Oxbotica raises $13.8M from Ocado to build autonomous vehicle tech for the online grocer’s logistics network

Ocado, the UK online grocer that has been making strides reselling its technology to other grocery companies to help them build and run their own online ordering-and-delivery operations, is making an investment today into what it believes will be the next stage of development of that business: the company is taking a £10 million ($13.8 million) stake in Oxbotica, a UK startup that develops autonomous driving systems.

Ocado is treating this as a strategic investment to develop autonomous systems that will work across its operations, from vehicles within and around its packing warehouses through to the last-mile vehicles that deliver grocery orders to people’s homes. It says it expects the first products to come out of this deal — likely in closed environments like warehouses rather than open streets — to be online in two years.

“We are excited about the opportunity to work with Oxbotica to develop a wide range of autonomous solutions that truly have the potential to transform both our and our partners’ CFC [customer fulfillment centers] and service delivery operations, while also giving all end customers the widest range of options and flexibility,” said Alex Harvey, chief of advanced technology at Ocado, in a statement.

The investment is coming as an extension to Oxbotica’s Series B that it announced in January, bringing the total size of the round — which was led by bp ventures, the investing arm of oil and gas giant bp, and also included BGF, safety equipment maker Halma, pension fund HostPlus, IP Group, Tencent, Venture Science and funds advised by Doxa Partners — to over $60 million.

The timing of the news is very interesting. It comes just one day (less than 24 hours in fact) after Walmart in the US took a stake in Cruise, another autonomous tech company, as part of recent $2.75B monster round. Walmart owns one of Ocado’s big competitors in the UK, ASDA; and Ocado recently made its first forays into the US, by way of its deal to power Kroger’s delivery. So it seems that competition between these two is heating up on the food front.

More generally, there has been a huge surge in the world of online grocery order and delivery services in the last year, with earlier movers like online-only Ocado, Tesco in the U.K. (which owns both physical stores and online networks), and Instacart in the U.S. seeing record demand, but also a lot of competition from well-capitalized newer entrants bringing different approaches (next-hour delivery, smaller baskets, specific products).

In Ocado’s home patch of Europe, they include Oda (formerly Kolonial), Rohlik out of the Czech Republic (which in March bagged $230 million in funding); Everli out of Italy (formerly called Supermercato24, it raised $100 million); Picnic out of the Netherlands (which has yet to announce any recent funding but it feels like it’s only a matter of time given it too has publicly laid out international ambitions). Even Ocado has raised huge amounts of money to pursue its own international ambitions. And that’s before you consider the nearly dozens of next-hour, smaller bag grocery delivery plays.

A lot of these players will have had a big year last year, not least because of the pandemic. Now, the big question will be how that market will look in the future as peoples go back to “normal” life.

That may well tighten the competitive landscape, and could be one reason why companies like Ocado are putting more money into working on what might be the next generation of services, one more efficient and run purely (or at least mostly) on technology.

Logistics account for some 10% of the total cost of a grocery delivery operation. But that figure goes up when there is peak demand or anything that disrupts regularly scheduled services.

My guess is also that with all of the subsidised services that are flying about right now where you see free deliveries or discounts on groceries to encourage new business — a result of the market getting so competitive — those logistics have bled into being an even bigger cost. So it’s no surprise to see the biggest players in this space looking at ways that it might leverage advances in technology to cut those costs and speed up how those operations work.

In addition to this collaboration with Oxbotica, Ocado continues to seek further investments and/or partnerships as it grows and develops its autonomous vehicle capabilities.

Notably, Oxbotica and Ocado are not strangers. They started to work together on a delivery pilot back in 2017. You can see a video of how that delivery service looks here:

 

“This is an excellent opportunity for Oxbotica and Ocado to strengthen our partnership, sharing our vision for the future of autonomy,” said Paul Newman, co-founder and CTO of Oxbotica, in a statement. “By combining both companies’ cutting-edge knowledge and resources, we hope to bring our Universal Autonomy vision to life and continue to solve some of the world’s most complex autonomy challenges.”

But as with all self-driving technology — incredibly complex and full of regulatory and safety hurdles — we are still fairly far from full commercial systems that actually remove people from the equation completely.

“For both regulatory and complexity reasons, Ocado expects that the development of vehicles that operate in low-speed urban areas or in restricted access areas, such as inside its CFC buildings or within its CFC yards, may become a reality sooner than fully-autonomous deliveries to consumers’ homes,” Ocado notes in its statement on the deal. “However, all aspects of autonomous vehicle development will be within the scope of this collaboration. Ocado expects to see the first prototypes of some early use cases for autonomous vehicles within two years.”

More to come.

UserZoom raises $100M, acquires EnjoyHQ, to grow its platform to improve UX and other interactive design elements

Graphic designer Paul Rand once famously said that the public was more familiar with bad design than good design. While he was referring to most of the design in the world being “bad”, these days that phrase might take on a second meaning: people typically only notice and talk about (and usually complain about) design when it is ugly, or works badly. Conversely, if it’s good, and it works, you don’t hear much.

Today a startup called UserZoom that has built a platform used by companies like Google, Microsoft, PayPal, Salesforce and many others stay off the bad design radar — with tools to evaluate their design and identify where and when it doesn’t work, and how to link it up better with bigger customer experience strategies — is announcing some significant funding to expand its business.

The company has raised $100 million — money that CEO and co-founder Alfonso de la Nuez said will be used to continue building its tools and mission to make design as critical to a company’s mission as sales might be to an e-commerce company. Alongside this, it has made an acquisition, of another experience insights company called EnjoyHQ, to expand its research operations.

“We feel companies are only scratching the surface of what they could be doing,” he said. “We think experience management could become the third system of record, similar to ERP or CRM.”

This funding is being led by Owl Rock, with other unnamed investors participating. Prior to this, UserZoom raised some $34 million. It is not disclosing valuation, but de la Nuez notes that this latest investment represents a minority stake UserZoom, that the startup is profitable and grew revenues by 40% last year, and that it’s currently on an annual run rate of $80 million.

De la Nuez and UserZoom are currently based out of Los Gatos in the South Bay Area, but the company actually got its start in Barcelona, Spain, where de la Nuez and his co-founder Xavier Mestres originally ran a more old-school user experience design consulting company.

