As investor sentiment tumbled in the middle of 2022, Australian retail tech powerhouse HIVERY bucked the trend by announcing a successful US$30 million (AU$$43.2 million) Series B round.
But co-founder Jason Hosking says the startup sector should prepare for conservative investment ahead, as “there’s no doubt the landscape, retail tech or otherwise, has changed significantly in the last six months”.
HIVERY, founded in 2015, creates artificial intelligence-backed solutions for consumer packaged goods brands and retailers, helping them determine optimal brick-and-mortar store and shelf arrangements.
The company has partnered with North American retail giant Walmart and drinks behemoth Coca Cola among others, while claiming to reduce the time spent on store reshuffles from months down to days.
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The Series B round was led by Tiger Global, with additional input from Blackbird Ventures, AS1 Growth Partners, and OneVentures.
Speaking to SmartCompany, Hosking said his company is now poised to build its product and engineering teams while exploring further expansion into Latin America, Europe and Asia.
HIVERY planned its latest capital raise “pretty well”, he said.
“But even the sentiment among our existing investor base, and the message we’re getting from them is, ‘Hey, just plan for the conditions to not be as optimal as they have been for a couple of years.'”
“So what that means is ‘make the money last a little bit longer’, pretty clearly,” he added.
That advice extends to other startups who may be planning a raise.
Unlike the heady days of 2020 and 2021 when investors eagerly invested in speculative ventures, “investors are looking for more capital efficient growth than perhaps they were a year ago,” Hosking said.
Solid growth numbers, a strong customer base, and renewed contracts are the name of the game, he added.
The result of those changing investment appetites?
“I think we’re going to see some lower valuations, I think we’re going to see some down rounds, we’re going to see multiples come down.”
Investors shy away, but the retail spending cliff isn’t here (yet)
Investor skittishness is wrapped up in fears rising inflation will force consumers to spend less, thereby reducing the flow of cash into companies which service the retail sector.
Tiger Global itself is no stranger to such concerns, reportedly telling investors this week it “underestimated the impact of rising global inflation and entered 2022 with too much exposure”.
In Australia — a relatively small market for HIVERY — consumer spending has remained resilient, despite inflation and successive interest rate hikes.
Large savings buffers accrued through the pandemic and a tight labour market are holding off that downturn, a “spending growth slowdown is inevitable given high inflation and rising interest rates,” an ANZ memo said Wednesday.
HIVERY claims to act as something of a hedge to that forecast downturn.
Hosking said its solution results in more efficient resource allocation, helping stores and brands reduce waste, the working hours needed to reorganise a store, and human error when ordering stock.
Even so, he doesn’t “think the retail tech sector is is shielded” from investor concerns over a broad economic weakness.
“I think the market will rebound, no doubt, at some point, whether that’s in six months, or it’s in three years,” he said.
“But as it’s a reminder that, you know, things are cyclical, and you need to factor that in when you’re on a good time, and when you’re riding a more compressed time.”