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Zonos banks $69M to develop APIs for democratizing cross-border commerce
Cross-border commerce company Zonos raised $69 million in a Series A, led by Silversmith Capital Partners, to continue building its APIs that auto classify goods and calculate an accurate total landed cost on international transactions.
St. George, Utah-based Zonos is classifying the round as a minority investment that also included individual investors Eric Rea, CEO of Podium, and Aaron Skonnard, co-founder and CEO of Pluralsight. The Series A is the first outside capital Zonos has raised since it was founded in 2009, Clint Reid, founder and CEO, told TechCrunch.
As Reid explained it, “total landed cost” refers to the duties, taxes, import and shipping fees someone from another country might pay when purchasing items from the U.S. However, it is often difficult for businesses to figure out the exact cost of those fees.
Global cross-border e-commerce was estimated to be over $400 billion in 2018, but is growing at twice the rate of domestic e-commerce. This is where Zonos comes in: The company’s APIs, apps and plugins simplify cross-border sales by providing an accurate final price a consumer pays for an item on an international purchase. Businesses can choose which one or multiple shipping carriers they want to work with and even enable customers to choose at the time of purchase.
“Businesses can’t know all of a country’s laws,” Reid added. “Our mission is to create trust in global trade. If you are transparent, you bring trust. This was traditionally thought to be a shipping problem, but it is really a technology problem.”
As part of the investment Todd MacLean, managing partner at Silversmith Capital Partners, joined the Zonos board of directors. One of the things that attracted MacLean to the company was that Reid was building a company outside of Silicon Valley and disrupting global trade far from any port.
He says while looking into international commerce, he found people wound up being charged additional fees after they have already purchased the item, leading to bad customer experiences, especially when a merchant is trying to build brand loyalty.
Even if someone chooses not to purchase the item due to the fees being too high, MacLean believes the purchasing experience will be different because the pricing and shipping information was provided up front.
“Our diligence said Zonos is the only player to take the data that exists out there and make sense of it,” MacLean said. “Customers love it — we got the most impressive customer references because this demand is already out there, and they are seeing more revenue and their customers have more loyalty because it just works.”
In fact, it is common for companies to see 25% to 30% year over year increase in sales, Reid added. He went on to say that due to fees associated with shipping, it doesn’t always mean an increase in revenue for companies. There may be a small decrease, but a longer lifetime value with customers.
Going after venture capital at this time was important to Reid, who saw global trade becoming more complex as countries added new tax laws and stopped using other trade regulations. However, it was not just about getting the funding, but finding the right partner that recognizes that this problem won’t be solved in the next five years, but will need to be in it for the long haul, which Reid said he saw in Silversmith.
The new investment provides fuel for Zonos to grow in product development and go-to-market while also expanding its worldwide team into Europe and Asia Pacific. Eighteen months ago, the company had 30 employees, and now there are over 100. It also has more than 1,500 customers around the world and provides them with millions of landed cost quotes every day.
“Right now, we are the leader for APIs in cross-border e-commerce, but we need to also be the technology leader regardless of the industry,” Reid added. “We can’t just accept that we are good enough, we need to be better at doing this. We are looking at expanding into additional markets because it is more than just servicing U.S. companies, but need to be where our customers are.”
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Why do SaaS companies with usage-based pricing grow faster?
Today we know of HubSpot — the maker of marketing, sales and service software products — as a preeminent public company with a market cap above $17 billion. But HubSpot wasn’t always on the IPO trajectory.
For its first five years in business, HubSpot offered three subscription packages ranging in price from $3,000 to $18,000 per year. The company struggled with poor churn and anemic expansion revenue. Net revenue retention was near 70%, a far cry from the 100%+ that most SaaS companies aim to achieve.
Something needed to change. So in 2011, they introduced usage-based pricing. As customers used the software to generate more leads, they would proportionally increase their spend with HubSpot. This pricing change allowed HubSpot to share in the success of its customers.
In a usage-based model, expansion “just happens” as customers are successful.
By the time HubSpot went public in 2014, net revenue retention had jumped to nearly 100% — all without hurting the company’s ability to acquire new customers.
