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June 16, 2019
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A young entrepreneur is building the Amazon of Bangladesh

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At just 26, Waiz Rahim is supposed to be involved in the family business, having returned home in 2016 with an engineering degree from the University of Southern California. Instead, the young entrepreneur is plotting to build the Amazon of Bangladesh.

Deligram, Rahim’s vision of what e-commerce looks like in Bangladesh, a country of nearly 180 million, is making progress, having taken inspiration from a range of established tech giants worldwide, including Amazon, Alibaba and Go-Jek in Indonesia.

It’s a far cry from the family business. That’s Rahimafrooz, a 55-year-old conglomerate that is one of the largest companies in Bangladesh. It started out focused on garment retail, but over the years its businesses have branched out to span power and energy and automotive products while it operates a retail superstore called Agora.

During his time at school in the U.S., Rahim worked for the company as a tech consultant whilst figuring out what he wanted to do after graduation. Little could he have imagined that, fast-forward to 2019, he’d be in charge of his own startup that has scaled to two cities and raised $3 million from investors, one of which is Rahimafrooz.

Deligram CEO Waiz Rahim [Image via Deligram]

“My options after college were to stay in U.S. and do product management or analyst roles,” Rahim told TechCrunch in a recent interview. “But I visited rural areas while back in Bangladesh and realized that when you live in a city, it’s easy to exist in a bubble.”

So rather than stay in America or go to the family business, Rahim decided to pursue his vision to build “a technology company on the wave of rising economic growth, digitization and a vibrant young population.”

The youngster’s ambition was shaped by a stint working for Amazon at its Carlsbad warehouse in California as part of the final year of his degree. That proved to be eye-opening, but it was actually a Kickstarter project with a friend that truly opened his mind to the potential of building a new venture.

Rahim assisted fellow USC classmate Sam Mazumdar with Y Athletics, which raised more than $600,000 from the crowdsourcing site to develop “odor-resistant” sports attire that used silver within the fabric to repel the smell of sweat. The business has since expanded to cover underwear and socks, and it put Rahim’s mind to work on what he could do by himself.

“It blew my mind that you can build a brand from scratch,” he said. “If you are good at product design and branding, you could connect to a manufacturer, raise money from backers and get it to market.”

On his return to Bangladesh, he got Deligram off the ground in January 2017, although it didn’t open its doors to retailers and consumers until March 2018.

E-commerce through local stores

Deligram is an effort to emulate the achievements of Amazon in the U.S. and Alibaba in China. Both companies pioneered online commerce and turned the internet into a major channel for sales, but the young Bangladeshi startup’s early approach is very different from the way those now hundred-billion-dollar companies got started.

Offline retail is the norm in Bangladesh and, with that, it’s the long chain of mom and pop stores that account for the majority of spending.

That’s particularly true outside of urban areas, where such local stores almost become community gathering points, where neighbors, friends and families run into each other and socialize.

Instead of disruption, working with what is part of the social fabric is more logical. Thus, Deligram has taken a hybrid approach that marries its regular e-commerce website and app with offline retail through mom and pop stores, which are known as “mudir dokan” in Bangladesh’s Bengali language.

A customer can order their product through the Deligram app on their phone and have it delivered to their home or office, but a more popular — and oftentimes logical — option is to have it sent to the local mudir dokan store, where it can be collected at any time. But beyond simply taking deliveries, mudir dokans can also operate as Deligram retailers by selling through an agent model.

That’s to say that they enable their customers to order products through Deligram even if they don’t have the app, or even a smartphone — although the latter is increasingly unlikely with smartphone ownership booming. Deligram is proactively recruiting mudir dokan partners to act as agents. It provides them with a tablet and a physical catalog that their customers can use to order via the e-commerce service. Delivery is then taken at the store, making it easy to pick up, and maintaining the local network.

“We’ll tell them: ‘Right now, you offer a few hundred products, now you have access to 15,000,’ ” the Deligram CEO said.

Indeed, Rahim sees this new digital storefront as a key driver of revenue for mudir dokan owners. For Deligram, it is potentially also a major customer acquisition channel, particularly among those who are new to the internet and the world of smartphone apps.

