Saltbox raises $10.6M to help booming e-commerce stores store their goods

E-commerce is booming, but among the biggest challenges for entrepreneurs of online businesses are finding a place to store the items they are selling and dealing with the logistics of operating.

Tyler Scriven, Maxwell Bonnie and Paul D’Arrigo co-founded Saltbox in an effort to solve that problem.

The trio came up with a unique “co-warehousing” model that provides space for small businesses and e-commerce merchants to operate as well as store and ship goods, all under one roof. Beyond the physical offering, Saltbox offers integrated logistics services as well as amenities such as the rental of equipment and packing stations and access to items such as forklifts. There are no leases and tenants have the flexibility to scale up or down based on their needs.

“We’re in that sweet spot between co-working and raw warehouse space,” said CEO Scriven, a former Palantir executive and Techstars managing director.

Saltbox opened its first facility — a 27,000-square-foot location — in its home base of Atlanta in late 2019, filling it within two months. It recently opened its second facility, a 66,000-square-foot location, in the Dallas-Fort Worth area that is currently about 40% occupied. The company plans to end 2021 with eight locations, in particular eyeing the Denver, Seattle and Los Angeles markets. Saltbox has locations slated to come online as large as 110,000 square feet, according to Scriven.

The startup was founded on the premise that the need for “co-warehousing and SMB-centric logistics enablement solutions” has become a major problem for many new businesses that rely on online retail platforms to sell their goods, noted Scriven. Many of those companies are limited to self-storage and mini-warehouse facilities for storing their inventory, which can be expensive and inconvenient. 

Scriven personally met with challenges when starting his own e-commerce business, True Glory Brands, a retailer of multicultural hair and beauty products.

“We became aware of the lack of physical workspace for SMBs engaged in commerce,” Scriven told TechCrunch. “If you are in the market looking for 10,000 square feet of industrial warehouse space, you are effectively pushed to the fringes of the real estate ecosystem and then the entrepreneurial ecosystem at large. This is costing companies in significant but untold ways.”

Now, Saltbox has completed a $10.6 million Series A round of financing led by Palo Alto-based Playground Global that included participation from XYZ Venture Capital and proptech-focused Wilshire Lane Partners in addition to existing backers Village Capital and MetaProp. The company plans to use its new capital primarily to expand into new markets.

The company’s customers are typically SMB e-commerce merchants “generating anywhere from $50,000 to $10 million a year in revenue,” according to Scriven.

He emphasizes that the company’s value prop is “quite different” from a traditional flex office/co-working space.

“Our members are reliant upon us to support critical workflows,” Scriven said. 

Besides e-commerce occupants, many service-based businesses are users of Saltbox’s offering, he said, such as those providing janitorial services or that need space for physical equipment. The company offers all-inclusive pricing models that include access to loading docks and a photography studio, for example, in addition to utilities and Wi-Fi.

Image Credits: Saltbox

Image Credits: Saltbox

The company secures its properties with a mix of buying and leasing by partnering with institutional real estate investors.

“These partners are acquiring assets and in most cases, are funding the entirety of capital improvements by entering into management or revenue share agreements to operate those properties,” Scriven said. He said the model is intentionally different from that of “notable flex space operators.”

“We have obviously followed those stories very closely and done our best to learn from their experiences,” he added. 

Investor Adam Demuyakor, co-founder and managing partner of Wilshire Lane Partners, said his firm was impressed with the company’s ability to “structure excellent real estate deals” to help them continue to expand nationally.

He also believes Saltbox is “extremely well-positioned to help power and enable the next generation of great direct to consumer brands.”

Playground Global General Partner Laurie Yoler said the startup provides a “purpose-built alternative” for small businesses that have been fulfilling orders out of garages and self-storage units.

Saltbox recently hired Zubin Canteenwalla  to serve as its chief operating offer. He joined Saltbox from Industrious, an operator co-working spaces, where he was SVP of Real Estate. Prior to Industrious, he was EVP of Operations at Common, a flexible residential living brand, where he led the property management and community engagement teams.

Goldman Sachs leads $23M in funding for Brazilian e-commerce startup Olist

Olist, a Brazilian e-commerce marketplace integrator, has raised $23 million in a Series D round extension led by new investor Goldman Sachs Asset Management that brings its total Series D financing to $80 million.

Existing backer Redpoint Ventures, which first put money in Olist in 2015, also participated in the latest round. With this latest infusion, Olist has now raised over $126 million since its 2015 inception. This round is reportedly its last before the company plans to go public, according to Bloomberg.

