Can a mobile classified app topple the behemoth that is Craigslist? We’ve asked the question before (more than once, in fact), and it looks like it may be in order again: 5miles, an app developed in China but being rolled out in the U.S. first as a quick way for people to list and buy items locally, has raised $30 million in funding to beat the classifieds leader at its own game. It has a couple of ace cards in its hand to help: 5miles was created to be mobile-first; it comes with some AI-based vetting features; and it costs absolutely nothing to use.
This latest round, a Series B, brings the total raised by the company to over $50 million. With this latest funding, 5miles’ valuation is over $300 million, TechCrunch understands.
5miles first launched in the U.S. in January 2015 after being founded by Lucas Lu, a physics PhD who had also worked at Alibaba and was a CTO at Chinese marketplace app Light in the Box. Although the app was built in China, Lu had done graduate work at Southern Methodist University, so when it came to launching the app he went back to Dallas as a starting point.
The app has grown rapidly in the last year: 5miles says it now has over 5 million downloads (appropriately enough), currently with 30,000 downloads/day across Android and iOS. It has 2 million active users, who it helped sell $1 billion worth of goods in 2015.
This article notes that Dallas and Houston are currently the app’s biggest markets, and an office in Dallas — its U.S. headquarters — employs 12 people. But Lu said that it’s already soft launched in 15 other markets in the U.S. — including LA, several cities in Florida, Boston, Philadelphia and New York.
“We’ll continue to build out in existing markets so we’ll cover most of major cities in the U.S. by the end of next year 2017,” he said. (To that end, it’s raising more money already.) If all goes to plan, it will eventually also expand globally in its home market, Europe, Latin America and other parts of Asia.
In contrast to the likes of eBay, 5miles is completely free both to download and use as a buyer or an individual seller. 5miles instead makes its revenues on services. “We already have started to partner with auto dealers and other SMBs as a lead generator and traffic driver (for them) and revenue stream (for us),” a spokesperson said. He added that the startup is testing a promotion built around this concept next month.
Investors in the this latest round include Blue Lake, IDG, Morningside and SIG-China (part of the Susquehanna Investment Group). They are eyeing up the opportunity of tapping into the multi-billion dollar peer-to-peer commerce market of individuals selling to each other with more modern technology and while it is a crowded market, they believe that 5miles has shown that it could be a contender to be one of the successes.
“We have been following 5miles’ progress since the beginning of 2015, and have been very impressed with the company’s rapid growth and the innovation they have brought to local sellers and buyers,” said Alex Yin, co-founder and general partner at Blue Lake Capital. “We very much look forward to working with the company as they continue to expand.”
There are also some more strategic-sounding investors involved in this round: “individuals with ties to e-commerce giants, Alibaba and eBay,” according to a news release from the company. Lucas Lu, the founder and CEO of 5miles, tells us that the Alibaba executive is Eddie Wu, but he declined to disclose the name of the investor with a tie to eBay.
The Alibaba connection is interesting, given that the company continues to eye up the best way to raise its profile and business in the U.S. market. Lu says that his company has been speaking with Alibaba regularly as it has grown.
The eBay connection is also notable, considering that 5miles is in an ongoing trademark dispute with the online marketplace giant. Specifically, it has filed a dispute over how eBay has rebranded its mobile-first classified listings app Close5. (The genealogy of Close5 is a little messy: In 2004, eBay acquired Dutch online sales app Marktplaats, which launched a service called Close5 in October 2015. It included assets from Las Vegas startup Rumgr, which eBay acquired in 2014.)
5Miles contends that Close5’s “name, logo and tagline now mirror 5miles‘ original branding,” and eBay is opposing 5miles’ trademark. The case is in the discovery phase right now, 5miles said. “We will continue to vigorously defend our trademark,” its CFO Garwin Chan said in an interview. “We’ve had many instances of confusion in the marketplace.”
Who follows whom?
5miles may claim that Close5 is too close its own style and ethos, but the reality is that there are a number of apps that are also trying to take on more legacy classified platforms with their own, more modern, mobile take. They include, but are not limited to, letgo, Wish Local (from Wish), Poshmark, Offerup, Wallapop, Depop and Snapsale — with the latter two focusing mainly on younger users.
Lu notes that 5miles is comparable in size to Letgo and Wallapop. Offerup is bigger, by virtue of being in the market for longer, “but we are growing a lot faster and will catch up,” he said.
With so many similar apps on the market, 5miles says that it’s differentiated in part by its pricing — free! — and the fact that it’s a one-stop shop with services as well as physical goods.
Like some of these other apps, 5miles plays on the fact that Craigslist — which still dominates the online classifieds space — is outdated and not vetted very well.
On the outmoded front, 5miles essentially updates the concept of classified ads with newer innovations in areas like mobile and social to make the listings easier to engage with and items faster to buy. It uses a Pinterest-style grid layout to present items across categories like cars, phones, clothes, collectibles and contracted services like babysitting, housekeeping and plumbing.
You can view items by distance from your location, price or date of listing. Potential buyers can ask questions, make purchase offers, or bookmark and share items through a streamlined interface in the app, and they can “follow” certain sellers they like.
Sellers can attach voice descriptions instead of text to a listed item, which they are only able to upload via the iOS or Android apps. On that note, you can browse listings online or on the app, but when it comes to any interactions, you also need to use the mobile apps.
On the vetting front, 5miles is attempting to tackle what it refers to as existing online marketplaces that are “full of spammers and fakes”.
It uses a multi-layered verification procedure for new sellers, cross checking people on email, by phone numbers and on social media.
Then company works with an “Awesome Experience” team that it claims vets every item that is uploaded to make sure it is “healthy and safe”. It also identifies and disables accounts with suspicious or fraudulent activity. There are about 70,000-90,000 images and 20,000 listings that are checked daily by in-house and outsourced teams today.
But this is not all as manual as you might think. To scale the service in the future, Lu says it’s developing a machine learning platform that learns from manual vetting procedures how to “read” items so that it can do the process more automatically, powered by artificial intelligence, in the future.
“The key is that in the beginning we manually do a lot of things, but right now we have engineers making a program that is leaning using AI that will be able to do some of this by machine learning,” he said.
Another way of avoiding fraud on the site is to cut out features that breed it: 5miles does not currently have a payments system in place, so all payments happen off its network. This seems to play on the very local nature of the app: “Our users coordinate pick-up and drop-off of items they wish to buy and sell,” the company notes. Of course, it says it has a payment option in the works, which might complicate things.