Freachly — Investing in the Future of How Local Businesses Do Marketing
Bringing Influencer Marketing to the Masses
This past week HV Holtzbrinck Ventures announced an investment into Freachly. In this post I would like to share some more background information around the investment.
What does Freachly do?
Small, local merchants have an ongoing problem: how can they market their business and grow their revenue? Classic channels like adverts, yellow pages or flyers are losing reach and aren’t measurable. Digital channels like Facebook and Google are difficult to manage on top of the busy schedule of running a small business.
In a nutshell, Freachly gives merchants access to influencers as a new marketing channel. Restaurants are the first vertical for Freachly. Influencers go to the venue, try the product and post about it to their audience. This reach drives new customers to the business. The merchant’s social presence is also fresher, more attractive and more authentic.
A few examples how it looks on Instagram
I also created a video (with my crazy video editing skills) to show how this works from an influencer perspective:
This product, currently live mainly in Berlin, is growing quickly. Freachly has over 600 merchants signed up. Over 5,000 influencers use the platform.
The market
In a wider sense Freachly competes against any other advertising channel in gaining new customers and building the brand. The problem for most local merchants: there simply aren’t that many alternatives.
Classic channels like adverts in local newspapers or the yellow pages obviously don’t work anymore. The audience has moved on.
Most merchants have tried multiple online marketing channels, including Google, Facebook, Instagram ads, Yelp, OpenTable and Quandoo. Many have given up on Google, and use Facebook sparingly. OpenTable, Quandoo etc. are good at driving orders to mid- to upper-scale restaurants. However restaurants feel they are not building their own brand, and question how many patrons turn into repeat customers.
All surveyed merchants have turned to Instagram as a better way of promoting their business. The colourful imagery on an Instagram presence is superior. Some merchants have tried to work directly with Instagram influencers, without using a platform like Freachly. This involves a ton of manual work. E.g. some influencers overstate their reach or buy fake followers, which merchants need to check for (see also “Instagram’s Wannabe-Stars Are Driving Luxury Hotels Crazy”).
The results are also clear: merchants are convinced social media activity drives customer traffic. While they don’t have actual numbers, there are some proxies. E.g. some have observed an increase after a Facebook post, or people showing Instagram photos to order the same specific meal their star did. So this seems to work.
And it’s not just kids. Just in Germany Instagram has 19.5m targetable users (MAU?). Wow. The audience skews urban, younger. However 60% are over 26, and female:male is 50:50.
In summary, the two main issues for businesses on Instagram are limited reach and fresh content. Both are addressed by Freachly’s solution. As a local merchant, it’s really quite hard to spend money on marketing. Freachly aims to both take marketing budget share from Google and Facebook and unlock new budgets.
What were the key reasons to invest
In the end, four key reasons drove an investment into Freachly.
I) Making money from the start
If you can find a sales model which works, the retail market is huge. Freachly already today generates significant revenue, just by focusing on restaurants in Berlin. There is an obvious case for rapid international expansion. Adjacent verticals (hotels, beauty, fitness, specialised retail) can be added quickly. Freachly benefits from strong network effects. Every additional vertical profits from the existing ecosystem of influencers and merchants.
II) Extremely positive customer feedback
The feedback from merchants during the due diligence was overwhelmingly positive. With early cases like Freachly it’s hard to gauge retention etc. from numbers. So it’s important to reach out to both existing customers, as well as potential ones. Freachly is solving a key pain point (how to get more revenue), as well as making processes more efficient.
III) TEAM, TEAM, TEAM!
Every “why we invested in” VC post raves about the team. Sounds corny, but the team is what drives early-stage investments. What impressed us most about Mario, Steffen, Yang, Lukas and David was their commitment, energy and enthusiasm. It’s hard to reach anyone from the team before ca. 4pm — that time is reserved for sales and working. The team also achieved great results so far without burning a ton of money. The funds from the investment are being put to good use — in fact, new salespeople are joining almost daily.
IV) Perfect fit with the investment strategy
HV Holtzbrinck Ventures is a credible investor in this space. Freachly fits well with past investments like e.g. Sumup, Groupon and Quandoo. There is significant experience with sales rollouts in this target audience, as well as international scale-outs.
What happens now
With the investment, Freachly will roll-out the current product by investing into sales and optimising the product.
Freachly will follow a sales model well-known from companies like Groupon or Foodora. The company aims to open new cities across Europe in the next 12 months. To achieve this rapid roll-out the team is planning on strongly increasing hiring, growing the company to over 100 people by December 2018. The company needs to make sure (and is very aware) of the stress this will put on the company culture, and the general organisation.
On the product side, the company will internationalise fast and add new verticals. The matching algorithm between influencer and merchants will be improved. Finally the backoffice needs to be kept running smoothly during this growth phase.
I, for one, am very excited about the times ahead!
PS also a big shout-out to Just Beyer and Johannes Schaback from SB21, who introduced HV to the Freachly team.
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