Building a hardware business is hard. The combination of supply chain commoditization and the large budgets required to differentiate your brand in a world where consumers have access to tens of unbranded products through horizontal e-commerce sites, are big challenges.
Led by its founder Ben Nader, the Butterfleye team did a great job in light of these challenges. I congratulate them for the acquisition.
As Josh Breinlinger explains in his marketplace framework, in service marketplaces with a high purchase frequency like food and car ordering, or large transaction values like real estate and car buying, it makes sense to have a vertical offering. The high repeat rates in the former and the large transaction values in the latter make the unit economics work.
However, in many service marketplaces, the transaction values are less than those of purchasing a home or a car and the purchase frequency is less than that of food and taxi ordering. In order to make the unit economics work, such marketplaces needs to augment the standalone value of the first transaction which likely won’t be repeated until several months later. This requires a horizontal approach where the marketplace offers many services that meet the demands of its target customer profile.
For example, a home services marketplace benefits from offering not only cleaning but also handyman, home improvement, and moving services.
Similarly, a car services marketplace benefits from offering not only car maintenance but also repair and roadside assistance services.
TBH (short for “to be honest”) is an anonymous messaging app that promotes positive communications rather than the negative communications that often plague anonymous messaging apps. We had invested in the app’s parent company at Aslanoba Capital, and TBH was recently acquired by Facebook.
At the time of our investment in February 2015, TBH’s parent company was working on an on-campus messaging app, not the anonymous messaging app that is currently TBH. The team then went through several iterations of other messaging apps before finding success with TBH. This article outlines their journey well. In other words, TBH wasn’t an overnight success, but the result of perseverance, learning, and continual growth.
I commend the TBH team and its CEO Nikita Bier for each of these three traits.
The first of these post-round new city expansions is now taking place with Rinse beginning to serve customers in Chicago. This is the fourth city that Rinse is operational in, following San Francisco, Los Angeles, and Washington DC.
If you live in Chicago and want to check out Rinse, you can do so here.
Once you start using the Nero 1, it captures and prompts you to tag the faces it identifies. This lets the Nero 1 remain passive in the event that it sees a known face while alerting you to new faces who could represent potential intruders.
What’s interesting about the facial recognition feature is that Butterfleye developed it using the Amazon Rekognition API. In other words, Amazon built the general image recognition algorithm, and Butterfleye is now using it for the specific case of facial recognition by applying the algorithm to the facial data that it collects.
This is a great example of the commoditization of AI algorithms. As more people have access to these algorithms, the source of value increasingly shifts from the algorithm itself to the data to which the algorithm is applied.
Webrazzi, the leading tech news website in Turkey where we’re investors, recently had its 11th birthday. Founded in 2006, I’m pretty sure that this makes it the oldest company in our portfolio.
Journalism is a very challenging job in today’s world. The emergence of social media which amplifies and quickly draws both supportive and critical feedback in response to each piece of content makes you choose your words carefully and think twice before you publish something.
Add to this the fact that Webrazzi covers tech, a sector where new developments take place at a very fast pace, and you get a glimpse of how challenging the job of a Webrazzi writer is.
In light of these challenges, Webrazzi’s writers are doing a great job. Happy birthday Webrazzi.
HotelRunner, where we’re investors, is a cloud-based website development and channel management software-as-a-service (SaaS) tool for hotels. Among other services, the company gives hotels the ability to build their website, accept online reservations, push their inventory to online travel agencies, and purchase third party services from the HotelRunner Store.
This partnership will drive additional guests and revenue to Wix Hotel users. And the fact that a company like Wix chose HotelRunner as its channel management partner shows the quality and breadth of HotelRunner’s service.
Ininal is a digital banking service where we’re investors. In a post from October 2016, I shared how Ininal launched its API for developers to build apps that leverage Ininal’s technical banking infrastructure. This includes the ability to create accounts and prepaid cards, deposit money, and perform money transfers.
At the time, several companies including Bitaksi and Sinemia from our portfolio began to leverage Ininal’s API. However, Ininal offered its API privately to developers working on specific projects on a case by case basis. It wasn’t public.
Now, Ininal has officially launched its public API. This means that Ininal’s API is now accessible to all developers. As a result, the pace at which we’re going to see new projects being built using Ininal’s banking infrastructure is going to increase. That means more financial services innovation, which is a great thing.
Vivense is an omni-channel furniture retailer where we’re investors. Although the company started off as an e-commerce player, it soon recognized that it operates in a product category where a high degree of product differentiaton and high order values demand a complementary offline strategy. Vivense therefore pursued a strategy of opening physical showrooms in order to build the brand and trust necessary to convert its online visitors into customers.
Vivense has so far opened 12 showrooms across Turkey. These include 3 on the European side of Istanbul, 2 on the Asian side of Istanbul, 2 in Izmir, and 1 each in Ankara, Bursa, Adana, Antalya, and Samsun.
In addition, the company is moving into its new 8000 square meter operations center in Inegol, a city with a very strong furniture manufacturing presence which is a 3 hour drive outside of Istanbul. Vivense’s previous operations center covered 900 square meters. The growth in the size of the operations center and the new showroom openings are strong signals of the extent of the company’s ambitions.
I had the opportunity to visit both the new operations center and the Inegol showroom over the Eid holidays, and was very impressed with how far the company has progressed since its original e-commerce only days.
Now that Rinse has solidified its playbook for expanding into geographies and bringing these geographies to contribution margin profitability, it will be using the new funding to apply the same playbook to grow to 10 new US cities. Rinse is currently operational in San Francisco, Los Angeles, and Washington DC, and among the 10 new cities that it will expand to are New York, Chicago, and Boston.
We commend the Rinse team for their decision to achieve operational excellence with their existing model before rolling it out to new cities. This requires patience and this patience eventually pays off.
We also thank Partech and Rinse’s existing investors for continuing to support the company on its exciting journey.