SoftBank led the first tranch of Olist’s Series D in November as well as the company’s $46 million Series C in 2019. Valor Capital, Velt Partners, FJ Labs, Península and angel Kevin Efrusy had previously invested in the first tranche of the Series D.

Olist connects small businesses to larger product marketplaces to help entrepreneurs sell their products to a larger customer base. The company was founded with the mission of helping small merchants gain market share across the country through a SaaS licensing model to small brick and mortar businesses.

As of October 2019, Olist had more than 7,000 customers and used a drop-shipping model to send products directly from stores to clients around the country, allowing them to grow with a capital-light model.

Today, Olist says its platform provides tools that support “all the stages of an e-commerce operation” with the goal of helping merchants see “rapid increases in sales volume.” It currently has about 25,000 merchants on its platform.

The startup is no doubt benefiting from the pandemic-fueled e-commerce boom taking place all over the world as more people have turned to online shopping. Latin America, in general, has been home to increased e-commerce adoption.

Olist says its revenue tripled to a record number in the first quarter of 2021 compared to the previous year, although it did not provide hard figures. It also reportedly doubled revenue in 2020, according to Bloomberg.

Olist Store, the company’s flagship product, gives merchants a way to manage product listings, logistics and store payments. It also offers “a unique sales experience” through channels such as Mercado Livre, B2W and Via Varejo. The product saw a record GMV in the first half of the year, which was up 2.5 times over the same period in the prior year, the company said.

Last year, Olist launched a new product, Olist Shops, giving users the ability to create a virtual showcase “in less than 3 minutes” that also offers payment checkout tools and integration with logistics operators. Shops has interfaces in Portuguese, English, and Spanish, and since its launch, it has attracted more than 200,000 users in 180 countries, according to Olist.

“The pandemic has accelerated digitalizing business processes around the world, thus spurring e-commerce growth in a surprising way,” said Tiago Dalvi, Olist’s founder and CEO, in a written statement. 

The company plans to use its new capital to invest in technology and products, pursuing new mergers and acquisitions and boosting its internationalization process. This is on top of two acquisitions Olist made last year — Clickspace and Pax Logistica, which gave Olist entry into the heated logistics space with more than 4,000 registered drivers.

Specifically, CFO Eduardo Ferraz said the company is in preliminary discussions with ERPs, retailers, and companies with complementary solutions to its own.

“That is why we also decided to expand the investment in our Series D and bring Goldman Sachs as another relevant investor to our cap table,” he said.

David Castelblanco, managing director and head of Latin America Corporate and Growth Equity Investing for the Goldman Sachs Asset Management, said his firm was impressed with how Olist empowers SMBs to generate more revenue.

“Tiago and the Olist team are incredibly customer oriented and have created an innovative technological solution for their e-commerce clients,” he added.

Olist is operating in an increasingly crowded space. In March, we covered São Paulo-based Nuvemshop’s $90 million raise that was led by Silicon Valley venture firm Accel. That company has developed an e-commerce platform that aims to allow SMBs and merchants to connect more directly with their consumers. 

Mercato raises $26M Series A to help smaller grocers compete online

The pandemic upended the way people shop for their everyday needs, including groceries. Online grocery sales in the U.S. are expected to reach 21.5% of the total grocery sales by 2025, after leaping from 3.4% pre-pandemic to 10.2% as of 2020. One business riding this wave is Mercato, an online grocery platform that helps smaller grocers and speciality food stores get online quickly. After helping grow its merchant sales by 1,300% in 2020, Mercato has now closed on $26 million in Series A funding, the company tells TechCrunch.

The round was led by Velvet Sea Ventures with participation from Team Europe, the investing arm of Lukasz Gadowski, co-founder of Delivery Hero. Seed investors Greycroft and Loeb.nyc also returned for the new round Gadowski and Mike Lazerow of Velvet Sea Ventures have also now joined Mercato’s board.

Mercato itself was founded in 2015 by Bobby Brannigan, who had grown up helping at his family’s grocery store in Brooklyn. But instead of taking over the business, as his Dad had hoped, Brannigan left for college and eventually went on to bootstrap a college textbook marketplace, Valore Books, to $100 million in sales. After selling the business, he returned his focus to the family’s store and found that everything was still operating the way it had been decades ago.

Image Credits: Bobby Brannigan of Mercato

“He had a very basic website, no e-commerce, no social media, and no point-of-sale system,” explains Brannigan. “I said, ‘I’m going to build what you need.’ This was my opportunity to help my dad in an area that I knew about,” he adds.

