Nosto Bags $5.5M To Help Smaller Online Stores Fight Ecommerce’s Amazons

Nosto, a customer recommendation marketing engine designed to help the smaller fish in the ecommerce pool make a bigger splash by improving their online stores with more tailored product recommendations and customer outreach, has closed a $5.5 million Series A funding round, led by European VC firm Wellington Partners.

The Finnish startup took in a $2.8 million seed round back in April 2013, with backing from Open Ocean CapitalSanomaVentures and a number of undisclosed angel investors. Open Ocean Capital and SanomaVentures also participated in its new round, along with Tekes, the Finnish government-backed Funding Agency for Innovation.

Nosto’s automated marketing system for ecommerce SMEs analyses user behaviour to tailor the experience they have with the ultimate aim of encouraging them to spend more and thus help the business compete better with ecommerce behemoths like Amazon.

The product was launched in October last year, and the startup says it now has more than 1,200 online retailer users — NB: not all of whom are paying (given that it offers retailers a free trial). It launched a self service version of its product six months ago and claims to have seen revenue grow by 500% over that period.

Nosto’s plans for the new cash injection include continued development of its core product with a focus on scalability and making it easier to use, as well as adding new features. It says it will also be spending on recruitment, with hiring in biz dev, R&D, marketing and management on the cards — to help fuel plans to develop new products and ideas to monetize.

Other areas where the money will go include marketing, partnering with other ecommerce platforms to expand its reach, and market expansion (with plans to expand into new markets and expand its overseas operations), according to CEO and founder Juha Valvanne.

How has Nosto been spending its time (and prior funding) over the past year+? “Overall we did a lot of things related to onboarding, ease of use, and decreasing go-to-live time with Nosto. Many of the new merchant features rolled out were related to give more control over the recommendation logic (how to filter/choose the products recommended) to merchants. We also rolled out the second generation of our Javascript integration with merchant sites which enables better support for JS-heavy sites,” he told TechCrunch.

“Some of the improvements were about have better support for a/b or multivariable testing and optimising sites. During the spring we did a lot of research and piloting related to new features and products that are to be rolled out later this year.”

Commenting on the funding, Eric Archambeau, Wellington Partners’ Managing Partner, said the firm sees a big opportunity for ecommerce analytics and marketing automation tools to help close the gap between the online retail behemoths and the rest of the field.

“We see a huge opportunity for a new generation of such tools to help small and medium-sized online stores level the playing field in terms of performance against e-commerce giants such as Amazon and Rakuten,” he said in a statement.

“These big companies have developed a data-driven advantage over smaller web shops that could not afford the same level of R&D in data mining and predictive modeling. The combination of deep technology and simplicity offered by Nosto made us very excited about joining forces with Nosto’s founders and existing investors.”