This offline-online model — known by the often-buzzy industry term “omnichannel” — isn’t new, but in a world where apps and messaging is prevalent, reaching and retaining users is challenging, particularly in emerging markets.

“It’s not easy to direct people to a website today, and the app-first approach has made it hard,” Rahim said. “We looked at how companies in Indonesia and India overcame these challenges.”

In particular, he studied the work of Go-Jek in Indonesia, which uses an agent model to push its services to nascent internet users, and Amazon India, which leans heavily on India’s local “kirana” stores for orders and deliveries.

In Deligram’s case, the mudir dokan picks up sales commission as well as money for every delivery that is sent to their store. Home deliveries are possible, but the lack of local infrastructure — “turn right at the blue house, left at the white one, and my place is third from the left,” is a common type of direction — makes finding exact locations difficult and inefficient, so an additional cost is charged for such requests.

E-commerce startups often struggle with last-mile because they rely on a clutch of logistics companies to fulfill orders. In a rare move for an early-stage company, Deligram has opted to run its entire logistics process in-house. That obviously necessitates cost and likely provides significant growing pains and stress, but, in the long term, Rahim is betting that a focus on quality control will pay out through higher customer service and repeat buyers.

A prospective Deligram customer flips through a hard copy of the company’s product brochure in a local store [Image via Deligram]

Startups on the rise in Bangladesh

Rahim’s timing is impeccable. He returned to Bangladesh just as technology was beginning to show the potential to impact daily life. Bangladesh has posted a 7% rise in GDP annually every year since 2016, and with an estimated 80 million internet users, it has the fifth-largest online population on the planet.

“We are riding on a lot of macro trends; we’re among the top five based on GDP growth and have the world’s eighth-largest population,” Rahim told TechCrunch. “There are 11 million people in middle income — that’s growing — and our country has 90 million people aged under 30.”

“An index to track the growth of young people would be [capital city] Dhaka… you can just see the vibrancy with young people using smartphones,” he added.

That’s an ideal storm for startups, and the country has seen a mix of overseas entrants and local ventures pick up speed. Alibaba last year acquired Daraz, the Rocket Internet-founded e-commerce service that covers Pakistan, Bangladesh, Myanmar, Sri Lanka and Nepal, while the Chinese giant also snapped up 20% of bKash, a fintech venture started from Brac Bank as part of the regional expansion of its Ant Financial affiliate.

Uber, too, is present, but it is up against tough local opposition, as is the norm in Asian markets.

That’s because Bangladesh’s most prominent local startups are in ride-hailing. Pathao raised more than $10 million in a funding round that closed last year and was led by Go-Jek, the Indonesia-based ride-hailing firm valued at more than $9 billion that’s backed by the likes of Tencent and Google. Pathao is reportedly on track to raise a $50 million Series B this year, according to Deal Street Asia.

Pathao is one of two local companies that competes alongside Uber in Bangladesh [Image via Pathao]

Its chief rival is Shohoz, a startup that began in ticketing but expanded to rides and services on-demand. Shohoz raised $15 million in a round led by Singapore’s Golden Gate Ventures, which was announced last year.

Deligram has also pulled in impressive funding numbers, too.

The startup announced a $2.5 million Series A raise at the end of March, which Rahim wrote came from “a network of institutional and angel investors;” such is the challenge of finding a large check for a tech play in Bangladesh. The investors involved included Skycatcher, Everblue Management and Microsoft executive Sonia Bashir Kabir. A delighted Rahim also won a check from Rahimafrooz, the family business.

That’s not a given, he said, admitting that his family did initially want him to go to work with their business rather than pursuing his own startup. In that context, contributing to the round is a major endorsement, he said.

Rahimafrooz could be a crucial ally in future fundraising, too. Despite an improving climate for tech companies, Bangladesh’s top startups are still finding it tough to raise money, especially with overseas investors that can write the larger checks that are required to scale.

“I think the biggest challenge is branding. Every time I speak with new investors, I have to start by explaining where Bangladesh is, or the national metrics, not even our business,” Pathao CEO Hussain Elius told TechCrunch.

“There’s a legacy issue. Bangladesh seems like a country which floods all the time and the garment sector going down — that’s a part of the story but not the full story. It’s also an incredible country that’s growing despite those challenges,” he added.