Brannigan recruited some engineers from his last company to help him build the software systems to modernize his dad’s store, including Mercato’s co-founders Dave Bateman, Michael Mason, and Matthew Alarie. But the team soon realized could do more than help just Brannigan’s dad — they could also help the 40,000 independent grocery stores just like him better compete with the Amazon’s of the world.

The result was Mercato, a platform-as-a-service that makes it easier for smaller grocers and speciality food shops to go online to offer their inventory for pickup or delivery, without having to partner with a grocery delivery service like Instacart, AmazonFresh or Shipt.

The solution today includes an e-commerce website and data analytics platform that helps stores understand what their customers are looking for, where customers are located, how to price their products, and other insights that help them to better run their store. And Mercato is now working on adding on a supply platform to help the stores buy inventory through their system, Brannigan notes.

“Basically, the vision of it is to give them the tech, the systems, and the platform they need to be successful in this day and age,” notes Brannigan.

He likens Mercato as a sort of “Shopify for groceries,” as it gives stores their own page on Mercato where they can reach customers. When the customer visits Mercato on the web or via its app, they can enter in their zip code to see which local stores offer online shopping. Some stores simply redirect their existing websites to their Mercato page, as they can continue to offer other basic information, like address, hours, and other details about their stores on the Mercato-provided site, while gaining access to Mercato’s over 1 million customers.

However, merchants can also opt for a white-label solution that they can plug into their own website, which uses their own branding.

The stores can further customize the experience they want to offer customers, in terms of pickup and delivery, and the time frames for both they want to commit to. If they want to ease into online grocery, for example, they can start with next-day delivery services, then speed thing up to same-day when they’re ready. They can also set limits on how many time slots they offer per hour, based on staffing levels.

Image Credits: Mercato

Unlike Instacart and others which send shoppers to stores to fill the orders, Mercato allows the merchants themselves to maintain the customer relationship by handling the orders themselves, which they can receive via email, text or even robo-phone calls.

“They’re maintaining that relationship,” says Brannigan. “Usually, it’s a lot better if it’s somebody from the store [doing the shopping] because they might know the customer; they know the kind of product they’re looking for. And if they don’t have it, they know something else they can recommend — so they’re like a really efficient recommendation engine.”

“The big difference between an Instacart shopper and the worker in the store is that the worker in the store understands that somebody is trying to put a meal on the table, and certain items could be an important ingredient,” he notes. “For the shoppers at Instacart, it’s about a time clock: how quickly can they pick an order to make the most money.”

The company contracts with both national and regional couriers to handle the delivery portion, once orders are ready.

Mercato’s system was put to test during the pandemic, when demand for online grocery skyrocketed.

This is where Mercato’s ability to rapidly onboard merchants came in handy. The company says it can take stores online in just 24 hours, as it has built out a centralized product catalog of over a million items. It then connects with the store’s point-of-sale system, and uploads and matches the store’s products to their own database. This allows Mercato to map around 95% of the store’s products in a matter of minutes, with the last bit being added manually — which helps to build out Mercato’s catalog even further. Today, Mercato can integrate with virtually all point-of-sale (POS) solutions in the grocery market, which is more than 30 different systems.

As customers shop, Mercato’s system uses machine learning to help determine if a product is likely in stock by examining movement data.

“One of the challenges in grocery is that most stores actually don’t know how many quantities they have in stock of a product,” explains Brannigan. “So we launch a store, we integrate with the POS. And with the POS we can see how quickly a product is moving in-store and online. Based on movement, we can calculate what is in stock.”

This system, he says, continues to get smarter over time, too.

“We’re certainly three to five years ahead, and we’re not going back,” says Brannigan of the COVID impacts to the online grocery business. “It’s very plentiful now in many places, in terms of e-commerce offerings. And the nature of retail businesses is competitive. So if 1% of people are online, it might not drive other people. But if you have 15% of stores online, then other stores have to get online or they won’t be able to compete,” he notes.

Mercato generates revenue both from its consumer-facing membership program, with plans that range from $96/year – $228/year, depending on distance, and from the merchants themselves, who pay a single digit percentage transaction fee on orders — a lower percentage than what restaurant delivery companies charge.

The company has now scaled its service to over 1,000 merchants across 45 U.S. states, including big cities like New York, Chicago, L.A. D.C., Boston, Philadelphia, and others.

With the additional funding, Mercato aims to expand its remotely distributed team of now 80 employees, as well as its data analytics platform, which will help merchants make better decisions that impact their business. It also plans to refresh the consumer subscription to add more benefits and perks that make it more compelling.

