What Groupon did for couponing, a stealthy Durham startup called Yaarlo hopes it can do for rewards.
Launched this week in the App Store (and also available on Android), Yaarlo says it’s the first universal mobile-only rewards platform. By scanning receipts from coffee shops and restaurants, salons, retail stores and the grocery, consumers earn points from their purchases that can be redeemed for cash or a gift card to the store of their choice.
They don’t need any particular loyalty card or credit card or punch card—Yaarlo doesn’t care where they spend money. At least not today. Today is all about scans and users.
In the future, Yaarlo plans to be an entire platform for restaurateurs or retailers to offer up coupons, sell gift cards, collect mobile food orders or entice customers with even better rewards for shopping one place over another. And once Yaarlo has all that data about a consumer’s shopping behavior, it can also provide a Mint.com like dashboard for spending, and offer financial services, like its own credit card.
Founder Suresh Vanukuru didn’t start with such a big vision. He initially hoped to solve the biggest marketing challenge of bricks-and-mortar businesses—understanding the impact of marketing spend. A former Motricity and Virgin Mobile executive, Vanukuru now owns a Great Clips franchise in the Washington D.C. area and will soon open his fourth storefront. As he got to know the business, he realized that 6 percent of his revenue was spent on advertising and all of it was blind. He had no idea the value of the paper coupons he was distributing into the world.
He didn’t like online or mobile coupons—they immediately devalued his service because they were accessible to anyone. Loyalty programs didn’t make much sense for a haircut franchise either—it could take two years for a customer to earn a reward. He wanted a cost-effective solution that offered value to customers but gave him real data too.
And he wanted it on mobile, where he’d spent more than a decade of his career.
Vanukuru started with social media marketing—trading coupons or discounts for social media buzz, similar to the fast-growing Raleigh startup Stealz. That didn’t seem like a big enough play for Vanukuru, so his team began to build a competitor to the popular mobile rewards offering Belly, a Chicago startup with more than $25 million in funding. His service would be built around the scanning of receipts in order to collect rewards at specific businesses that subscribed to the service—he envisioned that one restaurant or retailer might agree to take all the rewards to get more customers in the door. That launched in December 2014. By January, Vanukuru saw its flaw. He needed to remove the merchant from the process in order to really scale.
He began to search for a truly universal mobile rewards play and found only one company called Swagbucks, a successful online rewards offering that recently raised $60 million. The company lets users earn rewards for shopping through the site, using online deals, answering polls, watching videos and rewards for gift cards at major e-commerce retailers like Amazon, Target, Walmart and PayPal—but the focus was online and on big national businesses not local ones.
With a year of technology development under his belt and a few months to rework the current version of the app, he thought he could build a platform that could grow as fast as users around the country can scan the receipts they collect every day. The key was to make the app as easy as possible to understand and use—lessons learned from overseeing the building of app stores at Motricity and Virgin. Specifically at Virgin, he says he saved the company $1 million in the gaming supply chain and increased its graphics business by 2.7 times simply by making changes to user experience.
“You need to make it as dumb as possible for the user,” he says. It took eight app releases to get Yaarlo right, he adds.
And so far, it’s working. Power users during a beta test already forced Vanukuru to rework the algorithm for awarding points. His goal was to award the equivalent of $10 every three months, and they were far surpassing that by scanning everything—now more points are given for retail or restaurant purchases versus gas. In coming days, his team will start a big campaign that includes mommy bloggers, social media and email marketing in hopes of really growing the userbase.
Vanukuru also has about 70 merchants on the site with coupons, and a portion of those will offer mobile food ordering when that service launches in the next three months. That’s a big revenue opportunity, Vanukuru says. Takeout food is a $70 billion business in 2014, and just $9 billion of that is mobile ordering today. So far, Yaarlo makes money from its merchants every time someone uses a coupon, earning double for sending new customers to a store. It will keep 10 percent of any food order or gift card sale. And eventually, it will work with major brands to provide gift card rewards. Today, Yaarlo purchases the cards or pays out the cash rewards.
Vanukuru’s big vision though is to have 20 or 30 million users on his site—enough to launch his own Yaarlo credit card, eliminating the need for receipt scanning.
“If we get the customer engaged enough to scan receipts, we can launch multiple businesses on top of it,” he says. “If you trust me every day with your receipts, I can offer you a credit card.”
Vanukuru tries not to talk too much about those eventual plans—though his time working alongside Jud Bowman at Motricity taught him to always think in the future and be five years ahead. He hopes investors have that mentality too.
Vanukuru and his technical co-founder in India have self-funded the business, with a little help from friends and family. He’s got a team of seven employees, including three developers in India. They plan to raise a series A round by the end of 2015, with help from a planned revenue stream of $60,000 to $75,000 and tens of thousands of users.
But today, there’s no pitching for Vanukuru. “Today, we concentrate on getting merchants and getting customers—customers first, merchants second.”