments in Attentive and Postscript, respectively.

“We both saw a similar opportunity with Givz,” he wrote via e-mail. “Discounting is a well worn marketing muscle, but it’s detrimental to the brand, margins and customer expectations. We believe continuous impact marketing becomes the alternative to discounting and marketers will begin to build teams and budget around thoughtful and persistent giving strategies.”

This Week in Apps: OnlyFans bans sexual content, SharePlay delayed, TikTok questioned over biometric data collection

By Sarah Perez

Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy.

The app industry continues to grow, with a record 218 billion downloads and $143 billion in global consumer spend in 2020. Consumers last year also spent 3.5 trillion minutes using apps on Android devices alone. And in the U.S., app usage surged ahead of the time spent watching live TV. Currently, the average American watches 3.7 hours of live TV per day, but now spends four hours per day on their mobile devices.

Apps aren’t just a way to pass idle hours — they’re also a big business. In 2019, mobile-first companies had a combined $544 billion valuation, 6.5x higher than those without a mobile focus. In 2020, investors poured $73 billion in capital into mobile companies — a figure that’s up 27% year-over-year.

This Week in Apps offers a way to keep up with this fast-moving industry in one place with the latest from the world of apps, including news, updates, startup fundings, mergers and acquisitions, and suggestions about new apps and games to try, too.

Do you want This Week in Apps in your inbox every Saturday? Sign up here: techcrunch.com/newsletters

Top Stories

OnlyFans to ban sexually explicit content

OnlyFans logo displayed on a phone screen and a website

(Photo Illustration by Jakub Porzycki/NurPhoto via Getty Images)

Creator platform OnlyFans is getting out of the porn business. The company announced this week it will begin to prohibit any “sexually explicit” content starting on October 1, 2021 — a decision it claimed would ensure the long-term sustainability of the platform. The news angered a number of impacted creators who weren’t notified ahead of time and who’ve come to rely on OnlyFans as their main source of income.

However, word is that OnlyFans was struggling to find outside investors, despite its sizable user base, due to the adult content it hosts. Some VC firms are prohibited from investing in adult content businesses, while others may be concerned over other matters — like how NSFW content could have limited interest from advertisers and brand partners. They may have also worried about OnlyFans’ ability to successfully restrict minors from using the app, in light of what appears to be soon-to-come increased regulations for online businesses. Plus, porn companies face a number of other issues, too. They have to continually ensure they’re not hosting illegal content like child sex abuse material, revenge porn or content from sex trafficking victims — the latter which has led to lawsuits at other large porn companies.

The news followed a big marketing push for OnlyFans’ porn-free (SFW) app, OFTV, which circulated alongside reports that the company was looking to raise funds at a $1 billion+ valuation. OnlyFans may not have technically needed the funding to operate its current business — it handled more than $2 billion in sales in 2020 and keeps 20%. Rather, the company may have seen there’s more opportunity to cater to the “SFW” creator community, now that it has big names like Bella Thorne, Cardi B, Tyga, Tyler Posey, Blac Chyna, Bhad Bhabie and others on board.

U.S. lawmakers demand info on TikTok’s plans for biometric data collection

The TikTok logo is seen on an iPhone 11 Pro max

The TikTok logo is seen on an iPhone 11 Pro max. Image Credits: Nur Photo/Getty Images

U.S. lawmakers are challenging TikTok on its plans to collect biometric data from its users. TechCrunch first reported on TikTok’s updated privacy policy in June, where the company gave itself permission to collect biometric data in the U.S., including users’ “faceprints and voiceprints.” When reached for comment, TikTok could not confirm what product developments necessitated the addition of biometric data to its list of disclosures about the information it automatically collects from users, but said it would ask for consent in the case such data collection practices began.

Earlier this month, Senators Amy Klobuchar (D-MN) and John Thune (R-SD) sent a letter to TikTok CEO Shou Zi Chew, which said they were “alarmed” by the change, and demanded to know what information TikTok will be collecting and what it plans to do with the data. This wouldn’t be the first time TikTok got in trouble for excessive data collection. Earlier this year, the company paid out $92 million to settle a class-action lawsuit that claimed TikTok had unlawfully collected users’ biometric data and shared it with third parties.