Mercato declined to share its valuation or revenue, but as of the start of the pandemic last year, the company had said it was reaching a billion in sales and a $700 million run rate.

U.S. e-commerce on track for its first $1 trillion year by 2022, due to lasting pandemic impacts

The COVID-19 pandemic boosted U.S. online shopping by $183 billion, accord to a new report by Adobe’s e-commerce division, released this morning. This figure represents the increase in online shopping during the months of March 2020, when the pandemic began in the U.S, through February 2021. During this time, U.S. consumers spent a total of $844 billion online. Meanwhile, $813 billion was spent during the calendar year 2020 alone, up 42% over 2019. To put this $183 billion in perspective, Adobe notes it’s nearly the size of the last holiday shopping season, when $188.2 billion was spent online during the months of November and December 2020. The firm expects this growth to continue in the years ahead, reaching $1 billion by 2022.

The pandemic has served as an accelerant to many industries, pushing them years ahead of where their natural growth would have otherwise taken them.

E-commerce benefitted from this trend as well, as consumers faced stay-at-home orders, non-essential retailers closed their doors, and in-person shopping was replaced with online commerce for many consumers. Adobe says the pandemic itself produced a “rare step change in online spending, equivalent to a 20% boost,” and noted the impacts will continue even as the pandemic comes to an end in the months to come.

The company’s analysts, for example, noted that the first two months of 2021 (Jan.-Feb 2021), have already seen consumer spending of $121 billion in the U.S, or a 34% year-over-year increase.

Also during this time, the buy-now-pay-later method for online shopping has jumped up by 215% year-over-year, with orders that are 18% larger — another factor in the growing sales driven by these changes.

Adobe predicts that current growth rates will continue, leading to 2021 calendar year sales of somewhere between $850 billion and $930 billion. It then expects 2022 to deliver the first trillion-dollar year for U.S. e-commerce.

Beyond the e-commerce sales increases, the pandemic may have also led to other long-lasting changes in terms of how people shop and what they’re buying.

Adobe said that both in-store and curbside pickup services had grown in adoption by 67% year-over-year, as of Feb. 2021. Consumers seem very receptive to this hybrid model of shopping, with a recent Adobe survey finding that 30% of U.S. consumers actually prefer pickup over standard delivery, for instance.

The shift to regular online shopping may have some later impacts on typical “sales holidays” that had, in the past, drawn larger increases in shopper activity. Memorial Day 2020 commerce grew 20% less than other days that week, and resulted in $32 million less revenue, Adobe noted. Labor Day and President’s Day saw similar trends. And notably, the five days between Thanksgiving and Cyber Monday 2020 also contributed 9% less to revenue share during the holiday season, equivalent to $600 million.

There were some indications that retailers haven’t quite adapted to the surge of new online shoppers, however. “Out of stock” messages were common, peaking in July 2020 which saw 3x the number of stockouts compared with a pre-pandemic period. And it Jan. 2021, out of stock messages were elevated at 4x pre-pandemic levels. This was common particularly among groceries, pet products and medical supplies, Adobe said.

Online grocery has also benefited from the change in consumer behavior, and doesn’t show any signs of slowing. In Feb. 2021, the category was up by 230% compared with Jan. 2020, pre-pandemic.

Unlike with consumer surveys, Adobe’s data is derived from trends seen directly in Adobe Analytics, which covers over 1 trillion visits to U.S. retail sites and over 100 million SKUs, giving it a more comprehensive, real-time look into the U.S. e-commerce industry and consumer spending.

Identiq, a privacy-friendly fraud prevention startup, secures $47M at Series A

Israeli fraud prevention startup Identiq has raised $47 million at Series A as the company eyes international growth, driven in large part by the spike in online spending during the pandemic.

The round was led by Insight Partners and Entrée Capital, with participation from Amdocs, Sony Innovation Fund by IGV, as well as existing investors Vertex Ventures Israel, Oryzn Capital, and Slow Ventures.

Fraud prevention is big business, which is slated to be worth $145 billion by 2026, ballooning by eightfold in size compared to 2018. But it’s a data hungry industry, fraught with security and privacy risks, having to rely on sharing enormous sets of consumer data in order to learn who legitimate customers are in order to weed out the fraudsters, and therefore.

Identiq takes a different, more privacy-friendly approach to fraud prevention, without having to share a customer’s data with a third-party.

“Before now, the only way companies could solve this problem was by exposing the data they were given by the user to a third party data provider for validation, creating huge privacy problems,” Identiq’s chief executive Itay Levy told TechCrunch. “We solved this by allowing these companies to validate that the data they’ve been given matches the data of other companies that already know and trust the user, without sharing any sensitive information at all.”

