Today we are excited to share that co-op has raised $5.8 million in seed funding led by Brian Sugar of Sugar Capital, with participation from Shopify, Bessemer Venture Partners, Indicator Ventures, RiverPark Ventures, and angel investors including Roth Martin of Rothy’s, Andy Dunn of Bonobos, Nate Checketts of Rhone, Jai Jung Kim of Hydrant, Sandy Cass of Red Swan Ventures, Cary Moelis of GroundUp Ventures, Ben Jabbawy of Privy, and others.
In light of this successful raise, we caught up with Conner to discuss how co-op rose so quickly, and his goals for the future.
Thanks for making time for us in the midst of a huge week! Can you tell us a bit about what you did before starting co-op?
Conner: I was at Facebook and Instagram from 2013 to 2018, and then I went to Affirm, which is where I came up with the idea for co-op. I saw the rise of all of these amazing DTC brands coming onto the scene, like Dollar Shave Club and Away travel, scooping up customers because ads were really cheap. At Affirm I worked with the actual DTC sites which offered a true glimpse into the ecosystem and the partners these brands use on site.
While I was there, I kept thinking, what if these brands cross-promoted each other? And I realized that no one was doing this. It just seemed too obvious, right? There's already a corollary for this: Amazon, Target, Nordstrom. Anywhere you shop, when you're in the mood for buying one thing, you probably need something else. It's the golden moment to help the consumer discover new things.
I am one of those rare people, for better or worse, that did not pivot at all since having the original idea when I came into the first cohort of On Deck till now. Some people come with a million ideas and iterate, but I came with one idea that I had and it is what we're still doing on a larger scale. On Deck played a massive, massive role at every single one of those steps, from the supportive network that helped me gain conviction to strike out on my own, scouting for hires, and enlisting crucial problem-solving help from the community.
What is co-op and why does it work?
Conner: co-op is a platform that helps independent brands partner together, acquire customers, and scale. We build tools to support upsells, cross-promotion, audience exposure, and intelligent insights. The idea is that we can facilitate every imaginable brand-to-brand interaction.
Acquiring new customers affordably has been—and will continue to be—the largest challenge faced by modern retailers. These dream channels for Customer Acquisition Cost (CAC), Facebook for example, that I saw open up to emerging brands in 2013 became too expensive too quickly. Prices went from a sub $2 Cost per Thousand Impressions (CPM) in 2012 to above $50 in 2021. We want to help merchants drive growth entirely outside of Facebook, Amazon, and Google by partnering together.
One of the biggest things investors kept asking me at the start was, “Why will brands ever want to work together?” It's been the most revealing and rewarding part of starting co-op. All of these brands are struggling with the same challenges. Many of them are cognizant of the fact that they're not destined to be a marketplace. By definition, they’re never going to be everything to everyone. So there's no point in being competitive with one another when they’re selling complementary products.
Our first product, the Post Purchase Experience allowed merchants, after they’ve had a successful sale, to present an inspired brand-aligned “products you may also like” experience. If you're selling coffee, for instance, you're not competitive with a seltzer brand, or a chocolate bar. There is power in identifying the brands that share the same values as you, have the same type of customers as you, so that you can really grow together.
How do you harness the community aspect of the flourishing ecosystem you are building?
Conner: We have a slack channel with 500 brands in it, like MATE the Label, Hydrant, and Made In Cookware. We’re zooming out of this post-purchase cross-promotional function and into an ecosystem of partnership potential in all its nuance. There are so many possibilities for brands to initiate, like retail partnerships or co-branded products, even things as lightweight as Instagram giveaways or email swaps or data partnerships.
From a brand’s perspective, you're trying to manage all of these partnership avenues and none of it is easy to activate or easily accessible in one place. Solving the pain points of that process is really powerful. We are showcasing how brands are brilliantly partnering, and then productizing all existing and new ways through our product. We try to make our product roadmap as community-led as possible.
