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“They’re idiots, they’re really naive,” is how Stevie Graham, the co-founder of fintech Teller, once described Open Banking Limited, the body charged with delivering open banking in the U.K.

His view back in 2017 — which now looks somewhat prophetic — was that open banking wouldn’t be the competition driver it was hyped up to be. Instead, incumbent banks were incapable of change and would act in a malevolent way to stop fintechs from walking through the front door and stealing their lunch.

He, along with co-founder Dan Palmer, had spent several years building an early version of Teller that reverse engineered the APIs used by U.K. banks for their own mobile apps, and offered access to developers that wanted to create apps using banking data. It was billed as a more robust and realtime alternative to either screenscraping or waiting haplessly for PSD2 — the European directive mandating open banking — to eventually come into existence.

But this inevitably meant playing a game of Whac-A-Mole as incumbent U.K. banks tried unsuccessfully to thwart the efforts of Graham and Palmer. It was also never entirely clear who was doing the whacking.

Fast-forward to today, and Graham, who was Twillio’s first European employee, has a different incumbent in his sights. In late 2018, Teller re-incorporated in the U.S. to take on Plaid, the financial services API provider recently acquired by Visa for a chunky $ 5.3 billion.

The fintech startup also quietly raised $ 4 million in seed capital from a slew of U.S. investors: Lightspeed Venture Partners, Founders Fund, and PayPal co-founder Max Levchin’s SciFi. Teller’s U.K. product has since been shut down, and the company launched a U.S. beta of Teller in September.

“The U.S. is a better opportunity for Teller because the market is far larger with more mature, large-scale customers to serve as well as startups being created every day, [and] an incumbent with an unreliable, unpopular product and not much competition,” Graham tells me.

“PSD2 was also a factor in our decision to withdraw from the U.K. Primarily because it made practically every use-case of banking APIs a regulated activity, meaning that it’s no longer possible to quickly build and test a product without first spending thousands of pounds and 3-6 months getting FCA approval. When we checked at the end of 2018 less than 100 entities had been granted approval. We can not build the business we want with a total addressable market of 100 customers”.

On Plaid, Graham is almost as scathing as he was about the major U.K. banks three years ago, even if he chooses his words a little more carefully. Unlike Plaid, Teller’s technology is not built using screenscraping, dubbed a “creaky technique” by the Teller co-founder,  and therefore is “more reliable and performant”.

“We are also better because we have the incentive to really care about our users and mean it. Plaid has rolled up the market by buying Quovo and is now effectively a monopoly. Speaking to users we found a lot of frustrated Plaid customers that didn’t feel as if Plaid was sympathetic when things went wrong. For example their Capital One integration has been down for months. Maybe the Plaid folks genuinely can’t fix it, maybe they don’t have truly enough competition to care. Either way, our Capital One integration works great”.

Suspicious of Visa’s ability to innovate and serve developers as customers, Graham says that if he was a Plaid user he would be concerned about the future quality of the product now that it’s owned by a legacy business “not exactly renowned for … shipping successful developer products”.

The deal is also substantially all-cash, he notes, suggesting that employees may have little incentive to stay.

“The top talent at Plaid has to now be sitting there in the morning thinking ‘do I really want to work at a stodgy public company that has barely 3x’d its stock price in 5 years? This is not what I signed up for’. This is why I fear for the future of Plaid’s product. A lot of their best people will be heading for the door, and we’d love to talk to them,” Graham says unabashedly.


TechCrunch

Maze wants to reinvent usability tests by letting you turn design prototypes into tests in just a few clicks. It could become the equivalent of a developing test suite for developers, but this time for designers — it could be something that you run before shipping an update to make sure everything works fine. The startup just raised a $ 2 million funding round and launched a couple of new features.

Since I first covered the company, Maze founders Jonathan Widawski and Thomas Mary still have the same vision. The company wants to empower designers and turn them into user testing experts. With Maze, you can turn your InVision, Marvel or Sketch projects into a browser-based user test.

You can then share a link with a group of users to get actionable insights on your upcoming design changes. Everything works in a web browser on both desktop and mobile.

After running a testing campaign, you get a detailed report with a success rate (how many people tapped on all the right buttons to achieve something in your app), where your users drop off, polling results and more.

That product has been working well, attracting 20,000 users working for IBM, Greenpeace, Accenture, BMW and more.

Now, Maze also supports Figma projects. Given the hype behind Figma, adding this feature is important to stay relevant. It also opens up a new market for Maze — companies using Figma as their main design tool.

Maze has also added a feature that should be particularly useful for companies that are just starting with user testing. The startup can put together a testers panel for you.