Weekly News

Platforms: Apple

Image Credits: Apple

  • ⭐ Apple told developers that some of the features it announced as coming in iOS 15 won’t be available at launch. This includes one of the highlights of the new OS, SharePlay, a feature that lets people share music, videos and their screen over FaceTime calls. Other features that will come in later releases include Wallet’s support for ID cards, the App Privacy report and others that have yet to make it to beta releases.
  • Apple walked back its controversial Safari changes with the iOS 15 beta 6 update. Apple’s original redesign had shown the address bar at the bottom of the screen, floating atop the page’s content. Now the tab bar will appear below the page’s content, offering access to its usual set of buttons as when it was at the top. Users can also turn off the bottom tab bar now and revert to the old, Single Tab option that puts the address bar back at the top as before.
  • In response to criticism over its new CSAM detection technology, Apple said the version of NeuralHash that was reverse-engineered by a developer, Asuhariet Ygvar, was a generic version, and not the complete version that will roll out later this year.
  • The Verge dug through over 800 documents from the Apple-Epic trial to find the best emails, which included dirt on a number of other companies like Netflix, Hulu, Sony, Google, Nintendo, Valve, Microsoft, Amazon and more. These offered details on things like Netflix’s secret arrangement to pay only 15% of revenue, how Microsoft also quietly offers a way for some companies to bypass its full cut, how Apple initially saw the Amazon Appstore as a threat and more.

Platforms: Google

  • A beta version of the Android Accessibility Suite app (12.0.0) which rolled out with the fourth Android beta release added something called “Camera Switches” to Switch Access, a toolset that lets you interact with your device without using the touchscreen. Camera Switches allows users to navigate their phone and use its features by making face gestures, like a smile, open mouth, raised eyebrows and more.
  • Google announced its Pixel 5a with 5G, the latest A-series Pixel phone, will arrive on August 27, offering IP67 water resistance, long-lasting Adaptive Battery, Pixel’s dual-camera system and more, for $449. The phone makes Google’s default Android experience available at a lower price point than the soon to arrive Pixel 6.
  • An unredacted complaint from the Apple-Epic trial revealed that Google had quietly paid developers hundreds of millions of dollars via a program known as “Project Hug,” (later “Apps and Games Velocity Program”) to keep their games on the Play Store. Epic alleges Google launched the program to keep developers from following its lead by moving their games outside the store.

Augmented Reality

  • Snap on Thursday announced it hired its first VP of Platform Partnerships to lead AR, Konstantinos Papamiltiadis (“KP”). The new exec will lead Snap’s efforts to onboard partners, including individual AR creators building via Lens Studio as well as large companies that incorporate Snapchat’s camera and AR technology (Camera Kit) into their apps. KP will join in September, and report to Ben Schwerin, SVP of Content and Partnerships.

Fintech

  • Crypto exchange Coinbase will enter the Japanese market through a new partnership with Japanese financial giant Mitsubishi UFJ Financial Group (MUFG). The company said it plans to launch other localized versions of its existing global services in the future.

Social

Image Credits: Facebook

  • Facebook launched a “test” of Facebook Reels in the U.S. on iOS and Android. The new feature brings the Reels experience to Facebook, allowing users to create and share short-form video content directly within the News Feed or within Facebook Groups. Instagram Reels creators can also now opt in to have their Reels featured on users’ News Feed. The company is heavily investing its its battle with TikTok, even pledging that some portion of its $1 billion creator fund will go toward Facebook Reels.
  • Twitter’s redesign of its website and app was met with a lot of backlash from users and accessibility experts alike. The company choices add more visual contrast between various elements and may have helped those with low vision. But for others, the contrast is causing strain and headaches. Experts believe accessibility isn’t a one-size fits all situation, and Twitter should have introduced tools that allowed people to adjust their settings to their own needs.
  • The pro-Trump Twitter alternative Gettr’s lack of moderation has allowed users to share child exploitation images, according to research from the Stanford Internet Observatory’s Cyber Policy Center.
  • Pinterest rolled out a new set of more inclusive search filters that allow people to find styles for different types of hair textures — like coily, curly, wavy, straight, as well as shaved or bald and protective styles. 