“We had physical labs, testing sites, were we ran focus groups,” he recalled. “It was tedious and manual.”

Years of working like that, and he and Mestres and a third co-founder who has since left the company, Javier Darriba, decided to see how and if they could retool the concept as a piece of software.

Their timing was perfect: It was 2007, the year of the iPhone debut, and the smaller screen of that device, and Apple’s prowess in nailing design and user experience, suddenly got the tech world (and the rest of the world) thinking about how they, too, could rethink their own digital experiences. You might think of it as an earlier iteration of the kind of digital transformation that people talk about today.

The company was growing in Spain at a time when it was much harder for startups to raise substantial rounds, so UserZoom made the decision move to California, but Mestres, who is the CTO, still runs the startup’s engineering, design and customer support teams (100 out of 300 staff in all) out of Barcelona. The cost base of employing tech people in Spain are completely different from the Bay Area, “and it’s helped us become profitable,” de la Nuez said.

The core of the company’s product is a platform that runs what it refers to as “XIM” (Experience Insights Management), which lets customers test out any digital experience — be it something on the web, or a phone, or a smartwatch or an interactive voice service, and soon, other interfaces such as automotive. (And it’s a list that is likely to grow as more hardware and services are built.) It can recruit testers to evaluate design, product interaction, marketing decisions that the company is trying out, and so on.

That testing interface is essentially started as product development begins, the idea being that customers can apply the principle of “agile development” as they continue to work on the product, rather than leave all of that to be tested after a product is technically already completed.

As a company users UserZoom, the results of tests can be shared among different stakeholders who can make notes on how product development would work (or wouldn’t work) with how they are envisioning, say, a new sales strategy or engagement goal. It also helps develop KPIs for customers to determine how and if a design is meeting KPIs.

These can cover not just basic goals like “more conversions” or “less shopping cart abandonment” or “opting in to cookies” but also whether a design is meeting accessibility goals. (As seen with the recent controversy around Ravelry, this is indeed a growing issue and one that de la Nuez said will be getting more attention at UserZoom.)

The space of UX and testing to improve it is a pretty crowded and well-funded one, with others in it including LogRocket, UserTesting, ContentSquare, and companies focusing on specific verticals, like AB Tasty. What’s giving UserZoom an edge are not just its extensive and impressive customer base but its focus on trying to provide an end-to-end concept of design and experience and how it might fit in with a bigger business strategy.

“In today’s digital economy, the quality of the customer and user experience is the driving factor that helps businesses retain customers and generate increased revenue,” said Pravin Vazirani, managing director at Owl Rock, in a statement. “Despite this, many organizations are still unable to properly extract and manage the potential insights that lie within a customer journey. UserZoom enables companies to harness these insights and drive improved digital experiences.” Andy Lefkarites, an investor at Owl Rock said in a statement, “We see a tremendous market opportunity for UserZoom, which enables companies of all sizes and industries to continually enhance and prioritize their digital experience strategy. We are pleased to be able to support UserZoom with growth capital to enable them to seize that opportunity.”

IBM acquires Italy’s MyInvenio to integrate process mining directly into its suite of automation tools

Automation has become a big theme in enterprise IT, with organizations using RPA, no-code and low-code tools, and other  technology to speed up work and bring more insights and analytics into how they do things every day, and today IBM is announcing an acquisition as it hopes to take on a bigger role in providing those automation services. The IT giant has acquired MyInvenio, an Italian startup that builds and operates process mining software.

Process mining is the part of the automation stack that tracks data produced by a company’s software, as well as how the software works, in order to provide guidance on what a company could and should do to improve it. In the case of myInvenio, the company’s approach involves making a “digital twin” of an organization to help track and optimize processes. IBM is interested in how myInvenio’s tools are able to monitor data in areas like sales, procurement, production and accounting to help organizations identify what might be better served with more automation, which it can in turn run using RPA or other tools as needed.

Terms of the deal are not being disclosed. It is not clear if myInvenio had any outside investors (we’ve asked and are awaiting a response). This is the second acquisition IBM has made out of Italy. (The first was in 2014, a company called CrossIdeas that now forms part of the company’s security business.)

IBM and myInvenio are not exactly strangers: the two inked a deal as recently as November 2020 to integrate the Italian startup’s technology into IBM’s bigger automation services business globally.

Dinesh Nirmal, GM of IBM Automation, said in an interview that the reason IBM acquired the company was two-fold. First, it lets IBM integrate the technology more closely into the company’s Cloud Pak for Business Automation, which sits on and is powered by Red Hat OpenShift and has other automation capabilities already embedded within it, specifically robotic process automation (RPA), document processing, workflows and decisions.

Second and perhaps more importantly, it will mean that IBM will not have to tussle for priority for its customers in competition with other solution partners that myInvenio already had. IBM will be the sole provider.

“Partnerships are great but in a partnership you also have the option to partner with others, and when it comes to priority who decides?” he said. “From the customer perspective, will they will work just on our deal, or others first? Now, our customers will get the end result of this… We can bring a single solution to an end user or an enterprise, saying, ‘look you have document processing, RPA, workflow, mining. That is the beauty of this and what customers will see.”

He said that IBM currently serves customers across a range of verticals including financial, insurance, healthcare and manufacturing with its automation products.

Notably, this is not the first acquisition that IBM has made to build out this stack. Last year, it acquired WDG to expand into robotic process automation.

And interestingly, it’s not even the only partnership that IBM has had in process mining. Just earlier this month, it announced a deal with one of the bigger names in the field, Celonis, a German startup valued at $2.5 billion in 2019.

Ironically, at the time, my colleague Ron wondered aloud why IBM wasn’t just buying Celonis outright in that deal. It’s hard to speculate if price was one reason. Remember: we don’t know the terms of this acquisition, but given myInvenio was off the fundraising radar, chances are it’s possibly a little less than Celonis’s pricetag.

We’ve asked and IBM has confirmed that it will continue to work with Celonis alongside now offering its own native process mining tools.