When an Identiq customer — such as an online store — sees a new customer for the first time, the store can ask other stores in Identiq’s network if they know or trust that new customer. This peer-to-peer network uses cryptography to help online stores anonymously vet new customers to help weed out bad actors, like fraudsters and scammers, without needing to collect private user data.

So far, the company says it already counts Fortune 500 companies as customers.

Identiq said it plans to use the $47 million raise to hire and grow the company’s workforce, and aims to scale up its support for its international customers.

Will Carbon and Shahry usher in a wave of buy now, pay later services in Africa?

Affirm, Afterpay, Klarna, Quadpay. These are some of the big global players in the buy now, pay later (BNPL) movement. They allow shoppers to purchase products online and pay in installments with nominal or no fees, and have become more prominent due to how the pandemic accelerated e-commerce market growth around the world.

Credit card companies have filled in this gap for a long time. But the problem is credit cards rely on exorbitant fees, leading people to debt in the long run. While the pandemic left many jobless, it taught millennials and Gen Zers — a growing demographic with more than $200 billion in spending power — the hard way of sorting out their debt issues. In turn, a number of them have become debt-averse and increased their demand for better financing options. 

A 2020 poll carried out by Motley Fool surveyed 1,800+ people on why U.S. consumers use BNPL services. From the survey, 39% of the respondents said they used BNPL services to avoid paying credit card interest rates, while 16.3% said they don’t like to use credit cards and 14% said their credit cards were maxed out.

To millennials, there’s no incentive to own a credit card these days. A shift of preference to buy products on credit at the point-of-sale is on the rise; $680 billion will be spent by global consumers using online POS finance or BNPL over e-commerce channels by 2025.

Yet, as established players continue to have thousands of merchants and millions of users on their platforms, BNPL services are just picking up in Africa.

In a continent where debit cards (not credit) are prevalent, the upcoming players are primarily lending companies who have found a way to assess their customers’ credit risk via technology. Gathering data from partnerships with merchants, they use consumers’ shopping habits and purchasing power to drive their BNPL ambitions.

How these platforms assess credit risk

Last week, Nigerian digital bank Carbon introduced Carbon Zero, a product that lets customers purchase electronics and gadgets while paying in small installments at a 0% interest rate. However, before a purchase is made, a percentage of the total cost is paid upfront. After that, customers can pay the remaining price over six months. 

There are different reasons why such services hardly exist on the continent. For one, the country’s credit infrastructure is still a work in progress, and most of its citizens have limited purchasing power. So how does Carbon plan to assess risk? 

The company started in 2012 as a digital lender. But it has since grown to become one of the country’s few digital banks providing different financial services to its more than 659,000 customers. With extensive experience and a track record of providing loans to Nigerians (in 2020, its loan disbursement volume was $63 million), Carbon has found itself in pole position to enter the buy now, pay later market with Carbon Zero.

“We do not believe that a firm without a track record of lending can provide a similar service, except they have a significant amount of capital to burn. Carbon has been lending in Nigeria for nearly 10 years, so we have a lot of credit history of our customers, and we believe we can assess new customers very well,” Chijioke Dozie, the company’s CEO, told TechCrunch. 

Dozie says Carbon Zero hopes to be the embodiment of the promise made to its customers years ago to embed finance in their everyday purchase. But there’s a benchmark to who these customers are. According to the company, Carbon Zero can only be accessed by customers who earn at least ₦200,000 ($500) monthly, representing a small amount of the population.

The case of finding a market need and product-market fit was slightly different for Egyptian digital lending platform Shahry. In 2019, co-founders Sherif ElRakabawy and Mohamed Ewis, while running Yaoota — Egypt’s largest shopping engine and price comparison website — noticed that one of the most frequent requests they got from users was the option to buy products and pay for them later. Simultaneously, the Egyptian pound was experiencing devaluation against the dollar, thereby causing inflation.

The founders launched Shahry targeting the underbanked part of its young population to pay for products in installments, going head to head with the banks that offered similar services, albeit via credit cards.

“We’re currently the only buy now, pay later app in Egypt that offers a fully online service with no physical friction or paperwork from signing up to product home delivery,” the CEO ElRakabawy told TechCrunch.  

While Shahry’s model does not require a down payment, it does require that users apply for virtual credit through their mobile app, which they use to buy products from Arab e-commerce giant Souq. The company determines creditworthiness using algorithms and a credit risk review based on customer data. The company is also working on an AI model for fully automated instant decisions.