Photos

  • Photoshop for iPad gained new image correction tools, including the Healing Brush and Magic Wand, and added support for connecting an iPad to external monitors via HDMI or USB-C. The company also launched a Photoshop Beta program on the desktop.

Messaging

  • WhatsApp is being adopted by the Taliban to spread its message across Afghanistan, despite being on Facebook’s list of banned organizations. The company says it’s proactively removing Taliban content — but that may be difficult to do since WhatsApp’s E2E encryption means it can’t read people’s texts. This week, Facebook shut down a Taliban helpline in Kabul, which allowed civilians to report violence and looting, but some critics said this wasn’t actually helping local Afghans, as the group was now in effect governing the region.
  • WhatsApp is also testing a new feature that will show a large preview when sharing links, which some suspect may launch around the time when the app adds the ability to have the same account running on multiple devices.

Streaming & Entertainment

  • Netflix announced it’s adding spatial audio support on iPhone and iPad on iOS 14, joining other streamers like HBO Max, Disney+ and Peacock that have already pledged to support the new technology. The feature will be available to toggle on and off in the Control Center, when it arrives.
  • Blockchain-powered streaming music service Audius partnered with TikTok to allow artists to upload their songs using TikTok’s new SoundKit in just one click.
  • YouTube’s mobile app added new functionality that allows users to browse a video’s chapters, and jump into the chapter they want directly from the search page.
  • Spotify’s Anchor app now allows users in global markets to record “Music + Talk” podcasts, where users can combine spoken word recordings with any track from Spotify’s library of 70 million songs for a radio DJ-like experience.
  • Podcasters are complaining that Apple’s revamped Podcasts platform is not working well, reports The Verge. Podcasts Connect has been buggy, and sports a confusing interface that has led to serious user errors (like entire shows being archived). And listeners have complained about syncing problems and podcasts they already heard flooding their libraries.

Dating

  • Tinder announced a new feature that will allow users to voluntarily verify their identity on the platform, which will allow the company to cross-reference sex offender registry data. Previously, Tinder would only check this database when a user signed up for a paid subscription with a credit card.

Gaming

Image Source: The Pokémon Company

  • Pokémon Unite will come to iOS and Android on September 22, The Pokémon Company announced during a livestream this week. The strategic battle game first launched on Nintendo Switch in late July.
  • Developer Konami announced a new game, Castlevania: Grimoire of Souls, which will come exclusively to Apple Arcade. The game is described as a “full-fledged side-scrolling action game,” featuring a roster of iconic characters from the classic game series. The company last year released another version of Castelvania on the App Store and Google Play.
  • Dragon Ball Z: Dokkan Battle has now surpassed $3 billion in player spending since its 2015 debut, reported Sensor Tower. The game from Bandai Namco took 20 months to reach the figure after hitting the $2 billion milestone in 2019. The new landmark sees the game joining other top-grossers, including Clash Royale, Lineage M and others.
  • Sensor Tower’s mobile gaming advertising report revealed data on top ad networks in the mobile gaming market, and their market share. It also found puzzle games were among the top advertisers on gaming-focused networks like Chartboost, Unity, IronSource and Vungle. On less game-focused networks, mid-core games were top titles, like Call of Duty: Mobile and Top War. 

Image Credits: Sensor Tower

Health & Fitness

  • Apple is reportedly scaling back HealthHabit, an internal app for Apple employees that allowed them to track fitness goals, talk to clinicians and coaches at AC Wellness (a doctors’ group Apple works with) and manage hypertension. According to Insider, 50 employees had been tasked to work on the project.
  • Samsung launched a new product for Galaxy smartphones in partnership with healthcare nonprofit The Commons Project, that allows U.S. users to save a verifiable copy of their vaccination card in the Samsung Pay digital wallet.