“In keeping with IBM’s open approach and $1 billion investment in ecosystem, [Global Business Services, IBM’s enterprise services division] works with a broad range of technologies based on client and market demand, including IBM AI and Automation software,” a spokesperson said in a statement. “Celonis focuses on execution management which supports GBS’ transformation of clients’ business processes through intelligent workflows across industries and domains. Specifically, Celonis has deep connectivity into enterprise systems such as Salesforce, SAP, Workday or ServiceNow, so the Celonis EMS platform helps GBS accelerate clients’ transformations and BPO engagements with these ERP platforms.”

Indeed, at the end of the day, companies that offer services, especially suites of services, are working in environments where they have to be open to customers using their own technology, or bringing in something else.

There may have been another force pushing IBM to bring more of this technology in-house, and that’s wider competitive climate. Earlier this year, SAP acquired another European startup in the process mining space, Signavio, in a deal reportedly worth about $1.2 billion. As more of these companies get snapped up by would-be IBM rivals, and those left standing are working with a plethora of other parties, maybe it was high time for IBM to make sure it had its own horse in the race.

“Through IBM’s planned acquisition of myInvenio, we are revolutionizing the way companies manage their process operations,” said Massimiliano Delsante, CEO, myInvenio, who will be staying on with the deal. “myInvenio’s unique capability to automatically analyze processes and create simulations — what we call a ‘Digital Twin of an Organization’ —  is joining with IBM’s AI-powered automation capabilities to better manage process execution. Together we will offer a comprehensive solution for digital process transformation and automation to help enterprises continuously transform insights into action.”

Cado Security locks in $10M for its cloud-native digital forensics platform

As computing systems become increasingly bigger and more complex, forensics have become an increasingly important part of how organizations can better secure them. As the recent Solar Winds breach has shown, it’s not always just a matter of being able to identify data loss, or prevent hackers from coming in in the first place. In cases where a network has already been breached, running a thorough investigation is often the only way to identify what happened, if a breach is still active, and whether a malicious hacker can strike again.

As a sign of this growing priority, a startup called Cado Security, which has built forensics technology native to the cloud to run those investigations, is announcing $10 million in funding to expand its business.

Cado’s tools today are used directly by organizations, but also security companies like Redacted — a somewhat under-the-radar security startup in San Francisco co-founded by Facebook’s former chief security officer Max Kelly and John Hering, the co-founder of Lookout. It uses Cado to carry out the forensics part of its work.

The funding for London-based Cado is being led by Blossom Capital, with existing investors Ten Eleven Ventures also participating, among others. As another signal of demand, this Series A is coming only six months after Cado raised its seed round.

The task of securing data on digital networks has grown increasingly complex over the years: not only are there more devices, more data and a wider range of configurations and uses around it, but malicious hackers have become increasingly sophisticated in their approaches to needling inside networks and doing their dirty work.

The move to the cloud has also been a major factor. While it has helped a wave of organizations expand and run much bigger computing processes are part of their business operations, it has also increased the so-called attack surface and made investigations much more complicated, not least because a lot of organizations run elastic processes, scaling their capacity up and down: this means when something is scaled down, logs of previous activity essentially disappear.

Cado’s Response product — which works proactively on a network and all of its activity after it’s installed — is built to work across cloud, on-premise and hybrid environments. Currently it’s available for AWS EC2 deployments and Docker, Kubernetes, OpenShift and AWS Fargate container systems, and the plan is to expand to Azure very soon. (Google Cloud Platform is less of a priority at the moment, CEO James Campbell said, since it rarely comes up with current and potential customers.)

Campbell co-founded Cado with Christopher Doman (the CTO) last April, with the concept for the company coming out of their respective experiences working on security services together at PwC, and respectively for government organizations (Campbell in Australia) and AlienVault (the security firm acquired by AT&T). In all of those, one persistent issue the two continued to encounter was the issue with adequate forensics data, essential for tracking the most complex breaches.

A lot of legacy forensics tools, in particular those tackling the trove of data in the cloud, was based on “processing data with open source and pulling together analysis in spreadsheets,” Campbell said. “There is a need to modernize this space for the cloud era.”

In a typical breach, it can take up to a month to run a thorough investigation to figure out what is going on, since, as Doman describes it, forensics looks at “every part of the disk, the files in a binary system. You just can’t find what you need without going to that level, those logs. We would look at the whole thing.”

However, that posed a major problem. “Having a month with a hacker running around before you can do something about it is just not acceptable,” Campbell added. The result, typically, is that other forensics tools investigate only about 5% of an organization’s data.

The solution — for which Cado has filed patents, the pair said — has essentially involved building big data tools that can automate and speed up the very labor intensive process of looking through activity logs to figure out what looks unusual and to find patterns within all the ones and zeros.

“That gives security teams more room to focus on what the hacker is getting up to, the remediation aspect,” Campbell explained.

Arguably, if there were better, faster tracking and investigation technology in place, something like Solar Winds could have been better mitigated.

The plan for the company is to bring in more integrations to cover more kinds of systems, and go beyond deployments that you’d generally classify as “infrastructure as a service.”

“Over the past year, enterprises have compressed their cloud adoption timelines while protecting the applications that enable their remote workforces,” said Imran Ghory, partner at Blossom Capital, in a statement. “Yet as high-profile breaches like SolarWinds illustrate, the complexity of cloud environments makes rapid investigation and response extremely difficult since security analysts typically are not trained as cloud experts. Cado Security solves for this with an elegant solution that automates time-consuming tasks like capturing forensically sound cloud data so security teams can move faster and more efficiently. The opportunity to help Cado Security scale rapidly is a terrific one for Blossom Capital.”

Lingoda, an on-demand online language school with live instructors and Zoom classrooms, raises $67M

A startup out of Berlin that’s built and grown a successful online language learning platform based around live teachers and virtual classrooms is announcing some funding today to continue expanding its business.

Lingoda, which connects students who want to learn a language — currently English, Spanish, French or German — with native-speaking teachers who run thousands of 24/7 live, immersion classes across a range of language levels, has picked up $67 million (€57 million). CEO Michael Shangkuan said the funding will be used both to continue enhancing its tech platform — with more tools for teachers and asynchronous supplementary material — and to widen its footprint in markets further afield such as the U.S.

The company currently has some 70,000 students, 1,400 teachers and runs more than 450,000 classes each year covering some 2,000 lessons. Shangkuan said that its revenue run rate is at 10x that of a year ago, and its customer base in that time grew 200% with students across 200 countries, so it is not a stranger to scaling as it doubles down on the model.

