Duetto

Overview

Duetto is a SaaS startup focused on providing cloud based software tools for the hospitality industry (including hotels and casinos).  Their two main product lines are a cloud pricing engine to optimize the price of a hotel room on a real time basis, and a revenue forecasting and data visualization tool.

Duetto currently has more than 2,000 locations using their software on 6 continents.  They have over 100 employees across 7 offices with their headquarters in San Francisco.

Why I like Them

They are attacking an underserved market with a huge TAM, an unconsolidated customer base, and minimal competition. Even large hotel chains are several decades behind on automation as the industry is extremely slow in understanding and adopting new technologies.  A shocking number of hotel operators still use Excel spreadsheets for pricing, meaning the bar is extremely low to prove the worth of Duetto's products.

I am continuously fascinated by pricing optimization software, especially as companies like Duetto use more powerful AI for their predictive models.  It is an amazing value for any business to be able to increase their revenue and margins while offering the exact same product, whether it be airline seats or hotel rooms.  Once a hotel or casino starts using the product it is extremely sticky and something they quickly come to rely upon.  Duetto confirmed this stating they have "ridiculously low" churn.

Adding to this advantage is a unique moat in terms of the software interfaces Duetto has to build out for installations.  Many hotel and casino operators rely on legacy software with no open APIs.  Duetto spends a large amount of resources building proprietary interfaces with these on premise systems.  This forms a strong moat for Duetto as competitors have a hard time plugging into the customers other software systems. 

Duetto has an extremely bright future ahead and I look forward to watching them accelerate into hyper growth mode.

Disclosure:  I have spoken to members of the executive team.

Xometry

Overview

Xometry is a startup that offers a software platform connecting engineers to a growing network of 500+ machine shops for custom part manufacturing.  Their software allows instant pricing of any designed component, lead times, optimal manufacturing process, and immediate ordering - all with click of a button.  Think of them as the Amazon of manufacturing.  

The magic in their technology lies in their software's ability to provide the above for never before manufactured components.  The company gives their software away for free with revenue made from the difference between Xometry's quoted price and what the machine shop charges.

The team is currently ~100 people and has doubled in size within the last year.  They have fast growing traction with over 5,000 customers including 15% of Fortune 500 firms (23% when removing Financial Service firms) including GE, BMW, etc.

Why I like Them

There is really nothing quite like this available today.  It is a great example of how software can make existing manufacturing processes more efficient.  In order to understand how powerful this is, for any CAD object to be created, usually an engineer has to manually send their designs out to manufacturers and wait for quotes to come in.  This occurs even at large manufacturing companies building custom parts.  With Xometry, this all happens instantly with the software quoted price being what the customer pays since Xometry itself takes on the risk of their price quote being off from what the machine shop actually charge. Design engineers love the product since its a complete upgrade to the standard process with glowing feedback from users.

The company has a huge green field opportunity ahead of it with such a superior product to what is currently industry standard. The nearest competitor are firms like Proto Labs (NYSE: PRLB) which are on demand rapid prototyping companies which offer a single price and fast lead times for any custom part.  However, Xometry is a few steps ahead, able to get competitive pricing from hundreds of machine shops giving it the edge.

Disclosure:  I have spoken to members of the executive team.

Trucker Path

Overview

Trucker Path is a software company building out a suite of offerings for the trucking industry.  It offers three product lines targeting long haul truckers.  Its initial product was a navigational and trip planning app called Trucker Path.  More recently it added a freight hauling marketplace platform called Truckloads, and InstaPay which is a factoring service.  The company monetizes via a premium version of the app along with its factoring services offered via its Truckloads platform.

The company is based in Mountain View, California and has ~60 employees.  Its founder is Ivan Tsybaev, a serial entrepreneur.

Why I like Them

Although I don't usually like app companies, Trucker Path caught my attention because what started as a basic navigation app for truckers has been able to transform itself into a full platform and freight logistics marketplace for goods shipped via truck. Trucking is a slow moving, fragmented industry and the team was clever to get their app and brand known by first offering targeted navigation features to the professional long haul trucker customer.  By all reports truckers are delighted by the app with an average of 4.7 out of 5 stars and 35,000 user reviews.  Trucker Path leveraged this satisfied user base to solve the chicken and egg problem in building a freight marketplace. 

This smart progression in product offerings has rewarded the team with extremely strong traction as they have 600,000 truckers using the navigation app.  Their freight marketplace Truckloads, has over 100,000 carriers searching through over 3 million monthly loads posted by 800+ freight companies.  The biggest opportunity lies with their freight marketplace and factoring business since trucking in the US alone is a $700B+ industry.  There is an open field here to automate the currently inefficient trucking marketplace as can be seen by the recent news that competitor Convoy has recently raised a large sum of money.

Technology like Trucker Path's offering serves as an intermediary step between human based trucking and fully autonomous self driving trucks.  Most importantly they have data that is invaluable to an autonomous trucking fleet operator.  As their head of marketing, Sam Bokher, describes it - "We have the most comprehensive data on trucking-related points of interest, truck parking data – this data have been crowdsourced from our users, so no one else in the industry has such information. In addition to that we have information about where the freight is going and what the current rates are."  It is easy to see how their products could plug right into the technology stack of companies building fully autonomous trucks (Uber, Tesla, etc.).