Pathao is reportedly on track to raise a $50 million Series B this year, according to Deal Street Asia. Elius didn’t address that directly, but he did admit that raising growth funding is a bigger challenge than seed-based financing, where the Bangladesh government helps with its own fund and entrepreneurial programs.

“It’s hard for us as we’re the first ones out there, but it’ll be easier for the ones who’ll follow on,” he explained.

Still, there are some optimistic overseas watchers.

“We remain enthusiastic about the rapidly expanding set of opportunities in Bangladesh,” said Hian Goh, founding partner of Singapore-based VC firm Openspace — which invested in Pathao.

“The country continues to be one of the fastest-growing economies in the world, underpinned by additional growth in its garments manufacturing sector. This has blossomed into an expanding middle class with very active consumption behavior,” Goh added.

Growth plans

With the pain of fundraising put to the side for now, the new money is being put to work growing the Deligram business and its network into more parts of Bangladesh, and the more challenging urban areas.

Geographically, the service is expanding its agent reach into five more cities to give it a total of seven locations nationwide. That necessitates an increase in logistics and operations to keep up with, and prepare for, that new demand.

Deligram workers in one of the company’s warehouses [Image via Deligram]

Rahim said the company had handled 12,000 orders to date as of the end of March, but that has now grown past 20,000 indicating that order volumes are rising. He declined to provide financial figures, but said that the company is on track to increase its monthly GMV volume by six-fold by the end of this year. Electronics, phones and accessories are among its most popular items, but Deligram also sells apparel, daily items and more.

Interestingly, and perhaps counter to assumptions, Deligram started in rural areas, where Rahim saw there was less competition but also potentially more to learn through a more early-adopter customer base. That’s obviously one major challenge when it comes to growth, and now the company is looking at urban expansion points.

On the product side, Deligram is in the early stages of piloting consumer financing using its local store agents as the interface, while Rahim teased “exciting IOT R&D projects” that he said are in the planning stage.

Ultimately, however, he concedes that the road is likely to be a long one.

“Over the last 18-20 years, modern retail hasn’t made much progress here,” Rahim said. “It accounts for around 2.5% of total retail, e-commerce is below 1% and the long tail local stores are the rest.”

“People will eventually shift, but I think it’ll take five to eight years, which is why we provide the convenience via mom and pop shops,” he added.

Amazon’s Alexa Fund invests in edtech startups, Zoobean and Unruly Studios

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Two edtech companies, Zoobean and Unruly Studios, are the latest to receive investment from Amazon’s Alexa Fund — Amazon’s corporate venture fund focused on fueling innovation in voice technologies, and specifically, integrations with Amazon’s voice assistant Alexa. Zoobean, which you may recall from its Shark Tank appearance a few years ago, offers reading software to schools and libraries. And Unruly Studios, a 2018 Alexa Accelerator alum, connects STEM learning for kids with physical play.

Zoobean makes a software platform called Beanstack, which helps educators and librarians run reading challenges and learn from data-driven insights about participants’ progress.

Following its initial debut on Shark Tank, where it received investment from Mark Cuban, the company has continued to develop its software and expand its footprint. Today, Beanstack is licensed to over 1,200 public libraries and schools worldwide, and is often referred to as the “Fitbit for reading” because of how it tracks and rewards progress.

Along with Alexa Fund, Cuban has also re-invested in the platform, joined by EAI Technologies, Jo and Elizabeth Tango, Pamela Bass-Bookey and Harry Bookey, and Neil Jaffe of Booksource. The company didn’t share the round’s size, and Amazon declines to share the size of its Alexa Fund investments.

Zoobean is now exploring ways to integrate Alexa into Beanstack so readers can ask Alexa to track their progress or sending them reminders about reading time.

Unruly Studios, meanwhile, is approaching learning through play. Led by Bryanne Leeming, the team includes gaming veterans from Mattel, Nickelodeon, iRobot, Hasbro, and elsewhere, who have designed a product called Unruly Splats — a programmable floor tile that pairs with an app in order to allow kids to play recess-style games. For example, the tiles can be used for things like musical chairs, whack-a-mole, relay races and more.

