As Amazon drives online sales skyward, a 4-year-old startup in the tech behemoth's backyard is helping brick-and-mortar retailers fine-tune their marketing.
This month Seattle-based Observa won the 16th Annual Bend Venture Conference, which was hosted by Economic Development for Central Oregon. The prize came with a check for $250,000 that is part of the company's current round of fundraising. Observa previously raised $1.3 million.
The company's revenue is up five-fold, year-over-year, said co-founder and CEO Hugh Holman. "We've found a product-market fit."
E-commerce "has trained us to understand the path to purchase for the consumers. I understand what they've seen and if that led to buying something," Holman said. "You don't know that in brick-and-mortar retail."
Observa gives traditional businesses a similar insight into in-store marketing using an AI-powered platform. The company creates real-time, crowd-sourced retail audits that show brands and retailers how products are being displayed and correlating that with sales. "It's like Google Analytics for brick-and-mortar," Holman said.
Observa offers two main services. The startup provides crowdsourced retail audits in which people who have downloaded the company's app get a prompt to take photos of shelves displaying products owned by an Observa customer. The startup's AI-enabled software analyzes the uploaded images to determine how the items are displayed, and can compare that information to sales data. Retailers can also hire Observa to analyze product placements.
Observa also has a platform for field representatives to use when checking on brands and products.
The crowdsourced folks shooting the photos are paid immediately and can earn a few dollars per gig. Observa customers are charged according to how many locations are surveyed, at a cost of about $8-to-12 per spot.
Holman said that new technology and sales services recently came online for the startup, allowing them to serve brands with a global reach, which drove their recent surge in growth.
Their top competitor is Trax Retail, which launched in 2010 and is based in Singapore.
Erik Chelstad is Observa's other co-founder and chief technology officer. The two have known each other for 20 years, and this is their first joint initiative. Holman most recently held leadership roles at the retail business Savers and the seafood company Aqua Star. Chelstad has worked in numerous tech roles, including the e-currency company BizX and the venture capital firm Arch Equity.
"In the end, the only thing that really matters is the consumer, and if you're not listening to the changing wants and needs of the consumer, then you'll go away as a retailer," Holman said. "The retailers who are listening are doing well, and we provide more information around that."
We caught up with Holman for this Startup Spotlight, a regular GeekWire feature. Continue reading for his answers to our questionnaire.
What does your company do? Observa is an AI platform that offers physical retail analytics similar to the online channel by using photos taken by people and machines. In the United States, brands spend $72 billion on in-store placement and promotion, and 72 percent of this spend is mismanaged at the store level resulting in brands realizing a negative return on their investment. Observa ensures that this spend is properly managed, resulting in an improved consumer shopping experience followed by sales improvements for the brands and retailers alike.
Inspiration hit us when: We were drinking a beer and looking at the taps. Seriously, we thought our first customers would be beer/liquor companies trying to measure the efficacy of their on-prem (in-bar) marketing efforts.
VC, Angel or Bootstrap: In the beginning, Observa was bootstrapped. We wanted to ensure that we had something of value before we reached out for investment and had tested with a few early clients. Once we had that, we tapped into the angel community. We're very thankful to the early investors who believed in Observa, as their funding enabled us to hire a staff and get the platform to the level it is at today. Now that we have several large clients as both consumer brands and even some retailers, we are really ready to take our product and services to the next level.
Our 'secret sauce' is: Flexibility. Our AI platform works with any input, from peoples' cell phones to robots to drones to shelf cameras. Our reporting provides oodles of data that will make any local Tableau or Microsoft employee happy. We work with Microsoft BI, Salesforce, etc. so our customers can flex their current assets around us.
The smartest move we've made so far: Getting into the market quickly doing proof of concepts (POCs) and pilots. There are a ton of "AI" companies out there that underwhelm their customers after a lengthy and expensive onboarding phase, leaving damaged expectations. We get in, show what we can do quickly and then move on to bigger projects.
The biggest mistake we've made so far: Not going after the big competitors sooner. We didn't realize how much better our product was already at this stage, as they spin a good yarn.
Which leading entrepreneur or executive would you most want working in your corner? I am a big fan of Richard Branson, entrepreneur and founder of Virgin Group. He is an explorer in every sense of the word. Not only does he travel extensively, but he jumps right into new commercial markets with both feet. He is both a brand builder and a leader of people. His positive, can-do attitude permeates all of his endeavors and seems to bring out the best in those around him.
Our favorite team-building activity is: We host a weekly, company-wide event called Beer Friday that kicks-off with an end of week wrap-up. We acknowledge team members who did something amazing or helpful during the week, provide status updates on projects, and most importantly celebrate the wins for the week. Since we're a startup, we don't have a massive budget, but we do have awesome friends. The other week, our friends blew our minds! They hooked us up with a free kegerator!
The biggest thing we look for when hiring is: We look for people who have a growth mindset. We seek out people who are always looking to embrace challenges. Though we all play roles in the business, we like to see people step out of their roles to help each other be successful. We can only win as a team, so we want to attract people that like wearing different hats and working with others. We expect everyone to pitch in and help out with just about every aspect of growing and running a successful company.
What's the one piece of advice you'd give to other entrepreneurs just starting out: Do the groundwork first and make sure your product is viable.
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