Undoubtedly, Augmented Reality (AR) has an enormous potential to change several industries in the next years.
Trax, the startup of our 10th episode, is focusing its efforts on using AR to change the way retail companies manage their on shelf products. To retailers, that means being able to better visualize, in real-time, their products in-store conditions and performance across all retail channels, so they can get gather better insights about their strategies and execution.
In this episode, Joel Bar-El, co-founder of Trax, tells us how the startup went from an idea to contracts with giant retailers like Coca-Cola and Proctor & Gamble.
***Hey, are you trying to take your first steps as an entrepreneur? Click here to see how I can help you.
Before going directly to the story, I would like to briefly understand about the problem that you’re solving and what kind of solutions does Trax offer to solve that problem.
Trax is solving the problem of digitizing the physical world of retail. Essentially, we work with global brand manufacturers like Coca-Cola and Procter & Gamble, as well as retailers like Tesco and Carrefour.
We are using computer vision algorithms to put cameras in the point of sale, taking pictures of shelf space and analysing those products—those SKUs—on shelf in a very high level of accuracy and in real time. And this information is helping those companies to perfect their in-store execution presentation on the shelf presence, pricing, promotions and interrelations between competing products on shelf.
TWO ISRAELIS IN SINGAPORE
Let’s go back to 2010, which was the year of the foundation of Trax. Who were the co-founders, what were your backgrounds and how have you met each other.
There were two founders for the business. One is myself, and the other is Dror Feldheim.
I’m coming from a series of startups that I’ve been establishing. So, this is not my first venture. I was working at Sanger, the data system, for about seven years after graduation from university. And then after seven years, decided to move from the corporate world and open my first startup. There was a second [startup] that somehow—through life’s mysterious ways—I found myself in Singapore, coming out of Israel. And then I sold my latest startup and I was actually looking to do some kind of a sabbatical after selling my company.
Dror—my co-founder—came from Switzerland, where he was living for 12 years. He’s also an ex-Israeli, and he came to Singapore, following his wife. His background is more about the retail execution. He was working for a private equity fund, which used to invest in consumer brands—so, he knew that work very well. He came to Singapore and had an idea in his head that [solving] the problem of visualizing the physical shelf in retail can be a tremendous help and tremendous business value to global manufacturers.
We met by coincidence, our daughters were going to the same kindergarden—as random as that. Because they were new in Singapore, we hosted them in our house. And this is how we first met.
PIVOTING INITIAL IDEA
Did you have, in that time, the perfect idea of what Trax would become?
When we started the main theme about visualizing the physical shelf was there from the beginning—from day one. Dror came with the need and I came with the technological solution.
But actually, when we looked at that, the first application that we thought of was really to harness it more for shopper marketing—to put these technologies through glasses, so people could shop in the store. Essentially, the computer vision algorithms would track what people were looking at—to have more a consumer tracking device when he’s shopping.
The first meeting we’ve ever did was with Procter & Gamble, and we just exploited an opportunity where a very senior guy from Procter was visiting Singapore. Actually, he was one of the people heading the innovation side on P&G, and we presented to him the solution.
And he basically said: “This is very nice. But if you can harness the same technology and help us to find out about share of shelf, plan around compliance, perfect store conditions, etc, that would be more valuable to P&G at that moment in time.” So, basically, a few days after we established the company with that mindset, we actually shifted—based on P&G feedback—to the specific focus we have today.
So, basically, a few days after we established the company with that mindset, we actually shifted—based on P&G feedback—to the specific focus we have today.
THE MINIMUM VIABLE PRODUCT
How was this first MVP or this first version of Trax like?
We had a very good vision and start at how to build the solution, but we knew it’s going to take time. In the solution there are many automated sections and some manual sections, but it’s mostly supposed to be completely automated as it is today.
Obviously, at the beginning, we didn’t have time, resources or personnel to do everything automated. So, essentially, we broke the solution into components. And some components, which were automated in vision, we actually did them manually. We broke the process in a way that—since the scale of the beginning is a fairly low scale—you could actually replace many components with manual alternatives.
We actually analysed the images, but we just use the people [to do it]. And by doing that, we also were building in parallel the recognition engine. And we used that annotation also to train the engine, how to recognize the product. […]
It was just you and Dror or have you hired more people to do that?
We had some funding at the beginning. Initially, we ourselves put some funding and then we had some early investors—kind of a seed funding. We had a small development team in Israel, doing the initial development of the product and we hired one or two people in Singapore to help us. Altogether, the company was around seven people.