How has the last year affected demand for co-op?
Conner: Because of the pandemic, you have all of these brands that were used to merchandising in physical stores coming online. A perfect example is Matcha Bar, which had so much awareness as a cult favorite brick-and-mortar in New York. Now they're online in a big way, they figured out a way to distribute it and get it straight into people's homes. Traditionally, it felt like DTC brands were always trying to crack how to get into retail, right? So it's almost the opposite now with every possible brand ramping up online distribution and seeking new audience discovery, driving up cost and competition for shopper eyeballs and attention.
You were in the very first On Deck Founders Fellowship. Why did you join On Deck? What has made it valuable for you?
Conner: When I did ODF1 I was working in big tech and didn't have any friends that were founders or entrepreneurs. The idea of taking the leap was super scary. I had the idea for co-op and a friend of mine who was in Village Accelerator let me know about On Deck. Suddenly I saw all these other people that benefited from working at big tech companies who wanted to start their own thing and just being around that ODF community alone was energizing.
Beyond that, On Deck was pivotal in so many different ways. My first developer and my first designer both came through On Deck, as did many investor introductions.
On Deck is the first place I go when I hit a roadblock or have a question because I know that there's someone in the community that must have done this before. Someone's hired a lawyer before. Someone's issued equity to overseas talent before. Someone’s figured out how to file in Delaware for taxes. There's someone in On Deck, guaranteed, that knows the answer. That's been just so powerful for me on my journey because I just get the ability to reach out for a vital level of assistance. And then also give back in the same spirit from my experience. People that have seen that I'm part of On Deck can reach out to me for anything. It’s no surprise to me that On Deck has been so successful so far.
My Chief of Staff is doing the next ODCoS. And I’ll likely be doing the next On Deck Scale. In the last two years, I’ve probably encouraged about eight people to apply to On Deck, including some of my closest friends who worked with me at Facebook. You know that friend of yours that’s miserable? That comes to you repeatedly saying, “But I don't know what to do” or “how do you do this? How do you do that? How do you meet investors?” I tell them, just go to On Deck, which is simultaneously a tremendous resource and unbelievably motivating.
Congratulations on the fundraise, now with that additional firepower what’s next on the roadmap?
Conner: Before this fundraise we had only raised a tiny pre-seed round. This raise concretizes that we have something here. Our next focus is getting as many brands onto the platform as possible: we’re planning on having over 1,000 by the end of this year.
Any thoughts or predictions you have on the future of commerce and partnerships?
Conner: This is just the beginning of customer acquisition woes. As shoppers go back to work and have less time for social channels, you’ll see a decrease in advertising inventory on platforms like Facebook, Instagram, and TikTok—with that and more roadblocks in targeting like iOS 14.5, you’ll see even more scarcity and upward movement in price.
There’s never been a better time for brands to begin getting creative with their partnership strategy and leveraging each others’ owned channels and lists to grow. That’s what co-op is here for, to make all of those points of connection as easy, turnkey, and data-informed as possible.
co-op is hiring for numerous positions (including Product Designers and Engineers). To learn more, visit here.
“We're excited to lead this next round in co-op's journey. It's never been easier to start a brand, yet with new lowered barriers to entry, it's never been more challenging to scale. co-op is pioneering a new generation of commerce tools that aims to generate a tangible sense of community among the vast array of digitally native merchants. Through powerful first-party data that ultimately ties into a greater network, co-op is not just informing the best partnerships and product recommendations, but is also creating entirely new ways for merchants to acquire customers, transact and merchandise their products. co-op is providing a real media diversification strategy by unlocking an entirely new channel, powered by partnerships, to grow.”
— Brian Sugar, Sugar Capital
Note: This is part of a series where we talk to On Deck Founders alumni about the companies they’re building and what it will take to propel them to the next level. Consider joining our incredible community of founders who have launched over 1000 companies worth over $9B. Apply here.