Dear Startup Investor:
Boy, does digital marketing have a long way to go.
Sure, there’s no shortage of ways to advertise digitally.
Choose one you like best: organic posts, promoted posts, Facebook ads, Google display ads, other online ads or email campaigns.
It’s a pretty good range of choices, I’ll admit to that much.
So now tell me why you like it…
If you’re a brick-and-mortar outfit, whatever reasons you give me will be underwhelming.
Because right now, quite unbelievably, there’s no way you can track results.
I’m not kidding. All a store or a restaurant can do is compare the period of its online marketing campaign to the same period of the year before. So, for example, if your sales went up 10%, then you chalk up the boost to your digital campaign.
Of course, you’d have to adopt the economists’ lame loophole of “all other things being equal.”
The weather? The local economy? Consumer sentiment? They all could have an impact on how your campaign did.
Just as bad as not being able to track results, you can’t even track the customers who responded to your campaign (by redeeming their offers). So you have no way of following up with those customers.
It gets worse if you’re using more than one channel. You’re left with absolutely no idea of which advertising channel did better.
It’s as if online advertising and the in-store visits they generate exist in two parallel but separate universes, forcing retail marketers to operate in the semidarkness.
Is this really the best we can do?
One startup says no, we can do much better. Its name is Privy. And it’s not just saying that, it’s proving it with every passing day that the startup’s 30 clients continue using its technology.
Privy offers an elegant and easy-to-use platform that gives retailers the tools they need to track when a customer redeems a brick-and-mortar retailer’s online offer.
Not Just Impressions or Clicks
Where other marketing software leaves off (tracking impressions and clicks) is where Privy’s platform begins. Let me tell you how it works…
Say you own a hamburger joint. Privy will identify “high intent” searches (“Where can I find a good hamburger in this area code?”) and target those people for your Web-provided coupon offer.
Shoppers sign up for the special offer with their email addresses, and Privy does the rest. It automatically tracks where customers came from, when and what they spend and in which location they do it.
The company then adds more information to customers’ profiles, like geographic information, Facebook and Twitter profiles and what they like and follow.
So you can develop a rich profile on each of your customers.
That lets you segment your database into various demographic categories to better target customers for remarketing. One segment, for example, may have responded better to an email campaign, and another to a Facebook ad campaign. Or, how about this example…?
I’m very impressed with Privy’s technology. It’s identified a big problem for retailers, and its technology does a great job of fixing it.
Another big reason why I like it is that Privy enables follow-up.
Better Technology, Better Results
Up until now, retailers had to rely on loyalty programs (and the 1% to 5% who sign up for those programs) to get their customers back in the store.
Privy gives retailers the ability to hit the other 95%.
And it does so with redemption rates of between 15% and 40%. That’s much higher than the typical 5% to 10% industry rate. Why so high?
Remember, these are people who have recently used a search engine to look for related products or restaurants in the same neighborhood. Privy also sends them email reminders.
Redemption is made easy and convenient. Customers don’t have to print their coupons. They’re right there on their cellphones. All they have to do is show them to a cashier when checking out.
Privy has collected 150,000 email addresses. It has generated 45,000 landing page “claims.”
The result is pretty impressive: over 10,000 redemptions.
So it’s no surprise that Privy’s clients have been able to grow their customer databases five to 10 times faster than before.
Traction Revving Up
Privy has signed up 30 customers in a little over a year. That’s not mind-boggling great, but as you can see from the chart below, revenue growth started taking off in March. Not by coincidence, that’s also when Privy beefed up its sales staff.
And as Privy renews current contracts and continues to prove itself, contracts should get bigger.
Privy says it’s already happening. Eventually, the company plans to charge by how much revenue its campaigns pull in.
That’s the sweet spot. Privy will be able to benefit directly from the proven effectiveness of its marketing technology. And marketers will pay only for results, a much easier sell.
Sales are projected to increase to over $100,000 a month by the end of 2015, and that’s assuming the same-sized contracts it’s averaging now ($500 per month per customer).
It’s a realistic objective. Whether Privy makes it or not depends on how quickly it can hire sales reps (more so than the marketability of its technology).
I’m willing to live with that. Privy and its Founder and CEO Ben Jabbawy (a graduate of Cornell in “operations research and industrial engineering”) has shown me more than enough to accept this low-level risk.
The Opportunity
Privy raised $1.7 million last summer. It’s aiming to raise $250,000 more as a bridge from its seed round to a Series A round. Ben told me he’s aiming to raise again at the beginning of next year.
If you choose to invest, your money would be going into a convertible note bearing 8% interest. The company is capped at a $7 million valuation. So if Privy rates more than a $7 million valuation for its Series A round, you’d still get shares converted at the $7 million price.
And whether the valuation is $7 million or lower (it can’t be higher), you’d also get a 15% discount.
How to Invest
First, you’ll need to join Wefunder.com. To do so, you’ll need to verify that you’re an accredited investor. Plus, answer a few questions.
Then you need to go to Privy’s page on Wefunder, and click the big green “Invest” button in the upper-right-hand corner to reach the investment page. You may invest as little as $1,000.
This is a great opportunity. And we are especially pleased that Wefunder has agreed to keep the fundraise open an extra few days specifically for subscribers to Startup Investor. It is now scheduled to close about a week from today.
Deal Summary:
Type: Convertible Debt
Interest rate: 8%
Minimum investment: $1,000
Amount being raised: $250,000 approximate
Amount raised so far: $162,000
Valuation cap: $7 million
Discount (on next round of financing): 15%
Good investing,
Andy Gordon
Startup Investor Portfolio