Image Credits: Samsung

Adtech

Government & Policy

  • China cited 43 apps, including Tencent’s WeChat and an e-reader from Alibaba, for illegally transferring user data. The regulator said the apps had transferred users location data and contact list and harassed them with pop-up windows. The apps have until August 25 to make changes before being punished.

Security & Privacy

  • A VICE report reveals a fascinating story about a jailbreaking community member who had served as a double agent by spying for Apple’s security team. Andrey Shumeyko, whose online handles included JVHResearch and YRH04E, would advertise leaked apps, manuals and stolen devices on Twitter and Discord. He would then tell Apple things like which Apple employees were leaking confidential info, which reporters would talk to leakers, who sold stolen iPhone prototypes and more. Shumeyko decided to share his story because he felt Apple took advantage of him and didn’t compensate him for the work.

Funding and M&A

💰 South Korea’s GS Retail Co. Ltd will buy Delivery Hero’s food delivery app Yogiyo in a deal valued at 800 billion won ($685 million USD). Yogiyo is the second-largest food delivery app in South Korea, with a 25% market share.

💰 Gaming platform Roblox acquired a Discord rival, Guilded, which allows users to have text and voice conversations, organize communities around events and calendars and more. Deal terms were not disclosed. Guilded raised $10.2 million in venture funding. Roblox’s stock fell by 7% after the company reported earnings this week, after failing to meet Wall Street expectations.

💰 Travel app Hopper raised $175 million in a Series G round of funding led by GPI Capital, valuing the business at over $3.5 billion. The company raised a similar amount just last year, but is now benefiting from renewed growth in travel following COVID-19 vaccinations and lifting restrictions.

💰 Indian quiz app maker Zupee raised $30 million in a Series B round of funding led by Silicon Valley-based WestCap Group and Tomales Bay Capital. The round values the company at $500 million, up 5x from last year.

💰 Danggeun Market, the publisher of South Korea’s hyperlocal community app Karrot, raised $162 million in a Series D round of funding led by DST Global. The round values the business at $2.7 billion and will be used to help the company launch its own payments platform, Karrot Pay.

💰 Bangalore-based fintech app Smallcase raised $40 million in Series C funding round led by Faering Capital and Premji Invest, with participation from existing investors, as well as Amazon. The Robinhood-like app has over 3 million users who are transacting about $2.5 billion per year.

💰 Social listening app Earbuds raised $3 million in Series A funding led by Ecliptic Capital. Founded by NFL star Jason Fox, the app lets anyone share their favorite playlists, livestream music like a DJ or comment on others’ music picks.

💰 U.S. neobank app One raised $40 million in Series B funding led by Progressive Investment Company (the insurance giant’s investment arm), bringing its total raise to date to $66 million. The app offers all-in-one banking services and budgeting tools aimed at middle-income households who manage their finances on a weekly basis.

Public Markets

📈Indian travel booking app ixigo is looking to raise Rs 1,600 crore in its initial public offering, The Economic Times reported this week.

📉Trading app Robinhood disappointed in its first quarterly earnings as a publicly traded company, when it posted a net loss of $502 million, or $2.16 per share, larger than Wall Street forecasts. This overshadowed its beat on revenue ($565 million versus $521.8 million expected) and its more than doubling of MAUs to 21.3 million in Q2.  Also of note, the company said dogecoin made up 62% of its crypto revenue in Q2.

Downloads

Polycam (update)

Image Credits: Polycam

3D scanning software maker Polycam launched a new 3D capture tool, Photo Mode, that allows iPhone and iPad users to capture professional-quality 3D models with just an iPhone. While the app’s scanner before had required the use of the lidar sensor built into newer devices like the iPhone 12 Pro and iPad Pro models, the new Photo Mode feature uses just an iPhone’s camera. The resulting 3D assets are ready to use in a variety of applications, including 3D art, gaming, AR/VR and e-commerce. Data export is available in over a dozen file formats, including .obj, .gtlf, .usdz and others. The app is a free download on the App Store, with in-app purchases available.

