I did an interview this week with Janne Waltonen, VP Marketing and Communications at Fruugo. It has previously been unclear what to call Fruugo. It is not a webstore since they don’t own any products, legally you cannot call the company a webstore aggregator either, and it is not a not a search engine. During the interview we solved the dilemma and coined a name for this new player in e-commerce.
Waltonen demoed the actual beta service and walked me through where Fruugo is currently regarding the number of products and number of merchants, but did not give me an exact date when the service is to launch to the public. I also asked whether Fruugo will have an open API for developers to tap into. This might sound like a trivial question, but could have big effect for the local developer scene and give an indication of the policy the company takes in embracing the entrepreneurial culture. Creating a platform to innovate on the back of what is potentially a very large e-commerce player can lift many boats. This is something we have not yet seen in Finland: If Nokia has not been completely stone walling the local startups, it certainly could do more for them (although there are a few positive individuals who have been supportive), instead of threatening to move out of the country, which is the latest row regarding the mobile giant. After meeting the high spirited people at Fruugo I am very hopeful.
Whatever people make of Fruugo’s and Boo.com’s similarities and the rumors circulating around the company, this week I saw a healthy service (albeit still very much in its infancy) that has a good shot to become a major player in the e-commerce landscape. There are still a lot of unanswered questions. We don’t know how the deal will eventually go down with the large number of merchants, customers or whether all the logistical and regulatory bottle necks can be solved when pulling the patchwork of EU 27 together into a solid buying experience. But there’s always unanswered questions and challenges when doing something new and as Waltonen told me a few weeks ago about the rumors: “dogs bark, but the caravan goes on”. And so it seems to do.
Fruugo invited a few bloggers to the company's premises this week and demonstrated their service, also handing out beta accounts. (We'll try to get a few shortly also for our readers - let's see.)
Fruugo's Janne Waltonen, VP Marketing & Communication, mentioned that they have not really figured out yet what to call Fruugo; it is not a webstore since they don't own any products, legally you cannot call the company a webstore aggregator either, and it is not a not a search engine. We could settle for virtual marketplace for now. What Fruugo wants to do is to make it simple and safe to sell and buy things online across the Europe regardless of the country borders. The transaction participants should be able to complete the transaction just if they were in the same country, using their local currency and language.
Fruugo is developing the live beta service constantly (with around 60 own employees and 40 consults), so the UI and layout will likely be totally different after a short while . But the first screenshots give some indication of how the service is turning out (more shots in Fruugo's Flickr stream). The priority order for UI is 1) products, 2) consumers, 3) merchants. Fruugo is trying to find the most interesting and successful consumer segments first with a broad, steady approach, and then go after the selected ones with bigger international marketing power. The company does not plan to provide mobile offering anytime soon, as the mobile market isn't yet mature enough, Waltonen commented.
The company depends on the logistics of the merchants, and hence requires all merchants to guarantee certain levels of shipping speed and reliability, with four shipping options at the moment. Non-confirming merchants will be removed from the service. Fruugo's including only 30k-40k products in the early phase of the beta in order to better evalute the usage patterns. Once they have figured out a working layout, gathered enough data, and fixed biggest bugs they will start adding multiple merchants offering the same products. Having none overlapping merchants is also why currently some of the products in the service are considerably pricier compared to some other stores.
Despite any rumors, Fruugo does not introduce any billing methods of its own, they will rather use existing ones. In the beginning they have just the most common credit cards and Finnish e-bank systems. PayPal will be coming only later, which is understandable, given that using credit cards and e-bank accounts is much more common in the Nordics. Fraud management is going to be a huge task to Fruugo, as Fruugo will take responsibility for all transactions, both merchant-consumer and consumer-merchant. The company has reserved the second floor of their office for most part to operational and fraud management activities. Waltonen commented due to fraud issues they have needed to also rule out some product categories due to the requirements by the credit card companies.
So far Fruugo will not introduce any deeper social shopping features, like group shopping. Rather, there are "social traces", meaning users can review products, seek assistance from other users, and see actions of others. Interestingly, the recent product views and searches of all users appear on the front page in real time (anonymously). Registration event of new members will be be shown with the users' real name. Fruugo isn't planning on introducing any sellable promotion slots, rather they expect merchants to rise in the ranks and get visibility due to reliable service, popular products and good prices, and complete product information, which will generate positive reviews.
One major problem in integrating with merchants is that really few Finnish online merchants are used to providing outbound feeds (e.g. RSS), Waltonen described. In Sweden, UK, and Netherlands the situation is much better, as apparently feeding the different comparison sites is more common there. Considering Fruugo takes care of billing fees, fraud management, first line customer support, and managing the customer returns, the 10 % revenue cut the company is taking does not sound bad at all. If they can get the support for the rest of Europe up and running as per their vision, it seems Fruugo might even be the only sales channel a small webshop could need. In that case there could be clear business opportunities open to 3rd parties for helping small e-tailers setting up Fruugo-compatible shops.
Fruugo's CEO Juha Usva did an interview with Finnish MTV3 this morning, you can watch it here (in Finnish).
Reporting live from TechCrunch Brunch in Helsinki the morning following Slush. The theme for the morning's panel discussions are the implications of regionality and unique features in the Nordic startup scene.
The event was kicked off by Mike Butcher from TechCrunch UK and Ville Vesterinen from ArcticStartup, chatting a bit about Slush, its background and the Nordic startup environment in general.
