South African serial entrepreneur and investor Adii Pienaar’s new startup called Receiptful is making some noise. The co-founder of the popular website theme builder, WooThemes — which is also behind one of the world’s biggest online shop builders, WooCommerce — has developed an elegantly simple tool that helps online shops increase customer engagement using email receipts.
Since launching late last year, over 290 000 receipts have been sent which translates to around 5 000 receipts per day. To top that off, the startup has just revealed to us that it’s raised US$500 000 (over R6-million) to help it strengthen its operations going forward in the global ecommerce space.
The Angel round consists of the following mixture of South African and US investors and entrepreneurs:
Founder of WordPress Matt Mullenweg, co-founder of Buffer Joel Gascoigne, founder of Gyft Vinny Lingham, co-founder of Grasshopper David Hauser, Slack founder Andrew Wilkinson, Groupon SA founders Daniel Guasco and Wayne Gosling, co-founder of Jumia Nigeria Manuel Koser, WantItAll founder Justin Drennan, HealthQ co-founder Riaan Conradie, and some more.
Ventureburn caught up with Pienaar to chat about the importance of Receiptful and where this round of funding fits into its bold vision of becoming the next painkiller for online shops the world over.
Ventureburn: Can you give us some background on how the company started?
Adii Pienaar: As some context, I think we should go back to when I exited WooThemes. I exited WooThemes because I wanted a new challenge. The company got to that stage where as CEO I wasn’t creating as much as I did before. It was more about scaling the operation and I like getting my hands dirty and the chaotic nature of startups.
What I wanted to afterwards was something that relates to SaaS (Software as a Service). I was also really intrigued by building stuff for ecommerce. WooThemes later stages were more focused on WooCommerce. I figured that if I could find something similar that made sense, I’d love to double down on that and use my experience, skills and connections in that space.
I exited WooThemes at the end of 2013. About six months later, I stumbled onto an article called Growth Hacking with Email Receipts Is a Huge Missed Opportunity. It just connected two dots for me. One being the theory that email receipts might be a marketing opportunity and nobody else has pursued this at all. And secondly, it was about the same reasons why I exited WooThemes; challenging myself, explore SaS, and also find something that was within the ecommerce space to leverage my previous journey.
In May 2014, I outsourced a very crude MVP using Stripe, thinking that the growing third-party ecosystem around Stripe made a lot of sense and they have a fantastic API. Due to the fact that the API was so extensive, we found that everyone who’s implemented via the API had a slightly different implementation. We simply couldn’t catch all of the edge cases. I felt at that stage that I had just enough interest to take a moonshot with this, so I hired a full-time team in September.
VB: Can you tell us a bit more about the product specifics?
AP: When it comes to its value-proposition, Receiptful really has two things. Firstly, it gives the user the ability to easily customise the receipts.
The second part is where we help them include dynamic marketing messages or, as we’d like to call them, upsells. Right now, our two primary upsell vehicles are to give a customer a discount coupon — which incentivises them for a repeat purchase — and then we also include product recommendations.
We’ve seen over 70% open rates across our whole population. So far, we’ve sent a quarter of a million receipts. At least 10% of all receipts are engaged with in various kind of ways, which means it’s coming down to a click of some kind. That’s three or four times more than what MailChimp’s industry grade marks are for email marketing in general. That’s the idea of the upsells — literally taking that opportunity when you have that captive audience. On average people spend about 15 seconds or more actually reading the receipt.
VB: Quarter-of-a-million receipts sent so far? Can you elaborate on the traction?
AP: In the first month we sent 250 receipts, which made it real hard to stick with the idea. It took us 140 days to send our first 100 000 receipts. Twenty-nine days after to send our next 100 000. Then the next 50 000 were sent within the following eight days. There’s definitely seeing an exponential curve at this stage.
We have a total of 5 000 signups and we regard just over half of them as highly active — someone that has actually sent a live receipt in the last thirty days.
VB: How is it monetised? Is it based on a freemium model?
AP: What we’ve decided to do is keep our receipts 100% free. You can build into or on top of our receipts for free.
The strategy is to keep it free and build a relationship based on that initial value that we can help our customers. Even for a small retailer that does a few sales a week, we can probably make them a few additional dollars a month. It isn’t really significant in an isolated kind of way but for somebody only doing that few sales, a three or four percent increase on total revenue can become quite significant.
We’re working very closely to releasing our very first paid products.
We basically want to take the data we have on the customers of our merchants, and then optimise other interaction channels as well. The idea is for us to use the data as an underlying mechanism to fuel a whole bunch of different interaction points along the way.
VB: How big is the team currently and where are you guys based?
AP: Including myself, we have six full-time members and one part-time. I’m the only one based in Cape Town while most of the rest of my team is scattered around Europe, and then there’s one in Argentina.
Receiptful is based in the UK. I would not have been able to raise this kind of capital, if it was a South African company.
VB: Why is that?