The company participated in the Alexa Accelerator last year — in fact, they even connected Zoobean founder Felix Lloyd with the Alexa Fund, as it turns out. Unruly Studios is now exploring ways to connect its “Splats” with Alexa to make the experience more engaging, while also teaching kids programming fundamentals and voice design.

The Alexa Fund investment was part of its seed round of $1.8 million closed in April, also announced today. The round was led by eCoast Angels, and saw participation from new and existing investors including AT&T, Rough Draft Ventures powered by General Catalyst, TechStars, LearnLaunch, NextFab, and other New England angel funds.

“We were so impressed by Unruly Studios during their time with the Alexa Accelerator last summer, and we’re thrilled to be reinvesting here as part of their seed round,” said Paul Bernard, director of the Alexa Fund, about Amazon’s investment. “Their ability to combine STEM education with physical games is inspiring on its own, and we see voice as a way to make that experience even more fun and engaging. We can’t wait to see what they build in the future.”

These aren’t the Alexa Fund’s first investments in edtech, however. Last fall, the fund invested in voice-based software and services company Bamboo Learning, for example. It also invested in Sphero, which more recently pivoted to education with Sphero Edu.

“One of the reasons I’m so optimistic about voice technology is because it creates this communal experience where multiple people can share in the interaction,” said Mark Cuban, in a statement about the Alexa Fund investments. “Every startup founder should be looking at how voice services like Alexa fit into their business model, and it’s great to see companies like Zoobean and Unruly take that to heart. I’m excited to see them evolve their products and use voice to make reading and STEM accessible to more people.”

China overtakes U.S. in smart speaker market share

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The U.S. no longer leads the smart speaker market, according to new data from Canalys out this morning, which found China’s smart speaker shipments grew by 500 percent in Q1 2019 to overtake the U.S. and achieve a 51 percent market share.

The firm said shipments in China reached 10.6 million units which was driven by “festive promotions.”

More specifically, Baidu had a huge quarter thanks to an exclusive sponsorship deal with China’s national TV channel, CCTV, on its New Year’s Gala on Chinese New Year’s Eve — one of the biggest entertainment shows in terms of viewer numbers. This promotion prompted users to download the Baidu app, which distributed over 100 million coupons to an audience of 1.2 billion during the show, and drove awareness around the brand’s smart speakers, Canalys says.

In Q1, Baidu shipped 3.3 million speakers — putting it in third place behind Amazon’s 4.6 million and Google’s 3.5 million. Alibaba and Xiaomi followed, each with 3.2 million shipments, also driven by Chinese New Year promotions.

“The lightning fast development in China is largely driven by vendors pouring in large amount of capital to achieve dominant share quickly,” noted Nicole Peng, VP of Mobility at Canalys, in a statement. “This strategy is favoured by internet service providers like Baidu, Alibaba and Tencent who are used to spending billions on traffic acquisition and know how to reach critical installed base fast.”

Other brands, combined, accounted for a further 2.9 million shipments. That includes Apple’s HomePod, whose market share was so small it got wrapped into this “Other” section instead of being broken out on its own.

With 10.6 million units, China topped the U.S. 5 million units shipped and brought its market share up to 51 percent, while the U.S. dropped from 44 percent in Q4 2018 to 24 percent in Q1 2019.

Overall, the global smart speaker market returned to triple digit annual growth of 131 percent in the quarter, reaching 20.7 million total Q1 shipments — up from just 9 million in the first quarter of 2018.

Amazon faces greater shareholder pressure to limit sale of facial recognition tech to the government

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This week could mark a significant setback for Amazon’s facial recognition business if privacy and civil liberties advocates — and some shareholders — get their way.

Months earlier, shareholders tabled a resolution to limit the sale of Amazon’s facial recognition tech giant calls Rekognition to law enforcement and government agencies. It followed accusations of bias and inaccuracies with the technology, which they say can be used to racially discriminate against minorities. Rekognition, which runs image and video analysis of faces, has been sold to two states so far and Amazon has pitched Immigrations & Customs Enforcement. A second resolution will require an independent human and civil rights review of the technology.

Now the ACLU is backing the measures and calling on shareholders to pass the the resolutions.

“Amazon has stayed the course,” said Shankar Narayan, director of the Technology and Liberty Project at the ACLU Washington, in a call Friday. “Amazon has heard repeatedly about the dangers to our democracy and vulnerable communities about this technology but they have refused to acknowledge those dangers let alone address them,” he said.