This is completely optional and you can just stick with your monthly software-as-a-service plan and work with your own panel. But it provides a good end-to-end experience if you want to centralize all your user testing needs under one roof.

Maze has also raised a $ 2 million funding round. Amplify Partners is leading the round with existing investors Seedcamp and Partech also participating. Business angles in this round also include Eric Wittman, the former Director of Operations at Adobe and COO at Figma, Peter Skomoroch, the former Head of AI Automation & Data Products at Workday, and Datadog CEO Olivier Pomel.


TechCrunch

Lily AI, a startup focused on using deep learning to help brands better convert customers through emotionally tailored recommendations, announced this morning that it has raised a $ 12.5 million Series A led by Canaan Partners. Prior investors NEA, Unshackled and Fernbrook Capital also took part in the funding event.

Prior to its Series A, Lily had raised just a few million, according to Crunchbase data.

The round caught our eye for a few reasons. First, the investor leading the round — Maha Ibrahim — also led The RealReal’s Series C back in 2014. That company, which also sports a focus on the sartorial, went public in 2019. (Ibrahim has also dropped by TechCrunch from time to time, including here.) To see the investor lead an early round in a company operating in a related space was notable.

And the technology that co-founders Purva Gupta (formerly Eko India and UNICEF) Sowmiya Chocka Narayanan (formerly of Box) have built is neat.

TechCrunch first covered Lily back in 2017 when it raised $ 2 million from NEA. At the time it had an iOS application, along with a web app and API designed to help retailers “better understand a woman’s personal preferences around fashion” in their “own catalogs and digital storefronts.”

In a phone call with TechCrunch, Gupta said that she and Narayanan decided that “from a business model perspective” their technology was “better for an enterprise product.” The iOS app was eventually deprioritized (in “less than a year” after launch according to the CEO), with the company making a formal move to focus on enterprise offerings in early 2018.

So what does Lily AI do and what is it selling to large retailers? An e-commerce power-up.

How it works

Lily’s founding hypothesis came from Gupta’s time exploring fashion in New York, asking hundreds of women about what they had bought recently (more on the company’s founding story here). What came out of that exercise was the idea that every customer is “roaming around with [their own] emotional context,” how “they think about their body” and “how they react to different types of details and items.”

The CEO thought that if you could get that context into an online shop, it would probably help consumers find what they want, and help the store sell more at the same time. That’s the hypothesis behind Lily AI, according to Gupta, who wants to know the “individual emotional context” of “each customer” when they shop online.

It’s that idea that helped the company raise $ 12.5 million in its A, more capital by far than it had raised before in total.

The service works in three steps, starting with tech that can pull out myriad more attributes from items in a catalog; the more variables you have the more you can know about any particular product. Gupta told TechCrunch in an email that her company’s “approach captures significantly more detail on each product based on the traits customers look for when buying apparel,” including “style, fit, occasion” and the like.

Then, Lily uses “hashed customer data” that brands already collect, married to its item attribute data to “create a high-confidence prediction of each customer’s affinity to every attribute of every product in the catalog,” she continued. From there it’s a recommendation game.

The result of all this work is that “100 percent” of Lily’s customers have seen a “step gain in metrics,” not “just incremental” improvements, according to Gupta. (The company’s website claims a “10x ROI” on customer spend on its products.)

Lily charges for its service on a volume basis.

And there should be lots of that. According to Canaan’s Ibrahim, e-commerce “will continue to grow between 15-20% annually and will represent ~20% of all retail spending in 2020 […] off of an enormous absolute number base of ~$ 4T of e-commerce spend.” That means Lily has a pretty big market to grow into, which is just what venture investors love to see.

One final thing. During our call, I asked Gupta about privacy. After all, her company is pairing consumer preferences with other information for the benefit of a brand. In our discussion about how her startup protects customer privacy, she said something interesting that I asked her to expand on. Here’s how she described how her firm is built around understanding the feelings of others, or what’s better known as empathy:

We started Lily AI with the goal of helping customers look and feel their best. And I’m so proud that we use ‘Empathy’ as the guiding principle for everything: building products, hiring, retaining talent and establishing company culture.

Not a bad place to build from.


TechCrunch

The midwest may not be known as the fashion capital of the world (or even the U.S.), but its place in the consumer retail firmament is secure through L Brands and its Victoria’s Secret and Bath & Body Works subsidiaries.

Now, venture investors are investing $ 17.3 million to establish another tentpole clothing brand in the region, with a new commitment to the St. Louis-based clothing brand, Summersalt.

Founded by a former Washington University design professor and swimwear designer, Lori Coulter, and a marketing and branding consultant, Reshma Chattaram Chamberlin, Summersalt launched in 2017 with a lineof direct-to-consumer swimwear.

