Identify a market that everyone else has ignored, deliver a great product, and then become a champion for your customer.
And there, ta-da, you have the simple, elegant formula behind Faire, the Kitchener- and San Francisco-based scale-up that recently landed a US$150-million Series D, and in so doing became Waterloo Region’s newest unicorn – a private company valued at $1 billion or more.
And they’re not done yet. Not by a longshot.
“We know we can be a much, much larger company than a billion dollars,” says Faire CTO Marcelo Cortes. “Our market is huge. We are serving a very large space that's really outside, in the dark, [with respect to] technology.”
Faire’s customers are small retail shops – gift stores, speciality stores and the like – and the makers who service them. Faire’s algorithms curate product suggestions, and it is so accurate, so good at pinning down what sells, that Faire allows unsold inventory to be returned, removing a store owner’s risk and, ultimately, lowering the store owner’s anxiety.
What it additionally does is give a mom & pop shop staying power – the leverage it needs to face down a Walmart-style big-box competitor, and online retailers like Amazon.
“The reality is that our customers – makers and retailers – have really been underserved,” says Cortes. “They are the long tail, and kind of forgotten. Nobody has built tools for them.
“All they see is the news about the retail apocalypse and that the Amazons of the world are going to take over this space. Well, we don’t believe that is true and the data shows that it is not true.
“We’re giving [our customers] tools so that they can compete with the online stores and with the big-box stores. They really appreciate that there is a tech company that's fighting for them and helping them be more successful.”
Faire got its start in January of 2017 as Indigo Fair (its origin story was featured on Communitech News in April, 2017). Cortes, CEO Max Rhodes, CIO Daniele Perito and COO Jeff Kolovson met through their affiliation with Square, the mobile-payments company.
Now, less than three years later, Faire is affiliated with 7,000 makers and 50,000 retail outlets and last month the company made its services available in Canada. The company’s Kitchener co-headquarters, with more than 70 staffers, was recently relocated to the renovated former Budd’s department store space on King Street – the very kind of store that Faire might have served.
Faire’s Kitchener office is located at 165 King St., West, across from City Hall
in what used to be Budd’s department store. (Communitech photo: Sara Jalali)
Faire’s appeal, Cortes believes, stems from the fact that small retailers themselves appeal to their customers. The experience of shopping in a small, tastefully designed and smartly stocked shop, with knowledgeable, friendly staff, is one that a big-box or online outlet can’t replicate.
“A lot of customers – and there are surveys that support this – they enjoy the experience of walking into a store, a physical retail shop that has a style. They know they're going to find unique items there that they wouldn't find elsewhere,” says Cortes.
“They like the human interaction. They enjoy meeting with the person that can tell them the story of the manufacturer, the story behind the product, and give them more information on the product itself. It's that experience that we don't we really don't think is going away. People enjoy that.”
Cortes is from Brazil. He moved to Canada nearly 19 years ago, aiming, at the time, to learn English. Once he arrived, he didn’t want to leave. He enrolled at University of Waterloo, later married, had kids, and he’s now so enamoured with his adopted home he won’t leave under virtually any circumstance.
“I started working for companies like Google, and eventually Square, that all had offices in California. They all tried to get me to move to California and I always told them. ‘No, I'm not moving.’
Cortes, then, heads up the Kitchener office; his co-founders are in the U.S. (Faire has an office in Salt Lake City, as well as San Francisco and Kitchener).
He admits that even the company’s investors were at first skeptical about his determination to remain here and support an office in Waterloo Region as well as the Bay Area. That skepticism has been erased, he says.
And the role of the Kitchener office, which at first was exclusively an engineering and development site, is expanding. Today, Cortes says that “98 per cent of the company’s engineering takes place in Kitchener, as opposed to 100 per cent when the company launched, and that product design, product management and customer success teams have now been added here.
“The reality is that there is amazing talent in the region,” says Cortes, adding the company is looking to add 10 people per month for the next several months – the majority of them for the Kitchener office – and double its overall workforce of nearly 200 by the end of next year.
Growth toward a billion-dollar valuation hasn’t always been a straight line. Rhodes described in a January 2018 blog post some of the difficulties the company has weathered, including retailers returning too much product and too many retailers not paying. Quick changes were made, and “Within six months, our team had brought return rates down by 75%, cut defaults by almost 90%, and made other changes to get the marketplace to profitability,” Rhodes wrote.
Cortes acknowledges the period was a difficult one, one the co-founders had to grind through on their way to a solution.
“So yeah, what Max talked about, the bumps along the way, when we started our recommendation engine was not as good as it is today, so the return rate was much higher. The default was higher. We weren't very good at giving proper credit limits to the customers.
“[But] the more we grow, the more data we have, we learn a lot more and we become a lot better at serving our customers.”
Several successful raises since, it’s clear the company has found its footing. He acknowledges that reaching a billion-dollar valuation has been satisfying, but says he always believed deep down that it was possible. He knew there was a need for Faire’s service. And the co-founders were passionate about protecting the small retail experience from being subsumed by the retail monoliths. Corner stores, he explains, are his people.
“We believe in them.”
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