Taking on Amazon when it comes to e-commerce can be a futile effort. There are only a handful of e-commerce companies that have successfully been able to build a billion-dollar-plus business in e-commerce (without having physical stores) in a post-Amazon world. Zulily is one of those companies. Another one, which has stayed relatively under the radar, is Boston-based Wayfair.
Wayfair, founded by college friends Niraj Shah and Steve Conine in 2002, was born from CSN Stores, and rebranded as Wayfair in 2011. Shah and Conine are serial entrepreneurs, having sold their first company, Spinners, to XML in 1998.
What’s impressive about Shah and Conine’s company is that it has quietly been able to create a solid, $1 billion business around selling home goods and furniture online and will likely IPO in the next year or so. Instead of appealing solely to a high-end market, Wayfair focuses on the mid-market, competing with the Macy’s, Overstocks, Target, Bed Bath and Beyonds of the world. In addition to the Wayfair.com destination, the company also operates a One Kings Lane-competitor, Joss & Main (which focuses on high-end furniture), as well as a modern furniture site (think CB2 or Design Within Reach) called AllModern.
As Shah explains to me, the company hasn’t focused on pursuing massive press attention to flaunt big-name backers, even though Wayfair counts early Twitter backer Spark Capital, Battery Ventures, HarbourVest Partners and Great Hill Partners as investors. In fact, for the first nine years of operation, the company was bootstrapped. In 2011, Wayfair did decide to raise funding to expand aggressively, and took $200 million from the investors named above.
The site now has 7 million home products available for purchase from a fulfillment network of 8,000 suppliers across 12,000 brands. And Wayfair is seeing $1 billion in order volume, which translates into $900 million in sales for 2013. That’s up from $600 million in sales from 2012.
One drawback to ordering on Wayfair is because of its fulfillment network, and because it is shipping furniture, it can take days or even weeks to receive an item. But unlike Target or Macy’s’ online sites, Shah says, Wayfair actually pays attention to merchandising and has been utilizing technologies such as Pinterest-like inspiration clipboards and more, to help engage consumers. In fact, the company employs over 300 data scientists and engineers to help use these data points towards increasing personalization and engagement. To be fair, the Targets and Walmarts of the world are starting to realize that design, personalization and technology can only help them increase sales, but these companies tend to move slowly.
Home and furnishing spend is a $200 billion market in the U.S. alone, and only 5 percent of this spending is online. As e-commerce continues to grow, Wayfair’s share of this will, too. Right now, Shah estimates that Wayfair has around 1 percent of all home furnishing spending online. Amazon has expanded into new territories like fashion, wine and grocery, but he isn’t afraid of the e-commerce giant growing into the home furnishings territory (via Amazon’s Quidsi acquisition, it operates a home furnishings and supplies site Casa.com).
In fact, Shah believes that home furnishings, jewelry and fashion are the only areas in e-commerce where there is room for a number of large companies. That’s because, he explains, the consumer is looking for uniqueness in these categories vs. electronics, books, household supplies, grocery and more.
With the company’s growing sales, it’s of no surprise that Wayfair was one of the companies invited to present at Goldman Sachs’ Private Internet Company Conference in Las Vegas in November. Many of the companies invited to present are the ones bankers want to keep their eye on — and potentially represent in a public offering in the future. For Wayfair, an IPO may not be too far off.
Shah has been open about his intentions to go public. The company also recently brought on former Warner Music Group Chairman Michael Fleisher as CFO.
It’s clear that 2014 will be a pivotal year for the company. Investors will be looking for continued growth, and other large retailers will be trying to up their technology game to increase their share of online dollars spent on home furnishings. But for a company that was relatively unknown two years ago, Wayfair’s growth and ascent is impressive. Stay tuned.Read More →
In this week’s episode of Ask A VC, we had GGV Capital’s Glenn Solomon in the studio to talk about the developing technology market in China, and his predictions for 2014.