“We want the whole world to be learning languages,” Shangkuan said. “That is our vision.”

The funding is coming from a single investor, Summit Parnters, and the valuation is not being disclosed.

Founded in 2015 by two brothers — Fabian and Felix Wunderlich (now respectively CFO and head of sales) — Lingoda had only raised around $15 million before now, a mark of the company being pretty capital efficient.

“We only run classes that are profitable,” said Shangkuan (who is from the US, New Jersey specifically) in an interview. That being said, he added, “We can’t answer if we are profitable, but we’re not hugely unprofitable.” The market for language learning globally is around $50 billion so it’s a big opportunity despite the crowds of competition.

A lot of the innovation in edtech in recent years has been focused around automated tools to help people learn better in virtual environments: technology built with scale, better analytics or knowledge acquisition in mind.

So it’s interesting to come across edtech startups that may be using some of these same tools — the whole of Lingoda is based on Zoom, which it uses to run all of its classes online, and it’s keen to bring more analytics and other tech into the equation to improve learning between lessons, to help teachers get a better sense of students’ engagement and progress during class, and to more — but are fundamentally also retaining one of the more traditional aspects of learning, humans teaching other humans.

This is very much by design, Shangkuan said. At first, the idea was to disrupt in-person language schools, but if the startup had ever considered how and if it would pivot to more automated classes and cut the teachers out of the equation, it decided that it wasn’t worth it.

Shangkuan — himself a language enthusiast who moved himself to Germany specifically to immerse himself in a new country and language, from where he then proceeded to look for a job — noted that feedback from its students showed a strong inclination and preference for human teachers, with 97% saying that language learning in the Lingoda format has been more effective for them than the wave of language apps (which include the likes of Duolingo, Memrise, Busuu, Babbel, Rosetta and many more).

“For me as an entrepreneur trying to provide a great product, that is the bellwether, and why we are focused on delivering on our original vision,” he said, “one in which it does take teachers and real quality experiences and being able to repeat that online.” Indeed, it’s not the only tech startup that’s identified this model: VIPKid out of China and a number of others have also based learning around live teachers.

There are a number of reasons for why human teaching may be more suitable for language acquisition — starting with the fact that language is a living knowledge and so learning to speak it requires a pretty fundamental level of engagement from the learner.

Added to that is the fact that the language is almost never spoken in life in the same way that it is in textbooks (or apps) so hearing from a range of people speaking the language, as you do with the Lingoda format, which is not focused on matching a student with a single instructor (there is no Peloton-style following around instructors here), works very well.

On the subject of the teachers, it’s an interesting format that taps a little into the concept of the gig economy, although it’s not the same as being employed as a delivery driver or cleaner.

Lingoda notes that teachers set their own schedules and call classes themselves, rather than being ordered into them. Students meanwhile pay for courses along a sliding scale depending on various factors like whether you opt for group or one-to-one classes, how frequently you use the service, and which language you are learning, with per-classes prices typically ranging between $6.75 and $14.30 depending on what you choose.

Students can request a teaching level if they want it: there is always a wide selection yet with dozens of levels between basic A1 and advanced C1 proficiency, if you don’t find what you want and order it, it can take between a day and a week for it to materialise, typically with 1-5 students per class. But in any case, a teacher needs to set the class herself or himself. This format makes it fall into more standardized language learning labor models.

“We closely mirror the business model of traditional (brick and mortar) in-person language schools, where teachers work part time in compliance with local laws and have the flexibility to schedule their own classes,” a spokesperson said. “The main difference is that our model brings in-person classes online, but we are still following the same local guidelines.”

After students complete a course, Lingoda provides them with a certification. In English, you can take a recognized Cambridge assessment to verify your proficiency.

Lingoda’s growth is coming at an interesting moment in the world of online education, which has been one of the big juggernauts of the last year. Schools shutting down in-person learning, people spending more time at home, and the need for many of us to feel like we are doing something at a time of so many restrictions have all driven people to spend time learning online have all driven edtech companies to expand, and the technology that’s being used for the purpose to continue evolving.

To be clear, Lingoda has been around for years and was not hatched out of pandemic conditions: many of the learners that it has attracted are those who might have otherwise attended an in-person language class run by one of the many smaller schools you might come across in a typical city (London has hundreds of them), learning because they are planning to relocate or study abroad, or because people have newly arrived in a country and need to learn the language to get by, or they have to learn it for work.

But what’s been interesting in this last year is how services created for one kind of environment have been taken up in our “new normal.” The classes that Lingoda offers become a promise of a moment when we will be able to visit more places again, and hopefully order coffees, argue about jaywalkers, and chat with strangers here and there a little more easily.

“The language learning market is increasingly shifting to online offerings that provide consumers with a more convenient, flexible and cost-effective way to improve their foreign language skills,” said Matthias Allgaier, MD at Summit Partners, in a statement. “We believe Lingoda has developed one of the most comprehensive and effective online language learning solutions globally and is positioned to benefit from the ongoing and accelerating trend of digitization in education. We are thrilled to partner with the entire Lingoda team, and we are excited about the future for this business.” Allgaier is joining Lingoda’s board with this round.

Kroger launches its first Ocado-powered ‘shed’, a massive, robot-filled fulfillment center in Ohio

After inking a deal to work together almost three years ago, U.S. supermarket chain Kroger and U.K. online grocer Ocado today took the wraps off the first major product of that deal. Kroger has launched a new Ocado-powered customer fulfillment center in Monroe, Ohio, outside of Cincinnati, a gigantic warehouse covering 375,000 square feet and thousands of products for packing and delivering Kroger orders from online shoppers.

Built with a giant grid along the floor, “the shed”, as Ocado calls its warehouses, will feature some 1,000 robots alongside 400 human employees to pick, sort and move around items. It is expected to process as much as $700 million in sales annually, the sales of 20 brick-and-mortar stores.

Those orders, in turn, will be delivered in temperature-controlled Kroger Delivery vans, built on the model of Ocado’s vans in the US and able to store up to 20 orders. These will also be run using Ocado software, mapping algorithms to optimize deliveries along the fastest and most fuel-efficient routes.