AP: Mainly, it’s because of our IP constraints. The easiest way to make money from venture investments is obviously when the company goes public or exits. That’s fine for them to invest in a South African company but getting the IP is another story. Say, for example, a foreign company acquired a local company, the red tape involved makes a really complicated structure. It’s an area where the Reserve Bank has been very strict in and where Mark Shuttleworth has fought successfully.
Being based in the UK, we’re also able to use Stripe which is one of the best payment processes in the world. But you’re not allowed to use it as a South African company.
Lately there are more options. I know the Peach Payments guys are trying to get that down. But there’s still so much red tape getting that money flowing. We always had to find ways to work around that with WooThemes. You end up spending the money and time to work around this, instead of just being able to focus on the business.
VB: I don’t recall any investments raised for WooThemes. Was location a problem for you guys back in the day?
AP: We never took outside funding and we never planned on selling the company. Given the different model, this is a new learning curve for me — the one being venture-backed and the other bootstrapped. Many times we explored the notion of moving WooThemes off-shore but we just couldn’t find the cost effectiveness therein.
VB: You’ve mentioned the traction and the revenue model. Why do you need US$500 000 funding?
AP: Firstly, hiring European talent doesn’t come cheap. I self-funded it up until I started taking money from Angel investors and the decision I made was to keep our receipts for free.
We could’ve charged our users. Initially, that was the plan. We rolled out with a premium package and a 14-day trial and we changed that two weeks after. The reason was that we had to build out own social proof first.
Prior to Receiptful, nobody believed that receipts could actually generate additional revenue. It made it hard to sell. Whereas the freemium model is much easier for early adopters to try and then help us build the data and a use-case for what we’re doing. The Angel round, at this stage, is to enable that journey.
Right now, we’re seven months old. Within the next two to three months we’ll start releasing paid products and slowly start building revenue. SaS has that slow ramp. It’s going to take us couple of months at least to break-even.
At this stage, the outside funding is to allow us to stick true to our narrow focus and to roadmap without having to immediately chase revenue. In the past I was a spokesperson for bootstrapping. I just don’t think that bootstrapping would’ve worked for Receiptful’s model and roadmap.
We initially set out to raise a seed round and what ended happening was that we raised an Angel round.
VB: Is that easier for you?
AP: I think institutional investors normally invest other people’s money. This means there’s more pressure and structure to the whole process. Angel investors are — I wouldn’t say they have no process or no due diligence — but they’re generally easier to deal with. Most of the Angel investors are entrepreneurs themselves whereas not all institutional investors are entrepreneurial or at least have founded a startup. It’s just quicker that way.
It’s not that I’m trying to avoid institutional investors. There are still some that are interested and we’ll probably bring them on board for our next round.
VB: And when will that be?
AP: Well, with European payrolls to pay, I don’t know. Maybe within the next six to twelve months.
VB: What’s the general scene like for South African startups raising capital internationally? What needs to change?
AP: I think there’s a couple of observations that I can make. Firstly, there is capital. I don’t think you’re going to get the valuations that you’d get when you raise money as a non-South African startup, for example a US startup based in SA raising from US investors. Even if you compare US valuations and investors versus there and Europe, there’s already a difference. South Africa is just further down. It’s not impossible, but there is capital.
Secondly, a thing that was hugely beneficial for me. Prior to Receiptful, I reached out to people that could coach me through that experience. One of the biggest learnings was just the narrative around pitching your story. Not just pitching but telling how you got to where you are now and what you’re planning to do within the next six months with that funding. Ultimately, the better you can tell that story, the more likely you are going to raise that money.
VB: You hear a lot about investors investing more in the person than they do in the business. Do you think that was the case for you?
AP: My background and the fact that I’ve had a successful exit help a lot. I won’t be able to say how much that influences their decision, but it does. As far as I understand, a venture investor is far more likely to back an entrepreneur who had one big success and two failures than they would back a new guy who has none.
It doesn’t really matter what valuation you’re in if you’re a local startup. Once you’ve done that exit, it immediately becomes a stepping stone for more opportunity.
WooThemes might have been a fantastic business. And it is, to this day. It wasn’t perfect. Even after six years, there were so many big things. Internal things that you’d think after six years these guys would sort this out that we just couldn’t resolve. Even regardless of that, it didn’t hinder my exit and it definitely didn’t hinder me moving onto the next thing, which was being able to raise money.
I hear so many local entrepreneurs say that there isn’t money involved or that the terms aren’t good. I really want to challenge them. Get to that first success of some kind; whether that’s a R1-million exit or a US$1-million exit doesn’t really matter. You just need that first exit.
VB: Why do you think there are no other products like Receiptful on the market today?
AP: I don’t think it’s an obvious thing. Everyone says build products — especially B2B ones — where you’re solving a pain. If it can be a painkiller, it can be much easier to sell, right? That’s where people generally kind of head towards. I don’t think that Receiptful from day one, or even today, is a painkiller. We’re much more of a vitamin in that sense. Over time, we can build that into a painkiller, which is definitely the plan and where we’re progressing towards.