Solomon, who has taken 32 trips to China in the past eight years, tells me in our interview that developing for the Chinese market is completely different than developing for the Western markets. And any U.S. company that wants to expand to China has to be aware of this, and take into account these differences when introducing a product in China.
Solomon explains, “Several years ago, VCs thought they would create the blank of China, and a company that was successful here would work in China. But China is unique and the way you grow and start companies there has to be local.”
Solomon also made his predictions for the IPO market in 2014, investing changes and more.Read More →
Back in the Summer we saw the first signs of Berlin’s startup hot-house begin to consolidate. Amen has been the most high-profile company to throw in the towel and merge with a fellow Berlin startup, after an almost Herculean effort to get acquired by a big US company.
Others, like the Toast app and Gidsy also withered or were acquired (in Gidsy’s case). The latest is Moped, a messaging startup which was somewhat ahead of its time, prior to the explosion of similar such apps in the latter part of this year. On Moped, private messaging with the same useful hashtags you find on Twitter was integrated with Dropbox. Later it pivoted into the enterprise space with a product for teams.
Founder Schuyler Deerman has confirmed to users in an email that Moped had been acquired by 6Wunderkinder, the makers of Wunderlist and would be shutting down on December 31st. After that Moped will no longer be available. All Moped users are eligible for a free month of Wunderlist Pro, which lets you have conversations inside their to do app. He declined to comment further. 6Wunderkinder – which raised $19M in a Series B funding this month – has in turn confirmed that the acquisition was for the messaging technology only, and no Moped staff will be joining.
The move is probably a good one, since Wunderlist Pro is all about teams, so in theory the Moped tech will come in handy.
Moped had previously raised $1 million from SV Angel (Ron Conway), Lerer Ventures, Betaworks and Earlybird Capital.
Only last Summer Moped was continuing to iterate its product, allowing users to sign up within LinkedIn and saying that it was going after the “sweet spot” of sharing files over messaging.Read More →
A Merger In Gaming Services: Playhaven, Kontagent Combine In An All-Stock Deal Worth “Hundreds of Millions”
Playhaven and Kontagent, two of the bigger gaming services companies that help developers run analytics and retain their players, have decided to merge into a combined company worth “hundreds of millions” of dollars in an all-stock deal. Neither company could give more specifics on how the deal was structured.
“The valuation in the hundreds of millions, but I won’t tell you where,” said Andy Yang, who was Playhaven’s CEO and will lead the combined company. They have yet to choose a new name. Playtagent? Konplaygent, anyone?
Playhaven is a company that the biggest game developers use to retain their players with personalized promotions. They help studios segment out players, by whether they tend to play for free or are bigger spenders (known as “whales”). With the top gaming studios reaching tens of millions of players, retention has evolved into a big data problem.
Kontagent, on the other hand, is an analytics company that started off by catering to social game developers on the Facebook platform. They are used by everyone from EA to Zynga to China’s Tencent.
It’s a natural marriage of sorts. One company provides very deep analytics on game play, while the other offers a monetization solution.
“With this combination, we’ll be the 800 pound gorilla and the clear market leader,” Yang said. “Our clients were asking us about how they could take all the valuable data they’ve collected in Kontagent and act on it. We ended up having a shared vision.”
Yang said negotiations took somewhere between two and three months, and the boards of both companies were supportive. The two companies will end up reaching 22,000 apps and 400 million monthly active users together. The new company will employ 160 people and Yang and Kontagent’s CEO Josh Williams said there were no layoffs or redundancies with the deal. Williams will become the chief technology officer of the new company, while Yang will take the helm as CEO.
They expect to merge their two products by the end of 2014.
“At the moment, we’ll have to take one step at a time and have a simple integration at first,” Yang said. “It’s day one of our marriage, and we just moved in together.”
The merger comes at a time where we could be seeing more consolidation. As mobile and social gaming have matured, literally dozens of service providers offering competing analytics and monetization solutions have cropped up. Not all of them will survive.
“The market is very fragmented right now and you’ll see consolidation in the space,” Yang said.
As for why they decided to call it a merger and not an acquisition?