In the past two years the company has expanded beyond its $ 95 swimsuits to include cashmere sets, packable jackets, and wrinkle-free pants.

Initially backed by the Rise of the Rest Seed Fund, backed by AOL founder Steve Case’s Revolution investment fund, the company has gone on to attract capital from Founders Fund, Lewis and Clark Ventures and Victress Capital .

The latest round was led by Mercato Partners, a Utah-based venture capital firm.

“We could not be more thrilled with the opportunity to lead Summersalt’s latest funding found, and partner with two passionate founders who have a clear vision, are mission driven and have a track record for accelerated performance,” said Joe Kaiser, a director with Mercato Partners, in a statement. “The product, brand, team and the incredible consumers make for a winning combination.”

Summersalt calls its line of clothing travel wear and used its footprint in the swimsuit market to expand its reach with other items that could be taken on trips to less-sun-drenched parts of the world.

“We are building a generation defining travel brand that goes beyond swimwear and apparel to create a community of curious women who love to explore,” said Coulter, the company’s president and chief executive in a statement. “Our unparalleled experience in apparel, deep supply chain expertise and fit-technology will  be at the foundation as we continue to scale and build a brand with highly profitable unit economics.”


TechCrunch

Risk and compliance startup Osano, which earlier this year debuted on the Battlefield stage at TechCrunch Disrupt SF, has raised $ 5.4 million in its Series A round.

The company told TechCrunch that the round was led by LiveOak Venture Partners and Next Coast Ventures, both of which invested in the company’s seed round. Its Series A fundraise also included participation from several individual investors, putting Osano’s total amount raised to date at $ 8.4 million.

The Austin, Texas-based startup bills itself as a privacy platform that helps businesses understand and address their compliance with state and international privacy laws, like Europe’s GDPR and California’s new statewide privacy law, set to take effect on January 1. One of the company’s flagship features is providing cookie and consent management on customer websites, allowing users to choose their privacy settings in their own language.

To date, the turnkey platform is used by more than 750,000 companies — including some Fortune 500 companies — to secure over 3.5 million websites.

Osano plans to use the new funds to further invest in research and development, marketing, and hiring to meet “growing demand” for its service, the company said.

“We are proud to continue into the next round with our original investors,” said Arlo Gilbert, Osano’s co-founder and chief executive. “Heading into 2020, we are moving quickly to add talent to our growing team and to deepen Osano’s position as a leading data privacy platform.”

“There is a definitive need to bring transparency to the process of how companies deal with privacy, and we are very excited about taking on this challenge to empower both individuals and organizations,” said Gilbert.


TechCrunch

The market for second-hand clothes — the “circular economy” as it’s sometimes called — has been on the rise in the last several years, fuelled by economic crunches, a desire to make more responsible and less wasteful fashion choices, and a wave of digital platforms that are bringing the selling and buying of used clothes outside the charity shop. Today, one of the bigger companies in Europe working in the third of these areas is announcing a huge round of funding to double down on the trend.

Vinted, a site where consumers can sell and buy second-hand fashion, has raised €128 million (around $ 140.9 million) in a round that is being led by Lightspeed Venture Partners, with previous backers Sprints Capital, Insight Venture Partners, Accel and Burda Principal Investments also participating.

With this investment, the startup — founded and headquartered out of Vilnius, Lithuania — has passed a valuation of $ 1 billion (it is not specifying an exact amount), making it one of the biggest startups to come out of the country (but not the Baltics’ first unicorn… Estonian Uber competitor Bolt, formerly known as Taxify, is also valued at over $ 1 billion.)

The company is going to use the money to continue expanding in Europe, and building out more features on its platform to improve the buying and selling process, while sticking to its goal of providing a platform for consumers to list and buy used fashion.

“We want to make sure we don’t have new products,” CEO Thomas Plantenga said in an interview earlier. “All our sellers are regular people.” Some 75% of Vinted’s customers have never bought or sold second hand clothes in their lives before coming to the platform, he added. “The stigma is no longer there.”

Vinted’s growth comes on the heels of a remarkable turnaround for the startup. Founded in 2008 by Milda Mitkute and Justas Janauskas as a way to help Mitkute clear out here wardrobe before a house move, the company expanded fast, but at a price: by 2016, it was close to running out of money and business had slowed down to a crawl. Investors brought in Plantenga to turn it around.

“We changed the business model in 2016 to make the costs as low as possible for users to list clothes,” Pantenga said today. “That produced a dramatic change in our growth trajectory.”