A STRONG CEO
How was this effort of raising funds when you had actually no traction for your startup? How difficult it was, and how did you manage to be successful with that?
To be honest, we were very lucky and it was not that difficult. The seed money that we had come from people who knew us—you can call it friends and family—probably two years of the company. And we did one thing which I think was good and people can learn from that. We were the founders, but Dror knew—from a previous acquaintance—a lady in Switzerland, with the name of Tamara Minick-Scokalo.
She was a very senior person within consumer brands manufacturers, so she was working for Kraft, Cadbury, Coca-Cola, other big brands and Procter & Gamble as well. And we brought her—she was just leaving Kraft—to be the CEO of the company, from day one.
While we were focusing on the solution and on delivering the first version of the product, she was basically providing us not only with her wisdom, experience and strategic direction, she brought a lot of credibility into the team and into the idea. She was also one of the early investors who invested in the company. While she was there, she could reach out to the people she knew and to her Rolodex. She was not only opening doors for us to do more pilots and get market traction, she made it easier to get seed investment from people who are kind of close to the industry.
While she was there, she could reach out to the people she knew and to her Rolodex. She was not only opening doors for us to do more pilots and get market traction, she made it easier to get seed investment from people who are kind of close to the industry.
Everybody that understands that industry immediately saw the need for the solution and I think that it gave a lot of comfort to people to see her in the CEO role. […]
A LONG WAY TO RECURRING REVENUES
What about generating more traction for the platform in this years, what kind of marketing strategies did you notice that really worked well for you?
It took us a long time to get our first ever real recurrent revenue contract. As I mentioned before, in the summer of 2011, we had the first-day pilot. Actually, the first recurrent client, which really signed a long-term agreement to use the service was only in the summer of 2013. So, two years of pilots, and all kinds of pilots with all kinds of companies in all kinds of places, and many of the pilots lasted multiple months, and some of them even 4, 6, 8 and 12 months.
Eventually, that was a very tough journey. We learned a lot from that journey. The product became more mature, we added features, we were becoming more robust. But the only breakthrough was when we signed our first ever recurrent real contract. And when we had that, suddenly, all the contracts started to follow and coming one after the other.
So, we needed to have that first one, that basically bet on our solution and that gave us enough credibility in the market to go and sign up additional ones, within the same ecosystem of the first client—Coca-Cola, in Australia—and then after that with additional brands.
But the only breakthrough was when we signed our first ever recurrent real contract. And when we had that, suddenly, all the contracts started to follow and coming one after the other.
And why exactly did these pilots take so long? What was the process of convincing people like?
PRESENTING THE TECHNOLOGY
One of the challenges that we had to face is that it’s not only a pilot to prove a specific technology works or a solution works. First, it is to convince that this technology exists and it’s accurate, consistent and reliable. Because we were the first to come to the market with such a solution and we needed to educate the market.
So, the pilots were not only to prove something very specific. It’s also a broader conviction around a computer vision as a tool, which is reliable and consistent. In many cases, there were people running the pilot and not necessarily people signing the budget for a rollout. You needed to convince the whole value chain in order to do that. That was a process of educating the market.
The second challenge is that our solution specifically changes the way those companies are operating in the market. They need to educate their sales force, they need to invest in different hardware sometimes, and they need maybe to buy or upgrade some of the mobile devices of their field force. So, there were other obstacles that needed to happen.
Over time, obviously, by just a normal course of business, those devices were changing and a more advanced technology was on the hands of those front guys that were supposed to take the images. So, that was also a matureness process that happened in the world moving from iPhone one to an iPhone four or an iPhone six, etc.
Over time, obviously, by just a normal course of business, those devices were changing and a more advanced technology was on the hands of those front guys that were supposed to take the images.
And the last part is really to prove that, operationally, our value solution is actually bringing tangible value, increasing revenue, increasing market share. And it took time for those companies to test those elements and to be convinced that each is showing a consistent result of improvement.
Normally, those big companies are very cautious—especially when working with small companies and startups like Trax. In that sense, they took more time to vet that consistency, reliability and predictability of the results were really there.
A piece of advice for start-up entrepreneurs that want to go to this process of building a startup generate the traction for their businesses…
PREPARE TO KNOCK ON MANY DOORS
One [advice] is that we knocked on many, many doors. So, not to be despair, continue believing in your idea. The more doors we opened, the more opportunities and the more traction we had in the market. That was a very good strategy, which gave us a lot of opportunities.
