500friends, a Y Combinator-incubated startup that helps retailers manage their customer loyalty programs, is announcing that it has raised $5 million in Series B funding.
The round was led by existing investor Intel Capital and new investor Fung Capital. Previous backer Crosslink Capital also participated. (Intel’s Carey Lai and Fung’s Michael Hsieh are both joining the 500friends board.) The company also raised $2 million in debt — co-founder and CEO Justin Yoshimura told me that 500friends is unusually credit-worthy for a startup thanks to its recurring revenue.
500friends offers a program called LoyaltyPlus, which allows stores to interact with customers through things like rewards, sharing widgets, and user-generated content. One of the key features, as Yoshimura outlined for me last year, is the ability to divide customers into different segments and estimate their likely lifetime value based on those groups. So retailers can offer deals and special service to the customers most likely to be valuable.
Retailers using LoyaltyPlus include Build.com, Ice.com, Jewelry Television, and Shoebuy.com. 500friends says those customers are reporting increases in repeat purchase rates that are as high as 60 percent.
The next step, according to Yoshimura, is “omni-channel support.” In other words, the company is working to bring similar capabilities to physical stores. Co-founder Hong Hu said that 500friends will allow stores to offer loyalty programs via their customers’ mobile phones, and to add location-based capabilities like alerting people as they walk past the store that they’re in a certain tier of the loyalty program.
Yoshimura said that the company’s online loyalty programs see customer adoption rates between 22 and 35 percent. That number will probably be lower in physical stores, but he argued that, unlike existing loyalty and rewards programs, 500friends can help those retailers reach people who aren’t regular customers already. It also helps them understand who their customers are. More broadly, he pitched LoyaltyPlus as a way for retailers to stay competitive.
“I keep telling them, ‘Listen, do you really think you’re going to out-discount Amazon?” Yoshimura said.
500friends has now raised a total of $12 million.
500friends is the trusted provider of next generation loyalty marketing solutions to over 40 of the Internet Retailer 1,000 brands. The company is backed by leading institutional investors including Crosslink Capital, Intel Capital, and YCombinator.
Justin Yoshimura is an entrepreneur and angel investor. He is currently the founder and CEO of 500friends, a provider of SaaS loyalty marketing solutions backed by $12M+ from Crosslink Capital, Intel Capital, Silicon Valley Bank, and YCombinator. Prior to 500friends, he dropped out of high school to found two e-commerce companies, both of which were acquired. He is also an investor in Zencoder, ifeelgoods, Hipmunk, Homejoy, OwnLocal, Torbit, Userfox, Firebase, and First Opinion. Besides entrepreneurship, Justin is passionate about...
Intel Capital, Intel’s global investment organization, makes equity investments in innovative technology start-ups and companies worldwide. Intel Capital invests in a broad range of companies offering hardware, software, and services targeting enterprise, home, mobility, health, consumer Internet, semiconductor manufacturing and cleantech. Since 1991, Intel Capital has invested more than US$10.8 billion in over 1,276 companies in 54 countries. In that timeframe, 201 portfolio companies have gone public on various exchanges around the world and 317 were acquired or participated...
Fung Capital is a venture capital fund affiliated with Li & Fung, the world’s largest sourcing company that manufactures, distributes and retails consumer products globally with over $20B in revenue. We partner with entrepreneurs who share a vision in creating new and more efficient retail commerce with the marriage of innovation, data and product sourcing. Investment Focus Ecommerce Mobile Commerce Social Commerce Data Analytics Supply Chain Stage: Early and Growth Investment Size: $1M - $10M