Investment Notes: OfferFit - bridging the chasm between A/B and AI
Our Investment Notes deep dive into our investment decisions. We unpack what we loved, where we needed to build confidence, and how we ultimately gained conviction to invest.
Marketing has come a long way since the hedonistic days of Mad Men. That era, defined by rampant and largely unaccountable creativity, was famous for its Don Draper types, who got by on equal doses of creativity and whisky.
Next came the era of data: driven by tech behemoths such as Google and Facebook. Modern marketers were armed with treasure troves of intel, and have come to more closely resemble chemists than creatives. With frightening precision, marketers learned to pin down critical details about their target customer; and then build meaningful relationships by serving them up content likely to resonate, finely tuning the growth levers of their latest campaigns.
To achieve hyper-personalisation and hyper-targeting, marketers learnt to rely on A/B testing. This process has been a gold standard for understanding the mind of the customer and optimising ad performance. However A/B testing has always been plagued by its inability to scale. It’s time consuming, laborious, and you can only test a small number of ideas at a time. For marketers, it's a time and resource suck; and often pulls them away from the more creative parts of their job.
In OfferFit, we found a team that was unlocking the power of self-learning AI to achieve true 1:1 personalisation without the need for A/B testing. Best of all, this personalisation can achieved in a fraction of the time and with a fraction of the resources that marketing departments typically require.
Beyond the product, we loved what OfferFit could represent for the next wave of marketing: creativity is back with a vengeance! Until recently, creativity and data had been pitted against each other, with many marketers feeling snowblind behind the reams of data and time it takes to manage processes like A/B testing. This robbed them of the time they need to think expansively and laterally about growing their brand. In OfferFit, we see a way to usher in a new era of marketing : one where creativity and analytics traveled effortlessly together; and marketers could unlock all the benefits of personalisation without the headache.
Since coming together to co-found OfferFit in late 2020, George Khachatryan and Victor Kostyuk have been on a mission to empower businesses to unlock the power of their first-party data with AI. In doing so, they’ve already helped early customers achieve >200% uplift in profits:
“By using OfferFit, we achieved a 200% improvement in the profit of our contract renewal offers in just weeks. If we were trying to get there through A/B testing, it would have probably taken us another 18 months.” - Veronica Moturi
VP of Customer Retention at Brinks Home
What we loved about the opportunity
Leveraging AI, OfferFit turns data into insight
Over the last ten years, we’ve seen an explosion in the amount of data collected about everything we do - we are expected to collect 180 zettabytes of data in 2025, up from 64.2 zettabytes in 2020. While the value that can be created by data has long been touted - we are well past the days of capturing data for the sake of data. We believe that the next generation of iconic businesses will be defined by an ability to utilise their data in non-commoditised or uniquely scaleable ways.
Data without insight is just an observation. To a consumer, insight feels like a company has solved a real problem you have, or deeply understood your needs, or is able to make your life easier. OfferFit is designed to help companies uncover insight at scale, with ease. Their product takes reams of data and turns it into actionable insight - that a consumer experiences as true personalisation.
Leveraging machine learning, OfferFit helps their customers follow in the footsteps of brands such as Starbucks - we have long understood that the act of personalisation (i.e. writing customers’ names on their morning brew) really resonates with customers.
The team has the right superpowers
Even before we met the team, our first-principles analysis suggested a winning team for an enterprise SaaS MarTech solution would require two superpowers:
The operational discipline to run a tight enterprise sales process
The technical know-how to build solutions twice as effective and twice as quickly as the myriad of other AI players in the market.
We were delightfully surprised when the founding team delivered just that! CEO George cut his teeth founding and scaling the education non-profit Reasoning Mind. Over 15 years, he touched all aspects of building a business, including product management, marketing, sales, fundraising, and of course managing teams. Meanwhile, CTO Victor bring many years experience building MarTech AI solutions from his time as a Lead Data Scientist at BCG Gamma. He helped major enterprise brands build internal capabilities, and quickly earned a reputation as the go-to person for MarTech data science knowledge globally within BCG.
The global market for MarTech solutions is mind-bogglingly large
The OfferFit team is already working with 8 enterprise clients, spanning many geographies and industries. Yet, they’re only skimming the surface of the impact they can have across the globe. The number of applicable customers for a solution like OfferFit is endless.
With such a large opportunity space, the team apply three key questions to identify relevant businesses:
Does your business have a consumer facing proposition that makes use of offers and other communications directly with your customers?
Do you possess the required first party data?
Have you reached the appropriate scale to unlock commensurate return on investment from data and analytics?
When unpacking this opportunity, we quickly realised that the number of businesses that fit the above criteria is enormous, and still deeply underserved.
This market is competitive; we believe the true winners will be defined by their ability to build high fidelity, wide-reaching distribution channels to capture as much of this whitespace as possible in the medium term. The OfferFit team has already demonstrated their ability to reach customers across borders and industries and are on their way to solidifying their place as category leaders.
The challenges we saw
Can this ex-consulting duo shift delivering services to building a product-led startup?
Like many enterprise SaaS companies, OfferFit feels the tension between delivering great outcomes for their existing customers through investment in customer success, and focusing on top line growth through both new customer acquisition and account expansion. Much of our conversation with the team focused on how they intended to balance this tightrope moving forward, including discussing how they were already monitoring the ratio of lines of code written for ‘global’ versus ‘customer specific’ applications.
Can OfferFit remain at the technical forefront of machine learning?
Business such as OfferFit benefit from the rapid speed of innovation in machine learning, but they must confront the risk that their technical solutions become commoditised, or even outdated, in the medium term. We needed to build conviction that the OfferFit team could a) continue to out-innovate their MarTech competitors, and b) were targeting a use case complex enough to continue warranting third party solutions like OfferFit, even as enterprises are heavily invest in their own in-house data science capabilities.
Questions we had for the team
How will you attract the talent that empowers you to scale beyond founder-led sales and product development?
Although George and Victor have laid strong foundations in both enterprise sales and product development, it is inevitable that they will need to transition away from delivery and towards scaling the business by amplifying those around them. At the end of the day, two things helped build our conviction on their ability to assemble and empower an all-star team.
Firstly, George brings a wealth of experience scaling teams from his past experience at Reasoning Mind, where he demonstrated the ability to inspire those around him in support of a higher business cause. Secondly, the proof was in the pudding - we saw OfferFit’s early engineering hires throw away stable, well-paying jobs for the opportunity to work on cutting edge machine learning technology, alongside luminaries such as Victor. As VC investors, we recognise that the biggest investment someone can make is where they choose to invest their time. Seeing OfferFit’s early employees vote with their feet made us thrilled to be right there behind them.
How we built conviction
OfferFit’s mission spoke to problems familiar to two of our team members. Before AfterWork, Alex worked as a consultant at Quantum Black, McKinsey & Co’s advanced analytics arm. Here, he witnessed firsthand the way machine learning models deliver enormous amounts of enterprise value, in all kinds of sectors and industries. Additionally, our Venture Partner Mike Forster is the Director of Data and Analytics at KFC Global, and brought a customer understanding of how leveraging first party data can help KFC better serve its customers. Having seen dozens of data analytics businesses in marketing functions, OfferFit stood out as being among the best of the best.
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