The partnership was a long time in the making but the focus on what has come out of it is probably at its keenest right now, given the huge boost online shopping has had in the past year. The Covid-19 pandemic, and the resulting push for more social distancing, has driven a lot of people to the internet to shop, opting for deliveries over physical store visits for some or all of their food and other weekly essentials.

In call today with journalists, Rodney McMullen, Kroger’s chairman and CEO, said that delivery had grown 150% for Kroger last year. While some of that may well melt back into physical shopping as and when Covid-19 cases wane (fingers crossed), many in the industry believe that the genie has been let out of the bottle, so to speak: many consumers introduced to shopping online will stay, at least in part, and so this is about building infrastructure to meet that new demand.

(And there is some data that backs that up: Ocado CEO and co-founder Tim Steiner noted that at Ocado, pre-pandemic the average order value for the company was £105 ($144). That grew to £180 last year, and are at £120.)

Kroger, like many brick-and-mortar players, has been building out multiple fronts in its digital strategy. Alongside Ocado, the company has also been investing in technology to boost the efficiency of its in-store operations (for example by working with companies like Shelf Engine), and it has a grocery delivery partnership with Instacart.

That partnership with Instacart will remain in place, not least because it covers a much wider geography than the Ocado approach, which is live now in Cincinnati, and sounds like it will also expand to Florida. While Kroger today said that CFCs will vary in size and be built on the concept of “modules” (the Monroe facility is built on seven modules), this is still a capital intensive approach compared to the Instacart model, so might overall face a slower rollout and perhaps only make sense in Kroger’s denser markets.

“The two partnerships are critical to Kroger and our customers,” said Yael Cosset, Kroger’s CIO, in the call today. “We expect to work very closely in strategic partnership with Instacart and with Ocado.”

Ocado, an early player that started out in the UK back in 2000, is seen by many as the industry standard for how to build and run an online-only grocery business.

The company has been expanding its reach by way of taking the technology that it has built for itself and turning it into a product — a process that is still very much in development, with the company working now on robotic pickers and other autonomous systems, along with other technology to power and make its delivery service more efficient.

Ocado’s “AWS” strategy of turning tech that it has built for itself into a product to sell to others has born fruit: it now has partnerships to power online grocery services, and specifically fulfillment centers, in Japan (with Aeon), France (with Casino) and Canada (with Sobeys). That means the Kroger rollout is now a tested model, but it’s still a very notable move for the company to break into the U.S. while at the same time giving Kroger a much-needed bit of infrastructure to better compete with bigger players in the country like Walmart and Amazon.

In that regard, it will be interesting to see how and if Kroger leverages its much bigger Ocado-powered infrastructure for its other projects. The company is working with Mirakl to develop its own marketplace for third-party retailers, going head to head with similar offerings from — yes — Amazon and Walmart.

Upstack raises $50M for its platform and advisory to help businesses plan and buy for digital transformation

Digital transformation has been one of the biggest catchphrases of the past year, with many an organization forced to reckon with aging IT, a lack of digital strategy, or simply the challenges of growth after being faced with newly-remote workforces, customers doing everything online and other tech demands.

Now, a startup called Upstack that has built a platform to help those businesses evaluate how to grapple with those next steps — including planning and costing out different options and scenarios, and then ultimately buying solutions — is announcing financing to do some growth of its own.

The New York startup has picked up funding of $50 million, money that it will be using to continue building out its platform and expanding its services business.

The funding is coming from Berkshire Partners, and it’s being described as an “initial investment”. The firm, which makes private equity and late-stage growth investments, typically puts between $100 million and $1 billion in its portfolio companies so this could end up as a bigger number, especially when you consider the size of the market that Upstack is tackling: the cloud and internet infrastructure brokerage industry generates annual revenues “in excess of $70 billion,” the company estimates.

We’re asking about the valuation, but PitchBook notes that the median valuation in its deals is around $211 million. Upstack had previously raised around $35 million.

Upstack today already provides tools to large enterprises, government organizations, and smaller businesses to compare offerings and plan out pricing for different scenarios covering a range of IT areas, including private, public and hybrid cloud deployments; data center investments; network connectivity; business continuity and mobile services, and the plan is to bring in more categories to the mix, including unified communications and security.

Notably, Upstack itself is profitable and names a lot of customers that themselves are tech companies — they include Cisco, Accenture, cloud storage company Backblaze, Riverbed and Lumen — a mark of how digital transformation and planning for it are not necessarily a core competency even of digital businesses, but especially those that are not technology companies. It says it has helped complete over 3,700 IT projects across 1,000 engagements to date.

“Upstack was founded to bring enterprise-grade advisory services to businesses of all sizes,” said Christopher Trapp, founder and CEO, in a statement. “Berkshire’s expertise in the data center, connectivity and managed services sectors aligns well with our commitment to enabling and empowering a world-class ecosystem of technology solutions advisors with a platform that delivers higher value to their customers.”

The core of the Upstack’s proposition is a platform that system integrators, or advisors, plus end users themselves, can use to design and compare pricing for different services and solutions. This is an unsung but critical aspect of the ecosystem: We love to hear and write about all the interesting enterprise technology that is being developed, but the truth of the matter is that buying and using that tech is never just a simple click on a “buy” button.

Even for smaller organizations, buying tech can be a hugely time-consuming task. It involves evaluating different companies and what they have to offer — which can differ widely in the same category, and gets more complex when you start to compare different technological approaches to the same problem.

It also includes the task of designing solutions to fit one’s particular network. And finally, there are the calculations that need to be made to determine the real cost of services once implemented in an organization. It also gives users the ability to present their work, which also forms a critical part of the evaluating and decision-making process. When you think about all of this, it’s no wonder that so many organizations have opted to follow the “if it ain’t broke, don’t fix it” school of digital strategy.

As technology has evolved, the concept of digital transformation itself has become more complicated, making tools like Upstack’s more in demand both by companies and the people they hire to do this work for them. Upstack also employs a group of about 15 advisors — consultants — who also provide insight and guidance in the procurement process, and it seems some of the funding will also be used to invest in expanding that team.

(Incidentally, the model of balancing technology with human experts is one used by other enterprise startups that are built around the premise of helping businesses procure technology: BlueVoyant, a security startup that has built a platform to help businesses manage and use different security services, also retains advisors who are experts in that field.)

