By SUSAN LAHEY
Special contributor to Silicon HIlls News
It takes a consumer, using the top price tracking tools from Shopzilla to PriceProtectr, about 15 minutes to find the best price on an item online.
So if you’re an e-tailer, how could you possibly keep track of what competitors are charging for 100 or 1,000 or 10,000 of your key items, all the time? Austin startup BlackLocus does just that.
BlackLocus uses data mining to keep updated reports on specific items in the e-tail world. It can track millions of items and an unlimited number of competitors, so its customers know they’re neither pricing themselves out of the market nor leaving money on the table by under-pricing. It can alert customers when competitors change prices.
“This answers a really hard technical problem,” said Aziz Ahmed Gilani, director at DFJ Mercury which participated in a $2.5 million first round of financing for BlackLocus with Silverton Partners. “(The founders) had done all this great research at Carnegie Mellon around applying machine running to find like-minded products across retailers on the internet. When you’re searching across the web, across competitors, you have a huge problem with false positives.” For example, he said, if you’re looking for a pink iPhone you might find a couple pink iPhones and thousands of iPhone cases or silver iPhones and other mismatches.
“If you go to any shopping site and type in the name of something you want to buy…about 10 percent of the results you get are what you’re looking for….. These guys are really good at getting the exact results off the description of the product, not even the product number. That’s a really cool trick.”
The company, which arrived in Austin in July 2011, has been named one of Inc.’s “Startups to Watch in 2012” as well as one of CNET’s Best Startup Ideas from 2011. The founders were classmates at Carnegie Mellon University and started their business at Pittsburgh’s AlphaLab Accelerator.
Their idea was initially sparked by Charles, the English bulldog who belonged to CEO and founder Rodrigo Carvalho’s mother. Carvalho’s family, originally from Brazil, had moved to New York City and Charles wasn’t responding well to the climate change. Carvalho committed to find garments to keep Charles warm. He spent hours searching online for bulldog clothes and discovered that, though the breed was among the most popular in the U.S., no one made clothes for its thick body and neck and short legs.
So Carvalho, who had been a serial entrepreneur since he was seven, started a business, back in Brazil, making bulldog clothes.
His research taught him more than to appreciate the suffering of English bulldogs. He learned a lot about e-commerce and what a pain it was to get information from available sources. He also realized that while e-commerce sites collect massive amounts of data, hardly any of it gets translated to a usable form.
“There is a lot of data being dragged on the back end of e-commerce websites,” he said. “It’s tons of data but it’s not actionable…. We wanted to be able to help customers extract the data to make good business decisions.”
He started working on an MBA at Carnegie Mellon, knowing he wanted to start his own company and he needed to find other passionate entrepreneurs. He believed the right team trumped the choice of idea. He tried to interest several friends in an entrepreneurial venture. But they were mostly attorneys or investment bankers, not interested in the blood, sweat, and tears of a startup.
“They wouldn’t commit,” he said. “It takes a lot of commitment to build something from the ground up. It’s very time consuming…. I had a bunch of different ideas at that point but I knew the idea wasn’t as important as the team. The market changes, but the team sticks around. I was looking for people who had passion.”
At an entrepreneur boot camp, he met his cofounders: Fransisco Uribe who was working on master’s in computer science and Loukas Bouvrie who was pursuing an MBA in Entrepreneurship, Strategy and Qualitative Analysis. They had a passion for entrepreneurship and skills Carvalho lacked. They chucked the idea of expanding the bulldog clothing business. But they liked the idea of leveraging the massive amount of data in e-commerce sites and using that to help businesses make decisions.
After much debate, they named their company BlackLocus. Locus from the internal locus of control—the idea that the actions you take today will determine your future tomorrow. Black for the color you want on your bottom line.
AlphaLab Accelerator gave them $25,000 in seed money. They received another $100,000 when they won the DFJ Mercury prize at the Rice University Business Plan Competition. That competition put them on the radar for the Houston-based venture capital firm.
BlackLocus crawls online retail sites either a few times a week, at the customer’s request, or on a price-change schedule driven by consumer demand—like when a seasonal change inspires price changes in certain goods. With that data, it runs several algorithms to match products across different sites, and files them in a database.
The items customers choose to have BlackLocus watch are chosen based on the retailers’ market segment and search engine marketing strategies, Carvalho said.
“They come up with the strategy and they can use our platform to execute against the strategy they have,” he said
The company does not divulge its customers but, Carvalho said, they have grown by 10X since the beginning of 2011.
“Pricing is becoming more and more transparent and platforming is becoming more and more sophisticated, so what we do is super valuable.”
The Texas Retailers Association which represents brick-and-mortar retailers in the state agrees.
“Brick-and-mortar stores are always having to deal with the Main Street fairness issue because customers can walk in the store and look at a price and get on their phone and get a cheaper one,” said Carrie Blanda, Communications Director for the Texas Retail Association. “But something like this is interesting because it’s going to give Amazon a run for its money. Other retailers are more easily going to be able to compete with Amazon for its market.”
BlackLocus has 13 employees, but it’s hiring. That, in fact, is what brought it to Austin: the talent pool. The company has a very open, transparent culture, Carvalho said.
“I don’t like having functional areas that are separate from each other. We’re very open with each other about everything, including the financial aspect. Where we are and how things are going…. We give people autonomy, ownership of the work. We consider them all to be CEOs of their own area. At the end of the day, we’re friends.”
For himself, Carvalho said, he works constantly.
But he’s doing exactly what he always wanted to do.