“This is a merger of equals. We are two leaders in our respective categories and there’s no money changing hands. This is not a traditional acquisition,” Yang said.
The two companies have raised at least $26 million from investors including ALTOS Ventures, Battery Ventures, e.ventures, GGV Capital, Maverick Capital, Morgan Creek and Tandem.Read More →
This morning Anturis announced that it has raised a $2 million Series A round of funding. The company, focused on providing IT-monitoring services to small and medium-scale businesses, raised the new cash from Runa Capital and VEB Innovations. The two groups co-led the financing.
In case you are keeping score of Russian startups, Serguei Beloussov, who was involved with Runa Capital, and founded Parallels, was also an early founder of Anturis. So, that it raised more from Runa is hardly surprising.
Anturis, as TechCrunch’s Alex Williams reported earlier this year, is an “IT-monitoring service for the small business market,” that wants to provide “service that fits between enterprise software and open source offerings.” In practice that means that Anturis provides monitoring and notification technology to companies, akin to what Nagios offers.
Given its SMB and mid-size focus, Anturis is priced modestly, with its most expensive offering topping the charts at under $100 per month.
Why did it raise new money? The company has its sights on the United States market, where it has recently hired a business development lead, to head its desired growth in the country. Its development team remains housed in Moscow. Some of its new funds will be spent on marketing in the United States, unsurprisingly. The company called its business development hire the “start” of its U.S.-based entity.
On the product front, Anturis’s integration with CPanel is currently in beta. The company works to release updates on a bi-monthly basis, so that functionality should be locked down soon.
Of course, $2 million is a smaller-than-normal raise in the current market, but with its development team in Russia, the company could have lower personnel costs than other similar firms based in the United States. If the company intends on spending a firm chunk of its raise on marketing in the United States, a media market that can skew expensive, the amount it will retain to grow its team will be modest. As such, provided it meets its revenue targets, I would not be surprised to see the company raise more capital shortly. Perhaps from U.S.-based investors, if it wants stronger roots in this country.
Presuming that the firm isn’t yet profitable, it won’t be able to hire extensively in the United States without more capital.
Given marginally profitable price points (I confirmed that with the company), Anturis is in a fun place for a company of its size: A functional business model attached to fresh cash. It’s now a question of whether Anturis can execute. We’ll see.
Top Image Credit: FlickrRead More →
India’s Unique Citizen Identification project, also known as Aadhar, earlier this week finished capturing demographic and biometric data of about half a billion citizens–the largest biometric project of its kind currently in the world.
It’s been a multi-year effort not without its critics among privacy and security advocates and others. The latest development this week concerned the method that Aadhar is using to capture, store and manage the data, and the role a startup from the U.S. called MongoDB may be playing in it.
MongoDB, a NoSQL database startup, last year raised funding from the CIA-backed In-Q-Tel, an independent non-profit venture backed by the CIA and other U.S. intelligence agencies.
During past few days, several reports in the Indian media have quoted political parties and activists, raising questions about whether sensitive citizen data is being compromised by Aadhar, headed by the Infosys co-founder Nandan Nilekani.
Some of the reports have linked the controversy with MongoDB.
Governments across the world are raising concerns over spying by the National Security Agency, and anything even remotely associated with U.S. government intelligence agencies is enough to cause uproar. Moreover, with general elections set to be held next hear, political rhetoric is at an all time high in India.
I took a tour of Aadhar’s offices in Bangalore, and the truth of the matter, according to officials I spoke to, is that while some have alleged large contracts that include sharing data with MongoDB, the reality is that Aadhar is using MongoDB open source code that doesn’t touch sensitive data. The meeting also offered an opportunity to understand how the biggest biometrics database on earth is functioning, and dealing with concerns of security and privacy.
Moreover, in a statement issued on Friday, the Unique Identification Authority of India (UIDAI), denied having any formal contract with MongoDB and refuted allegations of sharing citizen data with any U.S. agencies.