I also had a chance to ask the team about their thoughts on fully autonomous trucking.  They don't see it being real for at least another 10 years and see the regulatory framework as not even close to where it would need to be to support fully autonomous trucking networks.

Trucker Path has strong prospects with the growth opportunity of their trucking freight marketplace business along with the value of their proprietary mapping and trucking related data trove.

Disclosure:  I have spoken to members of the executive team.

Navigation App

DiffBlue

Overview

DiffBlue is an artificial intelligence startup using AI to write code across several use cases to automate common programming tasks.  Their leading product right now is a test generation tool that automatically develops test cases and runs them for software as it is being developed.  It not only determines if code is bug free on its own but also suggests ways to increase program efficiency.  Within the next year they will have a SaaS offering of this tool in addition to the existing on premise solution.  This frees up developer time while also eliminating the need for dedicated QA test engineers. The firm also offers products for automatic code refactoring (restructuring code without changing any external behavior) and security vulnerability identification.

The team is currently ~50 members with plans to grow to 150 within the next year.  It was started at the University of Oxford by founder and current CEO, Dr. Daniel Kroening who is a professor of computer science.

Why I like Them

I like that DiffBlue has an immediate, commercial value to companies that can be measured in dollars today.  There is a lot of hype about artificial intelligence so it is nice to see a product hitting the market with a real commercial application.  Many AI companies today sound cool in theory but offer vague solutions with no direct measurable value.

I also like that their technology is a novel application of AI that had previously only been played with in the lab.  It is a great example of AI increasing productivity and efficiency, especially of a job that no one enjoys in software.  Although it varies, developers spend a quarter of their time on average writing test cases and debugging their code.  Not to mention the meta nature of software reading and testing software is cool to think about.  

Their core product of test generation software also seems like a product that sells itself with extremely strong delight from developers.  Developers in general hate to debug and deal with test cases of their own code as it is somewhat akin to explaining in detail why you got questions wrong on an exam.

Disclosure:  I have spoken to Founder and CEO Daniel Kroening.

Brandless

Overview

Brandless is a recently launched consumer packaged good eCommerce startup.  Think of it as Trader Joe's meets The Dollar Store meets Dollar Shave Club.  They have impressively launched with several hundred privately packaged and curated core basic consumer products (think toothpaste, household cleaning supplies, salad dressing, etc.).  They also have a flat price guarantee across all their products of $3.  Similar to other newly successful consumer brands such as Tom's Shoes or Warby Parker, Brandless has a philanthropic component to its business with the company donating a meal for every order.  

The company plans to keep its costs down by only distributing online and never selling more than several hundred SKUs at any given time with a very limited selection of each product type.

At launch they offer their B.More membership program likely inspired by Amazon's Prime program for $36 to get faster and free shipping options.  Creatively, as a membership perk they double the meal donations per order sent to homeless shelters and upon joining donate 10 meals.

Brandless is based in San Francisco and Minneapolis and was launched in July 2017.  The founders, Tina Sharkey and Ido Leffler, are serial entrepreneurs with decades of consumer brand experience.

Why I like Them

Brandless is the convergence of several interesting trends in consumer packaged goods (CPG) - the rise of private label brands, direct to consumer, value in the form of low price for quality, businesses that give back, and simplicity (in packaging, choices, and the product itself).  Ironically, of course the company seeks to integrate all of these simultaneously by creating their own anti-brand as it were with a logo of a white blank space (trade marked of course!).  The company is specifically designed to incorporate everything the millennial demographic looks for in consumer products today and it is obviously this customer they are laser focused on.  The founders read every marketing study done on millennial consumers and custom built a company that checked the box on each finding.

Looking at the larger picture it will be fascinating to see how Brandless does against the Amazon and Walmart.coms of the world. My hunch is that they will find limited success, perhaps with certain product categories their brand becomes known for, but quickly learn eCommerce and consumer packaged goods are a hyper competitive industry in this day and age.  I predict their customer acquisition costs will be shockingly high on a unit economic basis and their lack of pricing power (one of their brand promises at launch is everything is $3) will greatly hamper them.  Doing some basic price comparison of their products revealed they aren't cheaper than equivalent competing brand products on many of their offerings. 

Also, one of the big things consumers now look for online is free shipping (the single biggest draw of Amazon's Prime membership) and at launch free shipping only occurs for orders above $72, requiring at least 24 purchased items.  Otherwise shipping is an expensive $9, discouraging those who want to order a handful of  items.  This seems like a large flaw for a company who's only distribution channel is online and is creating a consumer facing brand from scratch.

Overall, I strongly applaud their innovative business model of attempting to combine every CPG trend into one company but suspect they are trying to many things at once.  I predict they will ultimately be forced to abandon the every item is $3 policy, as well as adjust their shipping rates and policies at a bare minimum.  

It will be a fascinating study in the next generation of CPG but I remain skeptical.

Disclosure:  All information is from publicly available sources, I have not had any contact with a member of the company or its investors.