The panelists (from left to right in the picture below):
Kai Lemmetty, Founder of Floobs
Janne Waltonen, Marketing director Fruugo
Mark Sorsa-Leslie, Managing director of Hammerkit
Jussi Laakkonen, CEO and president Everyplay.com
Leo Koivulehto, Co-founder and chairman, TripSay
Mike set the scene asking how the panelists see the startup scene in the Nordics, whether the environment is going to stay a tough place to do a startup due to relatively high living costs, difficulties with angel and VC funding etc. A few highlights below.
Mark stated he moved from the UK three years ago, and has been impressed with enthusiasm people have, the great engineering skills, and the passion to get things done in a practical manner. Janne continued the people in Nordic countries are quite modest, which is somewhat hindering international expansion
Janne mentioned the Nordic market's been traditionally about local startups thinking of local markets (Swedes being maybe somewhat different), which should end. As Janne put it, we really have all it takes if we have the will to take over.
Peter Vesterbacka commented the downturn is a perfect time to start a company as you have less competition and could be able to take over a lot of the potential customers in a swift. Furthermore, it's perfect to start in the Nordics, as "if you can make it in the slush you can make it anywhere". The current global economic environment it's actually not even that much different from the "normal" challenges up here.
Mike commented in London the startup world is focusing nowadays on revenues much earlier in the game. According to Janne startups should start marketing as soon as possible, and not really wait until their product is "ready". Traditionally the startups have relied perhaps too much on virality (beta invites etc.). Janne compared his experience between Fruugo and two Swedish startups he's been in, and noted Fruugo has really concentrated on not showing anything in public before they are sure their technical back-end is top notch, whereas the Swedish ones were really open since the beginning without even much knowledge about the technical side.
Stephen Lee from Muxlim added, as an American who's lived in Finland for 10 years, that the governmental systems supporting startups are built around the concept of startups having to prove themselves in Finland first, before getting further money to go abroad. According to Stephen this model doesn't really work anymore, and the organizations (and startups) should turn their focus on going global from the beginning.
Jussi answered arguing the Finnish game industry has gone global since the very beginning. Nowadays the industry is healthy and buzzing with 50+ companies with over 90% export ratio, so it's been proved already we can make it from here. Jussi continued the process for pitching a game concept to a games publisher is really similar to pitching a company to VCs, so there are people who have been pitching successfully and know their stuff.
The second panel focused around the topics of finding funding and how to cope in the downturn market.
The panelists (from left to right):
Helene Auramo, CEO and partner of Zipipop
Heikki Mäkijärvi, Venture parter of Accel Partners
Mohamed El-Fatatry, Founder and CEO of Muxlim
Joakim Achrén, founder of IronStar Helsinki
Kristoffer Lawson from Scred
The panel kicked off going through the current status of the startups - Scred and Zipipop are bootstrapping and looking for funding. Mohamed told Muxlim got very well seed money from Finnish angels, which are quite active and willing to help, but for big rounds the money is difficult to get and momentum can be lost. Muxlim run through 500 international VCs in 6 months, and finally landed with one from Sweden.
Regarding the economy, Heikki from Accel Partners encouraged startups to look critically their business in the current economic situation - if the customers are not buying, it may be worthwhile to stop and rethink the business plan, rather than waiting for a sale or better times. They've had very good experiences of startups finding a great business model by refocusing this way.
Heikki also commented they are being more careful about the investments currently. He argued in the early stage companies the team is the most important thing, so that the investors can trust the team knowing what they're doing. Heikki also went on explaining one notable difference with Finnish startups compared to Silicon Valley is in the executive team. The ideas are typically good, but the executive teams are much more juvenile than in the Valley, whereas the board is typically very experienced. So Heikki would rather see people like the board members doing the execution, mentioning he'd like to see people learning business in big global firms, and then establishing startups in their 40s. He explained while you can build a good startup regardless of your age, in the end it will take great skill in execution to take a startup from 5 Million to 10M, and futher to 50M in revenues.
Fruugo will be present today at digital marketing seminar DiVia in Helsinki, and might tell a bit more, although they'll still not show their actual product.
The Finnish business newspaper Kauppalehti released an article last Friday, stating that Fruugo has "forgotten" (as commented by Fruugo) to leave their financial statement to Trade Register at the end of August as required, but has just posted them a statement of losing the company's share capital. That doesn't necessarily mean the company wouldn't have cash or other liquid assets to run their operations, though, but looks like they're most likely looking for more money. Also, the previous CEO Reijo Syrjäläinen has left and Fruugo is now run by the company's operational director Juha Usva.
This Friday, Arctic Startup will be among the first to know what Fruugo, the super secret Finnish startup with Jorma Ollila and Risto Siilasmaa on board, is really up to. We have received an invitation to a morning event this Friday.
Fruugo will be hosting a breakfast meeting with a few bloggers. Fruugo is taking this first step seriously as the host for the session is none other than their CEO Reijo Syrjäläinen. VP of marketing, Janne Waltonen does not want to reveal anything regarding the event, however he wants to point out this is one of the first initiatives to support their open attitude towards social and participatory media.
If we could ask just one question from the CEO, Reijo Syrjäläinen - what would you want to ask?
Disclosure: I have worked with Janne Waltonen on founding Gyllene Skor, he is also a share holder in the company.