The advisors are part of the business model: Upstack’s customers can either pay Upstack a consulting fee to work with its advisors, or Upstack receives a commission from suppliers that a company ends up using, having evaluated and selected them via the Upstack platform.

The company competes with traditional systems integrators and consultants, but it seems that the fact that it has built a tech platform that some of its competitors also use is one reason why it’s caught the eye of investors, and also seen strong growth.

Indeed, when you consider the breadth of services that a company might use within their infrastructure — whether it’s software to run sales or marketing, or AI to run a recommendation for products on a site, or business intelligence or RPA — it will be interesting to see how and if Upstack considers deeper moves into these areas.

“Upstack has quickly become a leader in a large, rapidly growing and highly fragmented market,” said Josh Johnson, principal at Berkshire Partners, in a statement. “Our experience has reinforced the importance of the agent channel to enterprises designing and procuring digital infrastructure. Upstack’s platform accelerates this digital transformation by helping its advisors better serve their enterprise customers. We look forward to supporting Upstack’s continued growth through M&A and further investment in the platform.”

Berlin Brands Group raises $240M to buy and scale up third-party Amazon Marketplace brands

The race is on for companies building e-commerce empires by rolling up smaller, promising businesses that sell via Amazon and other marketplaces and growing by using some economies of scale to operate them as one. In the latest development, Berlin Brands Group has raised $240 million that it says it will be using to acquire smaller but promising enterprises in Europe and North America — specifically the U.S. — that are already making between $1 million and $100 million in sales via marketplaces like Amazon.

The funding is coming in the form of debt, not equity, and it is coming specifically from UniCredit, Deutsche Bank and Commerzbank, BBG founder and CEO Peter Chaljawski said in an interview. BBG is profitable and earlier this year it committed more than $300 million off its balance sheet for buying up and operating companies, and so with this debt round (which we reported earlier this year was in the works), it now has $540 million for that purpose.

“We’re in a wonderful situation with a proven business model, and this is the cheapest money you could get,” he said of the decision to go for debt, a choice often made by startups that are in capital-intensive modes but either reluctant or do not need to give up equity to raise capital to scale if they are generating cash. In the case of BBG it’s the latter, since the company is profitable. “This is better than equity. BBG does not have any debt as of 2020, and we had cash on hand for our first acquisitions, 20 brands that we bought in cash from our balance sheet. Now we want to accelerate that even more.”

Chaljawski said that BBG may well tap an equity round in the near future to bring on investors to shape its own growth and set a valuation for the company. (For a point of comparison, competitors like Thrasio are now valued in the multiple billions of dollars.)

BBG has to date mostly built its business around starting up and scaling its own in-house brands that sell on Amazon and elsewhere — starting first with home audio equipment, coming out of Chaljawski’s own interests in sound technology from a previous life as a budding dance music DJ. Its brands include Klarstein (kitchen appliances), auna (home electronics and music equipment), Capital Sports (home fitness) and blumfeldt (garden).

In a big move to scale and build out what it’s established itself, last year BBG shifted over to the roll-up model: leveraging a more buying power to cut better deals with manufacturers and other suppliers, consolidating some of the other functions like marketing, and providing a more comprehensive set of analytics around what is selling best, who is buying, how best to market an item, and more. It says it has 1.3 million square feet of warehouse space in Europe, Asia and the U.S. and is one of the biggest Amazon sellers in Europe today.

The basic idea of rolling up businesses that sell on the Amazon platform with FBA (Fulfillment by Amazon) has been around for years in fact, but the notable and more recent shift is that it has taken on a startup profile in part because of how some of the latest entrants are leveraging big data analytics, the latest innovations in manufacturing and logistics technology and a founder-led, e-commerce ethos to grow the model.

“Without data, you would go nowhere in this business,” Chaljawski said. “But on top of that, there is something you can’t pull from market data — a toolbox of manufacturing and engineering expertise that we use to evaluate products.” He says that BBG’s data scientists build algorithms that millions of products, and hundreds of thousands of sellers, to produce the data that it uses both to source potential acquisitions and to run the business.

U.S. players like Thrasio — which itself closed a $1.2 billion Series C for the same purposes: rolling up and scaling — have led the charge. But in recent months we’ve seen a number of others also move into the space, buoyed by hundreds of millions of dollars in funding from investors very keen to ride the e-commerce wave and the vision of tapping into some of the economies of scale and the marketplace model that have been such a juggernaut for Amazon.

It’s a two-sided marketplace, and Amazon has focused primarily on earning money from operating the marketplace itself and sales to consumers, so that leaves a huge opportunity on the table for someone else (or as it happens, many others) to tackle the opportunity to address the needs and services of the other side of that marketplace: the sellers.

In addition to BBG and Thrasio, others in the same space include Branded, which launched its own roll-up business on $150 million in funding earlier this year; SellerXHeydayHeroesPerch, among several others. Even removing the very-highly capitalized Thrasio and BBG from the equation, these companies have collectively raised or committed from their own balance sheets hundreds of millions of dollars to buy up small but promising third-party merchants.

If that sounds like a crowded market, well, it probably is. These are also startups, after all, and so the chances that some of these roll-up consolidators will not be that skilled at running multiple companies — with their disparate supply chains, customer bases, replacement cycles and marketing strategies — are as risky as in any other area of e-commerce startup interest.

On the other hand, though, there are a lot of opportunities to play for here.

By one estimate, there are about 5 million third-party sellers on Amazon today, a number that appears to be growing exponentially, with more than 1 million sellers joining the platform in 2020 alone. Out of those, Thrasio estimates that there are probably 50,000 businesses selling on the Amazon platform with FBA (Fulfillment by Amazon) that are making $1 million or more per year in revenues.

We have pointed out before that within that bigger number of merchants, there are a huge amount of clones and companies of questionable quality. What is interesting is that there are distinct companies, built around more originality and flair, swimming in that sea: some of them have broken through and floated, while others that have not.

So for a company like BBG, the opportunity lies in the fact that for many of these smaller but promising merchants, they have not been built with longer-term growth visions in place. The merchants might not be prepared for the kind of scaling, investment or operational commitment that would need to be made to keep their businesses going, or they simply don’t have the appetite for it. BBG’s selling point — as it is with others in this space — is that they do.