What Aadhar means for India
To set the context right here about Aadhar, and what it means for a country like India, more than half a billion people have no official ID of any kind, which makes it impossible for them to receive government aids, open a bank account, get a loan, get a driving license, and so on. The citizen database project, which is now enrolling over one million Indians a day, is scheduled to sign up about 1.2 billion people by the end of next year, making it the biggest biometrics database on earth.
One of the biggest advantages of having a 12-digit Aadhar number is that the government can link bank accounts of the country’s poor with it, and directly transfer cash benefits and other subsidies. Already, nearly 40 million bank accounts in India have been linked with Aadhar.
According to research firm CLSA, more than 40% of the Indian governmen’s $250 billion worth of subsidies and other other benefits meant for poor, will be lost to corruption over next few years. Aadhar will remove the middlemen and curb any corruption by enabling direct cash transfer to those who need government subsidies.
But several think-tanks and activists including Bangalore-based Centre for Internet & Society, have been raising concerns about privacy issues and even questioning the effectiveness of the entire project.
Inside the biggest biometrics database on earth
I have been trying to get meetings with the officials at Aadhar to understand security aspects, progress so far and their reaction to the MongoDB allegations.
They finally agreed to meet on Friday in their headquarters across the road in one of Bangalore’s southern suburbs, where both Intel’s and Cisco’s India headquarters are located. From outside, Aadhar’s technology center, which stores all citizen data (now totalling 5 Petabytes in size) does not look like a government building at all—it could pass for as one of the buildings housing Intel or Cisco nearby.
Inside, as I walked into a room with about dozen television screens in the center of it, some twenty young engineers feverishly looked ahead, typing on their computer keyboards, checking the movement of data packets storing citizen information, the setting looked like a very sophisticated command center. The television screens they were looking at showed the journey of these data packets (each sized at around 5MB) from the time they are logged at one of the 30k enrollment centers, through at least three stages of validation. Validation includes running duplication checks for each of the citizen profiles to ensure there are not more than one Aadhar number for the same person.
So, for every new enrollment, a ‘de-duplication’ check is done against all existing profiles, which is over half a billion currently.
Srikanth Nadhamuni, a former Intel engineer who helped set up Aadhar’s technology platform in September 2010, and is now running Khosla Labs in Bangalore, tells me that these data packets are stored behind 2048-bit encryption and capable of self-destruction if any unauthorized access is attempted.
Dealing with MongoDB controversy
So why did Aadhar engage with MongoDB in the first place and will it continue working with the startup?
Sudhir Narayana, assistant director general at Aadhar’s technology center, told me that MongoDB was among several database products, apart from MySQL, Hadoop and HBase, originally procured for running the database search. Unlike MySQL, which could only store demographic data, MongoDB was able to store pictures.
However, Aadhar has been slowly shifting most of its database related work to MySQL, after realizing that MongoDB was not being able to cope with massive chunks of data, millions of packets.
They have already started using ‘database sharding’: a process where data packets are stored across different machines to ensure the system does not crash as volumes rise.
This has helped Aadhar reduce its dependency on MongoDB and instead use MySQL for storing most of the data.
Ashok Dalwai, deputy director general of the tech center, told me that MongoDB has no access to any biometric data.
“We believe in using open source technologies to avoid any vendor lock-in, but that doesn’t mean we are in any way, compromising security,” Dalwai said.
When contacted, a MongoDB spokesperson redirected to this announcement about the company’s funding involving In-Q-Tel.
And more importantly, UIDAI started using MongoDB’s open source software much before the startup received any funding from In-Q-Tel. As this Crunchbase entry shows, MongoDB received venture round funding of $7.7 million from Red Hat, Intel Capital and In-Q-Tel, only in 2012.
So what lies ahead for Aadhar?
Despite all the controversies surrounding it, Aadhar is on track to enroll over 1.2 billion Indian citizens by end of 2014, the officials added. This will create a database of about 15 petabytes in size.
Currently, the project is enrolling around one million citizens a day. Narayana told me that he’s confident of achieving around two million enrollments a day from next year, and that will help bring the remaining 700 million people into the database.Read More →