HubSpot isn’t an outlier. Public SaaS companies that have adopted usage-based pricing grow faster because they’re better at landing new customers, growing with them and keeping them as customers.
Image Credits: Kyle Poyar
Widen the top of the funnel
In a usage-based model, a company doesn’t get paid until after the customer has adopted the product. From the customer’s perspective, this means that there’s no risk to try before they buy. Products like Snowflake and Google Cloud Platform take this a step further and even offer $300+ in free usage credits for new developers to test drive their products.
Many of these free users won’t become profitable — and that’s okay. Like a VC firm, usage-based companies are making a portfolio of bets. Some of those will pay off spectacularly — and the company will directly share in that success.
Top-performing companies open up the top of the funnel by making it free to sign up for their products. They invest in a frictionless customer onboarding experience and high-quality support so that new users get hooked on the platform. As more new users become active, there’s a stronger foundation for future customer growth.
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Subscription-based pricing is dead: Smart SaaS companies are shifting to usage-based models
Software buying has evolved. The days of executives choosing software for their employees based on IT compatibility or KPIs are gone. Employees now tell their boss what to buy. This is why we’re seeing more and more SaaS companies — Datadog, Twilio, AWS, Snowflake and Stripe, to name a few — find success with a usage-based pricing model.
The usage-based model allows a customer to start at a low cost, while still preserving the ability to monetize a customer over time.
The usage-based model allows a customer to start at a low cost, minimizing friction to getting started while still preserving the ability to monetize a customer over time because the price is directly tied with the value a customer receives. Not limiting the number of users who can access the software, customers are able to find new use cases — which leads to more long-term success and higher lifetime value.
While we aren’t going 100% usage-based overnight, looking at some of the megatrends in software — automation, AI and APIs — the value of a product normally doesn’t scale with more logins. Usage-based pricing will be the key to successful monetization in the future. Here are four top tips to help companies scale to $100+ million ARR with this model.
1. Land-and-expand is real
Usage-based pricing is in all layers of the tech stack. Though it was pioneered in the infrastructure layer (think: AWS and Azure), it’s becoming increasingly popular for API-based products and application software — across infrastructure, middleware and applications.
Image Credits: Kyle Povar / OpenView
Some fear that investors will hate usage-based pricing because customers aren’t locked into a subscription. But, investors actually see it as a sign that customers are seeing value from a product and there’s no shelf-ware.
In fact, investors are increasingly rewarding usage-based companies in the market. Usage-based companies are trading at a 50% revenue multiple premium over their peers.
Investors especially love how the usage-based pricing model pairs with the land-and-expand business model. And of the IPOs over the last three years, seven of the nine that had the best net dollar retention all have a usage-based model. Snowflake in particular is off the charts with a 158% net dollar retention.
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Bottom-up SaaS: A framework for mapping pricing to customer value
A few years ago, building a bottom-up SaaS company – defined as a firm where the average purchasing decision is made without ever speaking to a salesperson – was a novel concept. Today, by our count, at least 30% of the Cloud 100 are now bottom-up.
For the first time, individual employees are influencing the tooling decisions of their companies versus having these decisions mandated by senior executives. Self-serve businesses thrive on this momentum, leveraging individuals as their evangelists, to grow from a single use-case to small teams, and ultimately into whole company deployments.
In a truly self-service model, individual users can sign up and try the product on their own. There is no need to get compliance approval for sensitive data or to get IT support for integrations — everything can be managed by the line-level users themselves. Then that person becomes an internal champion, driving adoption across the organization.
Today, some of the most well-known software companies such as Datadog, MongoDB, Slack and Zoom, to name a few, are built with a primarily bottom-up product-led sales approach.
In this piece, we will take a closer look at this trend — and specifically how it has fundamentally altered pricing — and at a framework for mapping pricing to customer value.
Aligning value with pricing
In a bottom-up SaaS world, pricing has to be transparent and standardized (at least for the most part, see below). It’s the only way your product can sell itself. In practice, this means you can no longer experiment as you go, with salespeople using their gut instinct to price each deal. You need a concrete strategy that aligns customer value with pricing.
To do this well, you need to deeply understand your customers and how they use your product. Once you do, you can “MAP” them to help align pricing with value.