Partnering with merchants and raising capital to compete

Depending on the vertical, BNPL helps merchants drive sales, increase conversion rates and improve transaction sizes at decent percentages.

On how it makes money, Shahry takes interests and commission fees from merchants — a method Carbon Zero adopts. Via Souq, Shahry has Amazon as an online partner, and ElRakabawy says the company plans to onboard hundreds of brick and mortar, and online, merchants later this year.  

On the other hand, Carbon Zero launched with merchants that are top distributors of authentic electronics and gadgets in Nigeria. Although these merchants sell competing products, Dozie says Carbon doesn’t control the prices. The company is only concerned with financing the products as other necessities like product pricing, fulfilment and logistics is between the merchant and the customer.

“We have told merchants it’s in their best interest to provide the best pricing as we will not favour any merchant over the other. Customers can choose which Zero merchant they want to use, and they will vote with their wallet,” he said. 

To embark on a BNPL journey, a company must have a functioning credit system and a large war chest. This is why the likes of Affirm and Klarna have raised billions, and Afterpay millions, of dollars in investments. While Shahry and Carbon don’t have those amounts to burn, they will make do with what they have, as is usual with most African startups — case in point, despite raising just $650,000 in pre-seed investment last year, Shahry claims to have been experiencing double-digit month-on-month growth.

But ElRakabawy reckons that financing these transactions have put a strain on the business even though the company is yet to scratch the surface of what could be achieved in the Egyptian market.

“The market is huge and still mostly underserved,” he said. “The demand is so big that we’re currently only capped by the amount of loan capital we can disburse.” In the coming months, the company plans to close a second round of funding from new and existing investors to meet the growing demand for its service.

Carbon might be looking to do the same as the company gears up for a Series B in the foreseeable future. However, what is top of mind for Dozie is not fundraising; it is how to tailor the buy now, pay later service, which has become a global phenomenon, to a harsh market like Nigeria.

“We see a lot of potential in the Nigerian market for Carbon Zero. We do not believe we can blindly copy other BNPL players like Affirm or Klarna because they operate in markets that have an established offline and online retail market,” he said. “Carbon Zero will not only adapt to its environment to offer payment experience in the retail space but also in other areas where customers need to spread payments — in travel, education, and healthcare.”

Mind the gap: E-commerce marketers should revise their TAM and SAM estimates

2021 is going to be another glorious year for e-commerce.

It is that time of the year when most of us are looking back at the “total addressable market” estimates to plan for specific campaigns. Unlike us, if you had your 2021 kick off in Q3, bless your soul. You are an enlightened being.

For the rest of you, for whom e-commerce is a strategic market, I have a question — have you built your total addressable market (TAM) and serviceable addressable market (SAM) estimates for 2021 considering how things evolved in 2020?

It’s important to understand the underlying business model dynamics of companies and visualize TAM from those perspectives.

For most of us, research is a mind-numbing, repetitive exercise of clicking through links on Google until they all turn purple — at which point we start seeking the simplest possible explanation. For e-commerce, addressable market estimates come in the form of headlines from platforms like Shopify. The company quotes a merchant count number in its earnings calls and that becomes the basis for guesstimating the current TAM of e-commerce companies.

The other, rather simplistic approach is to look at the user-base count from several databases that publish tech platform-level user stats.

In reality, the simplest answer is not the right answer.

Mind the gap

Let’s take e-commerce shopping cart installations. Shopify, Magento, WooCommerce, BigCommerce and others publish installation numbers that run into millions.

Here is the dichotomy that should frame your TAM discussions.

E-commerce is long-tail heavy. Yes, there are millions of merchants, but e-commerce revenue is a fat-tail phenomenon — meaning, a disproportionate amount of e-commerce revenue comes from a few tens of thousands of companies.

PipeCandy publishes bottom-up TAM estimates with detailed data cuts by technology, logistics and payment system adoptions by firms across revenue tiers across all major markets. One of the common misconceptions we see in how firms misinterpret TAM estimates is that they equate revenue to spend potential.

BlackCart raises $8.8M Series A for its try-before-you-buy platform for online merchants

A startup called BlackCart is tackling one of the key challenges with online shopping: an inability to try on or test out the merchandise before making a purchase. That company, which has now closed on $8.8 million in Series A funding, has built a try-before-you-buy platform that integrates with e-commerce storefronts, allowing customers to ship items to their home for free and only pay if they choose to keep the item after a “try on” period has lapsed.

