Fairown — enabling circular economy for physical products
We’re happy to welcome another startup to our portfolio — the Estonian FinTech Fairown. With a mission to enable a circular economy, Fairown provides financing solutions that let people rent hardware products which they before had to buy in order to use. Last month we participated in their 7-figure funding round led by Main Incubator and primeCROWD.
Moving towards a circular economy
In 2021 everyone is used to monthly product subscriptions (see Spotify, Netflix or your go-to newspaper). It’s proven that user convenience is the key. We don’t need to own the products — but we do care about having the best access whenever we’re in the mood or have a specific need.
While we’re getting used to subscriptions in the digital, what about the physical? There are food delivery services. But still the vast majority of physical items are only for sale, not for rent. How would anyone subscribe to, for example, IKEA furniture, anyway?
But if this is what customers want then the industries are also adapting. People are getting more and more aware of their carbon footprint and don’t want to buy something that they could get second-hand or rent. So when the spirit of the time is demanding new ownership models, the industries are also adapting — albeit slowly. Any company wanting to launch a subscription model has to face the fact that developing such a system takes, on average, over a year to develop.
Fairown’s Subscription SaaS
This is where Fairown enters the play and gives companies a “plug & play solution” that has all the necessary infrastructure for subscriptions and payment services. There is no need for extra development.
For the end buyer, or the person renting a physical product, the process is as seamless as possible. While they’re getting a subscription to a physical product, let’s say a robotic lawnmower, they don’t even know that it is Fairown that’s providing the underlying financing solution.
But what is really happening under the hood?
When a customer checks out, Fairown initiates an unsecured loan agreement with a consumer bank so the seller is paid immediately.
Besides the loan, there is much more in a Fairown set-up. From robot to iPhone to handbag, each product has a specific checklist to evaluate normal wear and tear, plan for reverse logistics, and route to the secondary market. With the help of the most professional local financial service providers, they scale this solution from market to market (currently operational in 6 markets), becoming the sole counterparty for Stihl and other international brands (and sometimes retailers). It is then about multichannel distribution, where the brand can leverage and support its existing resellers’ network. Fairown portal is already used in hundreds of Point Of Sales as a payment method to cover subscription services.
It’s a win-win-win solution —the end buyers will get access to the products they otherwise would not have been able to afford and this way the manufacturers are getting more clients. And it’s also a win for the environment as less waste is created.
The subscription model is making sure that manufacturers produce long-lasting products that can be reused or recycled, hence moving us towards a circular economy and reducing waste. The model also caters to customer needs by allowing them to replace their devices regularly, or to buy or lease discounted refurbished devices.
Right team for the job
Fairown’s team has already grown to over 10 people. But it all started with CEO Hendrik Roosna as he had a history in launching physical products on a subscription model. His previous Y-Combinator backed startup Upgraded Technologies created subscription models for Apple and was eventually also acquired by Apple.
“I previously co-led the introduction of subscriptions for products at Apple. We learned that approximately one-third of Apple’s customers chose to pay a monthly fee instead of buying the product during the checkout process. We leveraged this success story and applied similar logic to other products which are used for a limited time and do not significantly deteriorate in value.“
After his time with Apple, Hendrik has taken this experience to build Fairown and acquire clients such as AVAD, STIHL and others. Since the launch in 2018 Fairown has made over €1.2m in revenue and with the recent funding they’re now aiming for global expansion.
Learn more from their website: http://www.fairown.com/