The MAP customer value framework
The MAP customer value framework requires deeply understanding your customers in order to clearly identify and articulate their needs across Metrics, Activities and People.
Not all elements of MAP should determine your pricing, but chances are that one of them will be the right anchor for your pricing model:
Metrics: Metrics can include things like minutes, messages, meetings, data and storage. What are the key metrics your customers care about? Is there a threshold of value associated with these metrics? By tracking key metrics early on, you’ll be able to understand if growing a certain metric increases value for the customer. For example:
- Zoom — Minutes: Free with a 40-minute time limit on group meetings.
- Slack — Messages: Free until 10,000 total messages.
- Airtable — Records: Free until 1,200 records.
Activity: How do your customers really use your product and how do they describe themselves? Are they creators? Are they editors? Do different customers use your product differently? Instead of metrics, a key anchor for pricing may be the different roles users have within an organization and what they want and need in your product. If you choose to anchor on activity, you will need to align feature sets and capabilities with usage patterns (e.g., creators get access to deeper tooling than viewers, or admins get high privileges versus line-level users). For example:
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How startups can leverage elastic services for cost optimization
Joey Lei is director of service management at Synoptek, a global systems integrator and managed services provider. Prior to joining Synoptek, he was a lead product manager for Dell EMC’s Data Protection Division and was a founding product manager for Dell EMC PowerProtect Data Manager, Dell EMC’s newest generation data protection and data management solution.
Due to COVID-19, business continuity has been put to the test for many companies in the manufacturing, agriculture, transport, hospitality, energy and retail sectors. Cost reduction is the primary focus of companies in these sectors due to massive losses in revenue caused by this pandemic. The other side of the crisis is, however, significantly different.
Companies in industries such as medical, government and financial services, as well as cloud-native tech startups that are providing essential services, have experienced a considerable increase in their operational demands — leading to rising operational costs. Irrespective of the industry your company belongs to, and whether your company is experiencing reduced or increased operations, cost optimization is a reality for all companies to ensure a sustained existence.
One of the most reliable measures for cost optimization at this stage is to leverage elastic services designed to grow or shrink according to demand, such as cloud and managed services. A modern product with a cloud-native architecture can auto-scale cloud consumption to mitigate lost operational demand. What may not have been obvious to startup leaders is a strategy often employed by incumbent, mature enterprises — achieving cost optimization by leveraging managed services providers (MSPs). MSPs enable organizations to repurpose full-time staff members from impacted operations to more strategic product lines or initiatives.
Why companies need cost optimization in the long run
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ProducePay nabs $190 million debt financing to lend to farmers
Los Angeles-based ProducePay has inked a $190 million debt facility from CoVenture and TCM Capital to expand its lending business and marketplace for farmers.
ProducePay offers farmers cash advances throughout the growing season to smooth the sometimes lumpy revenues and give farmers a bit more predictability, the company said. It buys produce ahead of delivery and sets itself up as a middle-man between distributors, growers and grocers.
Since its launch in 2015, the company has seen $1.5 billion worth of produce flow across its marketplace; $750 million of those transactions were in the last year.
ProducePay’s pitch to farmers is the company’s centralized marketplace, which the company says offers growers higher pricing and certain payment from distributors, along with better pricing for supplies and services like seed, equipment and logistics services.
The marketplace service, which only launched in October, has already seen $100 million in purchases.
“In just four years, ProducePay has had a transformative effect on the financial health and success of scores of farmers and value-additive distributors in Latin America and the U.S.,” said ProducePay founder and CEO Pablo Borquez Schwarzbeck, in a statement. “This new debt facility will accelerate ProducePay’s impact, empowering more farmers and distributors to run their businesses more profitably, making high quality and affordable fresh produce available throughout the U.S.”
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Here’s how much the all-electric Polestar 2 will cost in its launch markets
Volvo group’s Polestar electric performance car sub-brand has announced pricing for the Polestar 2, the company’s second production car, a four-door mid-sized fastback that will begin production in 2020 and start shipping as early as next June. Starting prices are set at between 58,800€ (around $63,720 U.S.). Those prices include three years of service and maintenance and European value-added tax (VAT). Polestar also previously communicated that its rough guide pricing for North America was at around $63,000, so this is consistent with that, but the final actual price for American buyers will be revealed later on.