The new round of financing was led by Origin Ventures and Hyde Park Ventures Partners, and saw participation from Struck Capital, Citi Ventures, 500 Startups, and several other angel investors including Christian Sullivan of Republic Labs, Dean Bakes of M3 Ventures, Greg Rudin of Menlo Ventures, Jordan Nathan of Caraway Cookware, and First National Bank CFO Nick Pirollo, among others.

The Toronto-based company last year had raised a $2 million seed.

Image Credits: BlackCart

BlackCart founder Donny Ouyang had previously founded online tutoring marketplace Rayku before joining a seed stage VC fund, Caravan Ventures. But he was inspired to return to entrepreneurship, he says, after experiencing a personal problem with trying to order shoes online.

Realizing the opportunity for a “try before you buy” type of service, Ouyang first built BlackCart in 2017 as a business-to-consumer (B2C) platform that worked by way of a Chrome extension with some 50 different online merchants, largely in apparel.

This MVP of sorts proved there was consumer demand for something like this in online shopping shopping.

Ouyang credits the earlier version of BlackCart with helping the team to understand what sort of products work best for this service.

“I think, in general, for try-before-you-buy, anything that’s moderate to higher price points, lower frequency of purchase, where the customer makes a considered purchase decision — those perform really well,” he says.

Two years later, Ouyang took BlackCart to 500 Startups in San Francisco, where he then pivoted the business to a B2B offering it is today.

Image Credits: BlackCart

The startup now provides a try-before-you-buy platform that integrates with online storefronts, including those from Shopify, Magento, WooCommerce, Big Commerce, SalesForce Commerce Cloud, WordPress, and even custom storefronts. The system is designed to be turnkey for online retailers and takes around 48 hours to set up on Shopify around a week on Magento, for example.

BlackCart has also developed its own proprietary technology around fraud detection, payments, returns, and the overall user experience, which includes a button for retailers’ websites.

Because the online shoppers aren’t paying upfront for the merchandise they’re being shipped, BlackCart has to rely on an expanded array of behavioral signals and data in order to make a determination about whether the customer represents a fraud risk. As one example, if the customer had read a lot of helpdesk articles about fraud before placing their order, that could be flagged as a negative signal.

BlackCart also verifies the user’s phone number at checkout and matches it to telco and government data sets to see if their historical addresses match their shipping and billing addresses.

Image Credits: BlackCart

After the customer receives the item, they are able to keep it for a period of time (as designated by the retailer) before being charged. BlackCart covers any fraud as part of its value proposition to retailers.

BlackCart makes money by way of a rev share model, where it charges retailers a percentage of the sales where the customers have kept the products. This amount can vary based on a number of factors, like the fraud multiplier, average order value, the type of product and others. At the low end, it’s around 4% and around 10% on the high-end, Ouyang says.

The company has also expanded beyond home try-on to include try-before-you-buy for electronics, jewelry, home goods, and more. It can even ship out makeup samples for home try-on, as another option.

Once integrated on a website, BlackCart claims its merchants typically see conversion increases of 24%, average order values climb by 51%, and bottom-line sales growth of 27%.

To date, the platform been adopted by over 50 medium-to-large retailers as well as e-commerce startups, like luxury sneaker brand Koio, clothing startup Dia&Co, online mattress startup Helix Sleep, cookware startup Caraway, among others. It’s also under NDA now with a top 50 retailer it can’t yet name publicly, and has contracts signed with 13 others who are waiting to be onboarded.

Soon, BlackCart aims to offer a self-serve onboarding process, Ouyang notes.

“This would be later, end of Q2 or early Q3,” he says. “But I think for us, it will still be probably 80% self-serve, and then larger enterprises will want to be handheld.”

With the additional funding, BlackCart aims to shift to paying the merchant immediately for the items at checkout, then reconciling afterwards in order to be more efficient. This has been one of merchants’ biggest feature requests, as well.

Image Credits: BlackCart; team photo

The funding will also allow BlackCart to expand its remotely distributed 10-person team to around 50 by year-end, including engineers, product specialists, customer support staff, and sales.

More broadly, it aims to quickly capitalize on the growth in the e-commerce market, driven by the COVID-19 pandemic.

“[We want to] take advantage of the favorable macroeconomic situation to scale as quickly as possible,” Ouyang explains. “We’re hoping to get to around $250 million in transactions through our platform by the end of 2021. And this would be driven by both engineering and sales hires, and just pushing it up,” he says.

Longer-term, Ouyang envisions adding more consumer-facing features to BlackCart’s platform, like on-demand returns where a courier comes to the house to pick up your return, for example.