“Amazon has been so non-responsive to these concerns,” said Narayan, “even Amazon’s own shareholders have been forced to resort to putting these proposals addressing those concerns on the ballot.”

It’s the latest move in a concerted effort by dozens of shareholders and investment firms, tech experts and academics, and privacy and rights groups and organizations who have decried the use of the technology.

Critics say Amazon Rekognition has accuracy and bias issues. (Image: TechCrunch)

In a letter to be presented at Amazon’s annual shareholder meeting Wednesday, the ACLU will accuse Amazon of “failing to act responsibly” by refusing to stop the sale of the technology to the government.

“This technology fundamentally alters the balance of power between government and individuals, arming governments with unprecedented power to track, control, and harm people,” said the letter, shared with TechCrunch. “It would enable police to instantaneously and automatically determine the identities and locations of people going about their daily lives, allowing government agencies to routinely track their own residents. Associated software may even display dangerous and likely inaccurate information to police about a person’s emotions or state of mind.”

“As shown by a long history of other surveillance technologies, face surveillance is certain to be disproportionately aimed at immigrants, religious minorities, people of color, activists, and other vulnerable communities,” the letter added.

“Without shareholder action, Amazon may soon become known more for its role in facilitating pervasive government surveillance than for its consumer retail operations,” it read.

Facial recognition has become one of the most hot button topics in privacy in years. Amazon Rekognition, its cloud-based facial recognition system, remains in its infancy yet one of the most prominent and available systems available. But critics say the technology is flawed. Exactly a year prior to this week’s shareholder meeting, the ALCU first raised “profound” concerns with Rekognition and its installation at airports, public places and by police. Since then, the technology was shown to struggle to detect people of color. In its tests, the system struggled to match 28 congresspeople who were falsely matched in a mugshot database who had been previously arrested.

But there has been pushback — even from government. Several municipalities have rolled out surveillance-curtailing laws and ordnances in the past year. San Francisco last week became the first major U.S. city government to ban the use of facial recognition.

“Amazon leadership has failed to recognize these issues,” said the ACLU’s letter to be presented Wednesday. “This failure will lead to real-life harm.”

The ACLU said shareholders “have the power to protect Amazon from its own failed judgment.”

Amazon has pushed back against the claims by arguing that the technology is accurate — largely by criticizing how the ACLU conducted its tests using Rekognition.

Amazon did not comment when reached prior to publication.

Read more:

Immigrant founders, smartphone growth, SEO tactics, SoftBank’s financials, and AR tech

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How an immigration crackdown is hurting UK startups

Our European correspondent Natasha Lomas spent the past few weeks investigating what’s been happening to immigrant founders and tech talent in the UK, who have been receiving more scrutiny from the Home Office in recent months. Natasha zooms in on Metail, a virtual fitting room startup, and its tribulations with the immigration authorities and the damage those action are having on the broader ecosystem:

The January 31 decision letter, which TechCrunch has reviewed, shows how the Home Office is fast-tracking anti-immigrant outcomes. In a short paragraph, the Home Office says it considered and dismissed an alternative outcome — of downgrading, not revoking, the license and issuing an “action plan” to rectify issues identified during the audit. Instead, it said an immediate end to the license was appropriate due to the “seriousness” of the non-compliance with “sponsor duties”.

The decision focused on one of the two employees Metail had working on a Tier 2 visa, who we’ll call Alex (not their real name). In essence, Alex was a legal immigrant had worked their way into a mid-level promotion by learning on the job, as should happen regularly at any good early-stage startup. The Home Office, however, perceived the promotion to have been given to someone without proper qualifications, over potential native-born candidates.

In addition to reporting the story, Natasha also wrote a guide specifically for Extra Crunch members on how founders can manage their immigration matters, both for themselves and for their employees.

The state of the smartphone

TechCrunch hardware editor Brian Heater analyzed the slowdown in smartphone sales, finding few reasons to be optimistic about how smaller handset manufacturers can compete with giants like Apple and Samsung. There are slivers of good news from the developing world and also from 5G and foldable tech, but don’t expect profits to reach their zenith again any time soon.

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