The company, more specifically, went through some drastic changes. First, it clawed back a lot of its pricey international expansion strategy (and along with that a lot of the costs associated with it); and second, it removed all listing fees to encourage more people to list. Now, Vinted charges a 5% commission only if you conduct transactions on Vinted itself, bundling in buyer protection and shipping to sweeten the deal. (You can still post, sell and buy for free if you pay offline but you don’t get those perks.)

The turnaround worked, and the company bounced back, and two years later, in 2018, it went on to raise €50 million. Today, Vinted has some 180 million products live on its platform, 25 million registered users in 12 markets in Europe (but not the US) and 300 employees. It expects to sell €1.3 billion in clothes in 2019, has seen sales grow 4x in the last 17 months.

From fast fashion to fashion that lasts

Vinted’s rise has matched a wider trend in the region.

Europe is the home to some of the world’s biggest “fast fashion” businesses: companies like H&M, Zara and Primark have built huge brands around making quick copies of the hottest styles off the fashion presses, and selling them for prices that will not break the bank (or at least, no more than you might have previously paid to buy a pair of average jeans on the discount rack of a Gap).

But it turns out that it’s also home to a very thriving market in second-hand clothes. One estimate has it that two out of every three Europeans has bought a second-hand good, and 6 out of 10 have sold their belongings using platforms dedicated to second-hand trade.

Even as the company continues to hold back on expanding into the US — perhaps burned a little too much by its previous efforts there; or simply aware of the wide competition from the likes of Ebay, OfferUp, Letgo, Poshmark, and many more — Vinted’s growth in Europe has caught the eye of investors in the that market.

“At Lightspeed, we look for outlier management teams building generational companies. We’ve been impressed by the team’s ability to build an incredible product and value proposition for their community, and adapt and expand their business along the way,” said Brad Twohig, a partner at Lightspeed. “Vinted is defining its market and has built a global brand in C2C commerce and communities. We’re proud to partner with Vinted and leverage our global platform and resources to help them continue to build on their success and achieve their goals.”

While charity shops have traditionally dominated this market, sites like eBay, followed by a secondary wave of platforms like Vinted and another competitor in this space, Depop, have made selling and buying items into an established, low-barrier business.

All the same, given that extending the life of one’s goods feeds into a do-good ethos, it’s noticeable to me that Vinted hasn’t quite replaced the Salvation Army: there is virtually no way to sell on Vinted and give the proceeds to charity, if you so choose.

It appears that this might be something Vinted will try to address in the future.

“We are looking at making fashion circular for our users so that clothing that they bought doesn’t go to waste,” Plantenga said. “[Giving proceeds to charity] is super interesting and we should explore it as part of our growth story. To be honest, those things have been in the background and not developed because we’ve just been trying to keep up with everything, but the idea fits into our culture.”

E-commerce — in particular startups nipping at the heels of bigger players like Amazon and eBay by focusing on specific areas of the market that aren’t as well served by them — has had a bumper day in Europe, after brick-and-mortar marketplace Trouva earlier today also raised a sizeable round.


TechCrunch

Gorgias, a startup offering artificial intelligence tools for customer service and support, is announcing that it has raised $ 14 million in Series A funding.

Co-founder and CEO Romain Lapeyre told me that the startup (whose name is pronounced “gorgeous”) is taking advantage of a broader shift as brands are looking to sell directly to consumers, rather than going through intermediaries like Amazon — for example, he pointed to Nike’s recent decision to pull its products from Amazon.

As brands make this change, Lapeyre (pictured above with his co-founder and CTO Alex Plugaro) said they need a “bundle of tools” to build their online business, and “each little part of the bundle is separate.” So they might create a store with Shopify, accept payments via Stripe — and naturally, Lapeyre believes they should be handling their customer support through Gorgias .

The product integrates with Shopify, using AI and customer data to automate responses to basic questions like, “What’s my tracking number?” By doing this, the business can free customer service representatives from spending most of their time responding to these routine requests, and the customers get faster answers.

Gorgias screenshot

“The automation should just be the very basic questions,” Lapeyre added.

But even when it comes to more complex queries, Gorgias also provides tools that help the customer service representatives to respond more quickly and to upsell customers on additional products and services — Lapeyre said they’re acting as “sales associates rather than customer service agents.”

It seems like this approach is becoming a reality at some of Gorgias’ 2,000 customers — the Groovelife customer service team gets paid a commission based on upselling. At Steve Madden, meanwhile, the customer service team is using automation to respond to 20% of tickets.

Gorgias previously raised $ 1.5 million in seed funding. The new round was led by Flex Capital, with participation of SaaStr, Alven, CRV, Amplify Partners and Eric Yuan.

Lapeyre said Gorgias will use the money to build out the product with new  features while also bringing on more merchants.


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