A quick check-in at McDonald’s gets you a free snack size McFlurry with any purchase. At Which Wich, it’s a homemade cookie. And at El Rodeo at Brightleaf Square in Durham, a bowl of delicious queso.
March 25, 2015
Free McFlurries and 400% User Growth Help Stealz Raise $1M
Raleigh social media engagement startup lines up national and regional restaurant chains as customers, and new investors.
The company helping to deliver deals at these and 800 other U.S. restaurants and bars, is Raleigh-based Stealz. The startup of now 17 employees has been fueled in recent months by fast growth with McDonald’s franchisees across the Southeast—a phenomenon its founders said in an interview last year they hoped to see.
In April, diners in 90 McDonald’s restaurants in seven states will earn freebies in return for social media activities like checking in, posting photos, liking on Facebook or following on Twitter. Applebee’s, Denny’s, Zaxby’s, Arby’s, Bojangles, Which Wich and other regional and national chains are following suit.
What’s drawing restaurateurs to the app is the easy access to positive social media and followings online, says Stealz co-founder and CEO Jim Zidar.
What’s drawing investors like John Replogle, owner of seven local Which Wich stores and president and CEO of Seventh Generation Inc., regional Applebee’s franchisee Michael Olander Sr. and angel investors Michael Olander Jr. and David Gardner is 400 percent active user growth over the last six months and an average of a new corporate customer every month.
They (along with other undisclosed investors) recently pumped $1 million into Stealz to continue its growth so it can raise a much larger Series A round at a higher valuation later this year. The company previously raised $480,000.
Says Replogle, who works just steps from Stealz at HQ Raleigh: “There is no one else in this space delivering the consumer relationships and digital marketing capability in the way they have. I think it’s a hugely scalable platform.”
So how does the growth continue? It’s a combination of targeted sales in its three key markets of Raleigh-Durham, Charlotte and Atlanta, in-store, word-of-mouth and digital marketing with the help of a Silicon Valley guru, and continued technology improvements. That’s all while maintaining great customer service—most word-of-mouth marketing happens because of that, Zidar says.
The development team led by CTO Brant Elliot, COO John Charlesworth and lead developer Dirk Smith are busy rolling out Instagram functionality, so Stealz users can seamlessly post their photos to the app and earn points on Stealz. They’ve installed iBeacon technology in every Stealz location, so that users are prompted on their smartphone to redeem a deal as soon as they enter the store (They must have Bluetooth turned on—Zidar says 55-60% of smartphone users do).
Digital marketing is ramping up thanks to a hire from Tradecraft, a 12-week accelerator program in San Francisco that trains highly-qualified people to become growth hackers, user interface designers or sales/business development professionals. His only job is to target consumers, Zidar says.
Zidar and co-founder Brent Nolan focus on the larger chains and regional expansion—Olander Sr.’s Apple Gold Group will grow its footprint beyond 14 Applebee’s stores after experiencing a 500 percent growth in social media mentions. Zidar says more large chain restaurant deals are coming.
But along with the fast growth are some challenging growing pains. For example, series A investors wanted in sooner, but the founders would have had to give up two board seats and control of the company.
“Do I give up everything now?” Zidar recalls thinking. “Or do I ride it out for seven months and hopefully have more leverage the next time I have this conversation—that was the bet we took.”
There’s also interest in cities beyond Stealz’s current bounds. He visited Austin just days before South by Southwest to meet with potential customers. The sell is easy, he says—the market is tech savvy and heavy in food and beverage, similar to the Triangle. But Austin is a 20-hour drive. It’s expensive to enter new markets. And there are scars in recent memory. Early in its life cycle, Stealz grew too fast—its technology and customer service couldn’t keep up.
The experience helped set the priority on customer care today—75 percent of Stealz employees now interface with customers. But Zidar knows the bigger growth is coming—the leadership team just must decide if its now.
Replogle is confident they’ll figure it out.
“I believe they’ve got a really strong leadership team,” he says. “I’m impressed by Jim’s vision for the business they are building and his range of skills from leading and building a team to thinking about financial models to unlocking value for customers.”