Jiobit (update)

Jiobit, the tracking dongle acquired by family safety and communication app Life360, this week partnered with emergency response service Noonlight to offer Jiobit Protect, a premium add-on that offers Jiobit users access to an SOS Mode and Alert Button that work with the Jiobit mobile app. SOS Mode can be triggered by a child’s caregiver when they detect — through notifications from the Jiobit app — that a loved one may be in danger. They can then reach Noonlight’s dispatcher who can facilitate a call to 911 and provide the exact location of the person wearing the Jiobit device, as well as share other details, like allergies or special needs, for example.

Tweets

When your app redesign goes wrong…

Image Credits: Twitter.com

Prominent App Store critic Kosta Eleftheriou shut down his FlickType iOS app this week after too many frustrations with App Review. He cited rejections that incorrectly argued that his app required more access than it did — something he had successfully appealed and overturned years ago. Attempted follow-ups with Apple were ignored, he said. 

Image Credits: Twitter.com

Anyone have app ideas?

Disney+ beats expectations to reach 116 million subscribers in Q3

By Sarah Perez

Disney’s streaming service is seeing improved growth, after initially seeing slower numbers of subscriber additions in Q2 as Covid lockdowns and mask mandates came to an end. Today, Disney+ beat analyst expectations for subscriber growth in Disney’s blowout third quarter, reaching 116 million paid subscribers — above the 114.5 million Wall Street had expected — and up over 100% year-over-year.

Disney also topped expectations across the board, with $17.02 billion in revenue versus the $16.76 billion expected, and earnings per share of 80 cents, above analysts’ expectations of 55 cents. Even Disney Parks were back in business. 

The pandemic had thrown a wrench in forecasting growth metrics across a number of industries, streaming included. Although Disney+ has well-established itself as one of the few competitors capable of challenging Netflix in an increasingly crowded market, it has seen some ups and downs due to Covid impacts. In the earlier days of the pandemic, streaming was on the rise. This March, Disney+ passed 100 million subscribers after just 16 months of operation. At the time, Disney execs said the service was on track to meet its projections of 260 million subscribers by 2024.

But in Disney’s second quarter earnings, the economy’s re-opening impacted Disney+ numbers, as people finally had more to do than just sit at home, and vaccinations become more widely available. Then, Disney+ only reached 103.6 million subscribers, when analysts were expecting 109.3 million, and the stock slipped as a result.

Disney wasn’t alone in feeling the impacts of Covid-induced lumpiness in subscriber additions. Netflix had also seen slower subscriber growth earlier in the year due to Covid and its far-reaching effects on things like production delays and release schedules.

But Netflix’s most recent quarter, where it once again topped subscriber estimates, had hinted that Disney+ may see a similar boost. Aiding in that growth, was Disney+’s recent market expansions in Asia. Disney+ Hotstar, arrived in Malaysia and Thailand in June, after prior launches in India and Indonesia last year.

The Hotstar version of Disney+, however, led to lowered average monthly revenue per user (ARPU) in the quarter due to its lower price points. In Q3, ARPU declined from $4.62 to $4.16 due to a higher mix of Disney+ Hotstar subscribers compared with the prior-year quarter, Disney said.

Disney’s other streaming services, Hulu and ESPN+, didn’t see the same trend.

Hulu’s subscription video service jumped from $11.39 to $13.15 year-over-year and its Live TV service (+SVOD) grew from $68.11 to $84.09. ESPN+ also grew from $4.18 to $4.47.

Subscriber growth also increased across the services, with ESPN+ growing 75% year-over-year to reach 14.9 million customers and total Hulu subscribers growing 21% to reach 42.8 million.

“…Our direct-to-consumer business is performing very well, with a total of nearly 174 million subscriptions across Disney+, ESPN+ and Hulu at the end of the quarter, and a host of new content coming to the platform,” noted Disney CEO Bob Chapek in a press release.

Across Disney’s direct-to-consumer business, revenues grew 57% to $4.3 billion and its operating loss declined from $0.6 billion to $0.3 billion, thanks to improved results from Hulu, including subscription growth and higher ad revenues.