And BBG’s added pitch is that they can help open another door, to Europe. In the region, Amazon on average has about a 10% market share of marketplaces, BBG estimates, with regional players accounting for more marketplace activity than in the U.S. BBG not only has the links into selling on these other marketplaces, but the promise is that it can help improve how a brand will sell on Amazon itself in the region, given its traction in the market already. Conversely, it hopes to do the same for European brands by giving them a better window into selling in the U.S.

Chaljawski is however realistic about the profusion of companies like his, and is “sure” there will be some casualties down the road. He also believes that we may start to see some emerge around specific verticals as an alternative.

“Yes, I’m sure consolidation will happen, but I also think that we’ll see some specialization, with roll-ups focusing on one vertical or another. I think it will be a mix,” he said.

Grover raises $71M to grow its consumer electronics subscription business

A startup tapping into the concept of the circular economy, where people don’t buy items outright but pay an incremental amount to use them temporarily, has raised some funding to scale its business in Europe and beyond. Grover, a Berlin-based startup that runs a subscription model where people can rent out consumer electronics like computers, smart phones, games consoles and scooters for set fees, has picked up €60 million ($71 million).

The funding is coming in the form of €45 million in equity and €15 million in venture debt.

The company, which as of September last year had 100,000 subscriptions and now has around 150,000, said it aims to triple its active users by the end of this year to 450,000 by the end of 2021. It will be using the funds both to expand to more markets: both to grow its business in Germany, Austria and the Netherlands (where it’s already operating) and to launch in Spain and the US, and to add in more product categories into the mix, including health and fitness devices, consumer robots and smart appliances.

And, it plans to invest in more innovation around its rental services. These have seen a new wave of interest in particular in the past year of pandemic life, which has put a strain on many people’s finances; definitely made it harder to plan for anything, including what gadgets you might need one week or the next; and turned the focus for many people on consuming less, and getting more mileage out of what they and others already have.

“Now more than ever, consumers value convenience, flexibility and sustainability when they shop for and use products. This is especially true when it comes to technology and all of the possibilities that it has to offer — whether that’s productivity, fun, or staying in touch with our loved ones,” said Michael Cassau, CEO and founder of Grover, in a statement. “The fresh funding allows us to bring these possibilities to even more people across the world. It enables us to double down on creating an unparalleled customer experience for our subscribers, and to push the boundaries of the most innovative ways for people and businesses to access and enjoy technology. The strong support from our investors confirms not only the important value our service brings to people, but also Grover’s vast growth potential. We’re still just scratching the surface of a €1 trillion global market.”

JMS Capital-Everglen led the Series B equity round, with participation also from Viola Fintech, Assurant Growth, existing investors coparion, Augmentum Fintech, Circularity Capital, Seedcamp and Samsung Next, and unnamed founders and angel investors from Europe and North America, among others. Kreos Capital issued the debt.

Samsung is a strategic investor: together with Grover it launched a subscription service in December that currently covers select models from its S21 series. “Samsung powered by Grover,” as it’s called, has started out out in Germany, so one plan may be to use some of this investment to roll that out to other markets.

The funding is coming on the heels of a year when Berlin-based Grover said its business grew 2.5x (that is, 150%). Its most recent annual report noted that it had 100,000 active users as of September of last year, renting out 18,000 smartphones, 6,000 pairs of AirPods and over 1,300 electric scooters in that period. It also said that in the most recent fiscal year, it posted net revenues of about $43 million, with $71 million in annual recurring revenue, and tipping into profitability on an Ebitda basis.

It raised €250 million ($297 million) in debt just before the start of the pandemic, and previously to that also raised a Series A of $44 million in 2018, and $48 million in 2019 in a combination of equity and debt in a pre-Series B. It’s not disclosing its valuation.

The company’s service falls into a wider category of startups building services around the subscription economy model, which has touched asset-intensive categories like cars, but also much lighter, internet-only consumables like music and video streaming.

Indeed, Grover has been regularly referred to as the “Netflix for gadgets,” in part a reference to the latter company’s history starting out by sending out physical DVDs to people’s homes (which they returned when finished to get other films under a subscription model).

Similar to cars and films, there is definitely an argument to be made for owning gadgets on a subscription. The pricier that items become — and the more of them that there are battling for a share of consumer’s wallets against many of the other things that they can spend money to own or use — the less likely it is that people will be completely happy to fork out money or build in financing to own them, not least because the value of a gadget typically depreciates the minute a consumer does make the purchase.

At the same time, more consumers are subscribing, and often paying electronically, to services that they use regularly: whether it’s a Prime subscription, or Spotify, the idea with Grover — and others that are building subscriptions around physical assets — is to adopt the friction-light model of subscribing to a service, and apply it to physical goods.

And for retailers, it’s another alternative to offer customers — alongside buying outright, using credit, or offering by-now-pay-later or other kinds of financing, in order to close a deal. Shopping cart abandonment, and competition for shoppers online, are very real prospects, so anything to catch incremental wins, is a win. And if they are working in a premium (cost-per-month of use, say) to give customers possession of the gadget in question, if they manage to secure enough business this way, it actually might prove to be even more lucrative than outright sales, especially if the maintenance of those goods is offloaded to a third party like Grover.

Although some people have regularly been wary of the idea of used consumer electronics, or other used goods, that has been shifting. There have been a number of companies seeing strong growth in the last year on the back of helping consumers resell their own items. This has been helped in part by buyers being more focused on spending less (and sellers maybe earning back some money in the process), but also being keen to reduce their own footprints in the world by using items that are already out in circulation. In Europe alone, last week, Brighton-based MPB raised nearly $70 million for its used-camera equipment marketplace. Other recent deals have included used-goods marketplace Wallapop in Spain raising $191 million and clothing-focused Vestiaire Collective raising $216 million.

What is interesting here is — whether it’s a sign of the times, or because Grover might have cracked the subscription model for gadgets — the company seems to be progressing in an area that has definitely seen some fits and bumps over the years.

Lumoid out of the U.S. also focused on renting out tech gear but despite finding some traction and inking a deal with big box retailer Best Buy, it failed to raise the funding it needed to run its service and eventually shut down.  It’s also not alone in trying to tackle the market. Others in the same space include Tryatec and Wonder, which seems to be focused more on trying out technology from startups.