That’s a pretty competitive price in the electric performance sedan market: The Model S starts at $75,000 U.S., for instance. The Polestar 2 is really much more a competitor for the Model 3, however, and is priced more closely to a kitted out version of that vehicle.
In terms of what the Polestar 2 packs in performance, its estimated EPA range is set at around 275 miles (the Model 3 starts at 240 but ranges up quickly to 310 and 325 miles depending on battery options). It offers around 408 horsepower from its 300 kW electric powertrain, again just short of the Model 3 when that’s equipped with its dual-motor performance configuration. Polestar say that it’ll do 0 to 60mph is under five seconds, again sort of in the middle of the pack when you look at the Model 3’s full configuration lineup.
Aside from its electric powertrain, the Polestar 2 will have some other interesting techie twists, including an infotainment system based entirely on Android OS and shipping complete with the full suite of Google services, including Google Assistant and the Google Play Store. This is a deeper integration than just Android Auto, which is powered by an Android phone and basically just displays an interface on the in-car screen.
Like the Model 3, the Polestar 2 will initially launch at a higher price point, with more affordable model variations coming later on, including a base model starting at around $45,000 U.S.
For now, here’s the full list of the prices for the initial markets here Polestar 2 will be available first:
- Norway NOK 469,000
- Sweden SEK 659,000
- Germany EUR 58,800
- United Kingdom GBP 49,900
- The Netherlands EUR 59,800
- Belgium EUR 59,800
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How the trade war with China hit Uber’s public offering
Uber’s much heralded public offering has arrived not so much with a bang as with a whimper, thanks largely to the ongoing trade war between the U.S. and China.
Overnight, the U.S. government made good on the threat from President Donald Trump to hike tariffs on $200 billion worth of Chinese goods to 25% up from 10%.
As a result, stock markets slid further on Friday, and their decline hit Uber’s initial public offering. The company’s shares began trading at $42.54, below its initial pricing of $45 per share.
At its initial pricing, Uber was valued at $75.5 billion, below the $120 billion price that Wall Street thought the company would fetch late last year, but still among the biggest public offerings in history. Only Facebook’s $81 billion public offering and the whopping $169 billion debut of Alibaba were bigger, according to a Dealogic analysis cited by Business Insider.
Uber’s historic public offering — which was designed to raise at least $90 billion for the ride-hailing giant — was no match for the equally historic struggle between the U.S. and China’s emerging economic superpower.
The rising tariffs were designed to hit business equipment, but will also affect prices on some $40 billion in consumer goods — ranging from clothes to furniture, refrigerators, washers and dryers.
Trump boosted tariffs after China reneged on certain concessions it had made during the trade negotiations. Chiefly, the U.S. was looking for written commitments from the Chinese government that it would provide less direct support to its state-owned enterprises and loosen restrictions on U.S. companies operating in the country.
Uber’s disappointing debut can’t be chalked up to trade woes alone. Its immediate American rival, Lyft, has seen its stock decline precipitously since its opening at nearly $79 per share. Lyft is now trading at around $55 per share.
Yesterday, Lyft reported its first earnings as a public company, losing $1.14 billion on $776 million in revenue.
While Lyft is focused on consumer transportation, Uber has expanded to include freight shipping and meal delivery as part of its attempts to become an all-in-one hub for consumer and business logistics.
That expansion has come at a cost. The company may have generated revenues of $11.3 billion in 2018, but it operated at a $3 billion loss for the year. And Uber is deeply in the red. With deficits reaching nearly $8 billion by the end of 2018, as MarketWatch points out.
Trade wars, it seems, trump transportation disruption.
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Uber Lowers Fares In Over 100 Cities
Uber is lowering prices in over 100 U.S. and Canadian cities, effective tomorrow. January is a slower month for the car service and the company says it is reducing fares in order to increase demand. “Seasonality affects every business, and Uber is no exception,” said the company blog post. Uber claims that the increased demand will offset the lower prices and that drivers will… Read More
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