And a “door” is not only clients. It can be advisers, it can be bankers, it can be investors, it can be many people. Eventually, most industries in the world—especially when you’re talking about niche market solution, like Trax— are closed ecosystems and a good thing normally travels. The word of mouth travels fast and people get to hear about it.
THE BIG ONES
The second advice is we started with the biggest companies out there. Sometimes, people think it’s easier to go to the smaller companies, which are more agile in terms of taking decisions. If we would have gone to a small company, probably we couldn’t get the contract before 2013. But I think that they’ll learn from our experience at least that going to the large companies is the better strategy.
Yes, it takes more time, but those companies have budgets for innovation, they’re open to try new things, and they have people dedicated for that—so, their ability to get pilots is easier. And the reputation that those companies have. Even while piloting with them that reputation is helping the company a lot when it comes to its branding and its fundraising efforts.
Eventually, if one of those pilots becomes into a contract, the reputation for the overall market is such that it would be much easier to get any other contract in the market versus the other way around. If you start with a small company, it doesn’t matter if you have 10 small companies, still the Procter and the Coca-Cola of the world, we look at you and say: “this does not count, these are just small companies.”
Eventually, if one of those pilots becomes into a contract, the reputation for the overall market is such that it would be much easier to get any other contract in the market versus the other way around.
LOOK FOR PARTNERSHIPS
And the last point is that we found an auxiliary ecosystem to Trax. In our case, it was sales force automation systems, which was a very fiercely competitive market—it really is today, as well. And we offered that component, that image recognition capability as a differentiator to those companies.
And we managed to have a lot of alliance or partnership contracts signed in those early days, with many of those companies. It didn’t generate to Trax nothing—not even $1 from those partnerships.
But those companies, then met with the retail guys on the brand manufacturing side. And since there were many of those companies all trying to compete with one another—and all of them trying to get the same type of advantage—that was very effective marketing tool, which really helped us in getting traction in the market.
Hey, what do you think of this episode? Leave your comment!
Or check other startup stories here.
MORE ABOUT THE FOUNDERS
Joel Bar-El (LinkedIn) is a co-founder and the Chief Executive Officer (CEO) at Trax. Joel is responsible for Trax’s vision and overall market strategy and execution. Before being named CEO of Trax in October 2011, Joel was Trax’s Chief Technology Officer.
Prior to Trax, Joel was CEO of Sentryi Limited, a wealth management software company, which after four years of establishment was sold to IRESS Limited. Joel also co-founded Tersus Software Limited, where he built and managed the global sales channels and marketing activities.
Joel previously served as SunGard Business Integration General Manager for Asia Pacific and later North America, overseeing complete P&L and execution in those regions.
Joel has a unique ability to envision, develop and deliver paradigm changing technologies and is in every sense, a tech entrepreneur. Joel has spent the last 20 years delivering technology solutions to blue-chip clients and holds a B.Sc. in Physics from Tel Aviv University.
Dror Feldheim (LinkedIn) is a co-founder and the Chief Commercial Officer (CCO) at Trax. Dror is responsible for Trax’s global sales management, distribution channel management, marketing communications, pricing and customer service. Before being named CCO in Jan 2015, Dror was Trax’s VP of Global Sales and Business Development, where he oversaw negotiations, joint ventures and partnerships that complement Trax’s long-term vision and strategy.
Prior to joining Trax, Dror has had over 15 years of business development experience within the FMCG sector. With proven track record of successfully launching FMCG brands in diverse geographies, he has managed various categories for tier-one manufacturers and distributors across both emerging and developed markets.
Dror has a strong background in customer success and category leadership, constantly seeking innovative ways to meet both customer and business needs. Dror holds a B.A. in Business Administration from Webster University.
MORE ABOUT TRAX
Trax (LinkedIn; Twitter; Facebook; Youtube) digitizes the physical world of retail. In 2010 Trax introduced a revolutionary new image recognition technology to the consumer goods industry. Our purpose was twofold – to raise awareness of the significance and value of image recognition and to drive greater efficiencies and effectiveness for consumer goods companies. For the first time, sales representatives could receive detailed product and category information including out-of-shelf, share of shelf, planogram, pricing and promotional compliance and more, all delivered to their mobile phones within minutes in the store.