The big question indeed is not just whether Grover will find more of a market for its rental/subscription model, but also whether it has cracked those economics around all of the supply chain management, shipping and receiving goods, reconditioning or repairing when needed, and simply keeping strong customer service throughout all of that. As we’ve seen many times, a good idea on one level can prove extremely challenging to execute on another.

SnackMagic picks up $15M to expand from build-your-own snack boxes into a wider gifting marketplace

The office shut-down at the start of the Covid-19 pandemic last year spurred huge investment in digital transformation and a wave of tech companies helping with that, but there were some distinct losers in the shift, too — specifically those whose business models were predicated on serving the very offices that disappeared overnight. Today, one of the companies that had to make an immediate pivot to keep itself afloat is announcing a round of funding, after finding itself not just growing at a clip, but making a profit, as well.

SnackMagic, a build-your-own snack box service, has raised $15 million in a Series A round of funding led by Craft Ventures, with Luxor Capital also participating.

(Both investors have an interesting track record in the food-on-demand space: Most recently, Luxor co-led a $528 million round in Glovo in Spain, while Craft backs/has backed the likes of Cloud Kitchens, Postmates and many more).

The funding comes on the back of a strong year for the company, which hit a $20 million revenue run rate in eight months and turned profitable in December 2020.

Founder and CEO Shaunuk Amin said in an interview that the plan will be to use the funding both to continue growing SnackMagic’s existing business, as well as extend into other kinds of gifting categories. Currently, you can ship snacks anywhere in the world, but the customizable boxes — recipients are gifted an amount that they can spend, and they choose what they want in the box themselves from SnackMagic’s menu, or one that a business has created and branded as a subset of that — are only available in locations in North America, serviced by SnackMagic’s primary warehouse. Other locations are given options of pre-packed boxes of snacks right now, but the plan is to slowly extend its pick-and-mix model to more geographies, starting with the U.K.

Alongside this, the company plans to continue widening the categories of items that people can gift each other beyond chocolates, chips, hot sauces and other fun food items, into areas like alcohol, meal kits, and non-food items. There’s also scope for expanding to more use cases into areas like corporate gifting, marketing and consumer services, and analytics coming out of its sales.

Amin calls the data that SnackMagic is amassing about customer interest in different brands and products “the hidden gem” of the platform.

“It’s one of the most interesting things,” he said. Brands that want to add their items to the wider pool of products — which today numbers between 700 and 800 items — also get access to a dashboard where they monitor what’s selling, how much stock is left of their own items, and so on. “One thing that is very opaque [in the CPG world] is good data.”

For many of the bigger companies that lack their own direct sales channels, it’s a significantly richer data set than what they typically get from selling items in the average brick and mortar store, or from a bigger online retailer like Amazon. “All these bigger brands like Pepsi and Kellogg not only want to know this about their own products more but also about the brands they are trying to buy,” Amin said. Several of them, he added, have approached his company to partner and invest, so I guess we should watch this space.

SnackMagic’s success comes from a somewhat unintended, unlikely beginning, and it’s a testament to the power of compelling, yet extensible technology that can be scaled and repurposed if necessary. In its case, there is personalization technology, logistics management, product inventory and accounting, and lots of data analytics involved.

The company started out as Stadium, a lunch delivery service in New York City that was leveraging the fact that when co-workers ordered lunch or dinner together for the office — say around a team-building event or a late-night working session, or just for a regular work day — oftentimes they found that people all hankered for different things to eat.

In many cases, people typically make separate orders for the different items, but that also means if you are ordering to all eat together, things would not arrive at the same time; if it’s being expensed, it’s more complicated on that front too; and if you’re thinking about carbon footprints, it might also mean a lot less efficiency on that front too.

Stadium’s solution was a platform that provided access to multiple restaurants’ menus, and people could pick from all of them for a single order. The business had been operating for six years and was really starting to take off.

“We were quite well known in the city, and we had plans to expand, and we were on track for March 2020 being our best month ever,” Amin said. Then, Covid-19 hit. “There was no one left in the office,” he said. Revenue disappeared overnight, since the idea of delivering many items to one place instantly stopped being a need.

Amin said that they took a look at the platform they had built to pick many options (and many different costs, and the accounting that came with that) and thought about how to use that for a different end. It turned out that even with people working remotely, companies wanted to give props to their workers, either just to say hello and thanks, or around a specific team event, in the form of food and treats — all the more so since the supply of snacks you typically come across in so many office canteens and kitchens were no longer there for workers to tap.

It’s interesting, but perhaps also unsurprising, that one of the by-products of our new way of working has been the rise of more services that cater (no pun intended) to people working in more decentralised ways, and that companies exploring how to improve rewarding people in those environments are also seeing a bump.

Just yesterday, we wrote about a company called Alyce raising $30 million for its corporate gifting platform that is also based on personalization — using AI to help understand the interests of the recipient to make better choices of items that a person might want to receive.

Alyce is taking a somewhat different approach to SnackMagic: it’s not holding any products itself, and there is no warehouse but rather a platform that links up buyers with those providing products. And Alyce’s initial audience is different, too: instead of internal employees (the first, but not final, focus for SnackMagic) it is targeting corporate gifting, or presents that sales and marketing people might send to prospects or current clients as a please and thank you gesture.

But you can also see how and where the two might meet in the middle — and compete not just with each other, but the many other online retailers, Amazon and otherwise, plus the consumer goods companies themselves looking for ways of diversifying business by extending beyond the B2C channel.

“We don’t worry about Amazon. We just get better,” Amin said when I asked him about whether he worried that SnackMagic was too easy to replicate. “It might be tough anyway,” he added, since “others might have the snacks but picking and packing and doing individual customization is very different from regular e-commerce. It’s really more like scalable gifting.”

Investors are impressed with the quick turnaround and identification of a market opportunity, and how it quickly retooled its tech to make it fit for purpose.

“SnackMagic’s immediate success was due to an excellent combination of timing, innovative thinking and world-class execution,” said Bryan Rosenblatt, principal investor at Craft Ventures, in a statement. “As companies embrace the future of a flexible workplace, SnackMagic is not just a snack box delivery platform but a company culture builder.”