“Our firm is excited to partner with BlackCart as it makes try-before-you-buy the standard in online shopping,” said Prashant Shukla of Origin Ventures, who now sits on BlackCart’s board, as result of the new financing. “Its underwriting technology provides merchants with peace of mind, and its best-in-class consumer experience delivers significant sales and conversion lifts. Digital Native generations expect to be able to shop online exactly as they would in a retail store, and BlackCart is the only company providing this experience,” he adds.

E-commerce infrastructure startup Nacelle closes $18M Series A

Consumer online shopping habits have led to a windfall of revenues for these web storefronts, but COVID-era trends have also breathed new life into the market for developer tools that help e-commerce sites operate more smoothly for shoppers.

LA-based Nacelle is one of many e-commerce infrastructure startups to earn attention from investors amid COVID.

The web services company helps streamline the backends of e-commerce websites with a so-called “headless” platform that shifts how the front end of websites interact with content in the back end. The startup claims its tech can boost performance, promote better scalability, cut down on hosting costs and offer developers a more streamlined experience.

Nacelle has closed an $18 million Series A led by Inovia with participation from Accomplice, Index Ventures, High Alpha, Silas Capital and Lerer Hippeau. The company just closed a $4.8 million seed round in mid-2020, the speedy pace of their Series A’s close seems to speak to the investor enthusiasm that has deepened around companies operating in the e-commerce world.

“It’s not secret that commerce has done well during COVID,” CEO Brian Anderson tells TechCrunch. “Not only did we get this subtle structural change with COVID that I believe is long-lasting, but merchants have been focusing more on performance.”

One of the startup’s central points of focus has been ensuring that they can bring customers onboard its platform without causing undue headaches. It can be “very painful to migrate data” with other services, Anderson says. The company’s service is “anti-rip-and-replace,” meaning potential customers can integrate “without having to be rebuild their stores.”

The firm’s customer base is largely made up of small- to medium-sized e-commerce sites. Nacelle works closely with agencies for customer referrals, also tapping on Anderson’s past contacts from his days running a Shopify Plus agency.

This past August, data from IBM’s U.S. Retail Index suggested that pandemic trends had accelerated the consumer shift from primarily visiting to physical stores to shopping on e-commerce storefronts by roughly five years.

MadeiraMadeira, Brazil’s answer to Wayfair and Ikea, is now worth over $1 billion

MadeiraMadeira, the Brazilian answer to Wayfair or Ikea, is now worth $1 billion after raising $190 million in late stage financing from investors led by SoftBank’s Latin American investment fund and the Brazilian public and private investment firm, Dynamo.

An online marketplace specializing in home products, MadeiraMadeira offers roughly 300,000 products so customers can build furnish, renovate and decorate their homes.

Founded in 2009 by Daniel Scandian, Marcelo Scandian and Robson Privado, the company has seen huge tailwinds come from the shift to online shopping in Brazil as a result of the global COVID-19 pandemic.

With stores closed, online shopping in Brazil surged. As Daniel Scandian noted, before the pandemic ecommerce penetration in Brazil was at roughly 7%, that number ballooned to 17% at the height of the pandemic in Brazil and has now stabilized at around 10%.

Combining third party sales with private labeled goods and its own shipping and logistics facilities has meant that MadeiraMadeira can take the best practices from several online retailers and home furnishing stores, Scandian said.

There are more than 10,000 sellers on the MadeiraMadeira platform and roughly 2.5 million stock keeping units. In recent years the company has added showrooms to its mix of retail facilities, where customers can check out merchandise, but complete their orders online.

“That’s the way we can tackle the offline market with a digital mindset,” Scandian said. 

Money from the most recent financing will be used to invest in expanding its logistics capabilities with the addition of new warehouse facilities to expand on its existing ten locations. The company also intends to add same day delivery and the expansion of its private label services.

The new capital, likely the last round before a potential public offering, included previous investors like Flybridge and Monashees along with public-focused investment firms Velt, Brasil Capital and Lakewood.

Early investors like Monashees, Kaszek, Fundo Avila, Endeavour Catalyst and angel backers like Niraj Shah, the founder of Wayfair, and Build.com founder Christian Friedland were instrumental to MadeiraMadeira’s early success, Scandian said.

Based in Curitiba, MadeiraMadeira has over 1300 employees, with the majority of them focused on technology, logistics and product development.

“With this new investment, we are raising our commitment to MadeiraMadeira’s long-term value creation vision as the company consolidates its position as the leader in Latin America’s home goods market. Since our initial investment, MadeiraMadeira’s management team has delivered everything they’ve promised, and our faith in them continues to grow,” said Paulo Passoni, Managing Investment Partner to SoftBank Latin America fund.