These gains were offset by a higher loss at Disney+ attributed to programming, production, marketing and technology costs that were somewhat mitigated by increases in subscription revenues and success of the Disney+ Premier Access release of “Cruella.” (Disney’s fiscal quarter ended July 3, so the impacts of the massive haul that “Black Widow” saw following its U.S. opening — nor the resulting lawsuit from star Scarlett Johansson, for that matter — have yet to be included in these figures.)

 

Wonder Brands picks up $20M, aims to build marketplace of Latin American e-commerce brands

By Christine Hall

E-commerce roll-up companies are big in the United States, and Wonder Brands wants to be that for Latin America.

The Mexico-based company closed on $20 million in seed funding, co-led by ALLVP and Mountain Nazca, with participation from CoVenture, Victory Park Capital, GFC, QED (Fontes), Korify Capital and Endeavor Catalyst.

Wonder Brands co-founders Nicolás Gonzalez Luna and Federico Malek came together to start the company in January 2021 to acquire digital brands in the MercadoLibre and Amazon ecosystem. It then leverages its technology to scale their operations and grow sales by taking care of the marketing, analytics, supply chain management and working capital needs of the companies. It focuses on companies in the areas of home and garden, sports and fitness, beauty and personal care.

“MercadoLibre has a larger share, but Amazon is entering the region quickly, so there is not one dominating marketplace. MercadoLibre may have half the market, but then it is more balanced between a number of different platforms,” Gonzalez Luna told TechCrunch. “That diversification means operations here are more complex than the classic Amazon seller. Negotiations take longer and require more discussion about who you are to get the trust in you. That’s why we will be doing fewer, but larger deals than our U.S. counterparts.”

Malek’s background is on the commerce side, having worked at Argentinian insurtech company iunigo.com before founding e-commerce fulfillment company Avenida.com, which was acquired by Groupon in 2010. He then worked as Groupon’s managing director in the region. He knew Gonzalez Luna, whose background includes Goldman Sachs where he focused on M&A.

Michael Breitstein, principal at CoVenture, said his firm has made a variety of investments on the debt and equity sides of e-commerce and believes Malek and Gonzalez Luna provide a “great one-two punch” with their backgrounds, as well as the ability to raise capital and build out a platform.

Though there is a lot of competition to acquire digitally native companies in the $1 million revenue range, Malek said Wonder Brands will focus on larger sellers and operators, with a deal target of at least $5 million in revenue. They are also taking a “buy and build” approach rather than the “buy and consolidate” business model many of the other roll-up companies have, he added.

With its approach, the company’s goal is to enable its acquired companies to sell on multiple channels. It provides support in four areas: category management and brand development, marketing and performance, technology to automate processes like inventory and logistics and operations to manage all of the channels needed. For example, in Latin America, inventory has to be consolidated into one warehouse, but then separated depending on the sales channel, Malek.

Acquiring and scaling companies is big business. London-based Hahnbeck Business Systems, an e-commerce M&A firm that tracks funding to FBA (fulfillment by Amazon) acquirers all over the world, reports that e-commerce roll-up companies raised $7.24 billion in disclosed funding to date.

According to the different sources, reports say Latin American e-commerce company MercadoLibre has a market cap of between $70 billion and $94.billion. Meanwhile, marketplace merchants accounted for 55% of units sold on Amazon.com, according to the retailer. In 2020, that accounted for $300 billion in sales, according to Marketplace Pulse estimates based on Amazon disclosures.

The seed financing enables Wonder Brands to invest in building a team to focus on the four support areas and marketing. The company has 20 employees currently and plans to triple that in the next month. The funding is also complementing larger debt facilities that the company has available to acquire brands. Its target is to make six or seven acquisitions this year.

The company is on target to achieve $55 million in revenue by the end of the year and will then move toward $100 million in revenue in the next 12 months, Malek said. It currently operates in Mexico and plans to begin operations in Brazil by the end of 2021.

 

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