Subscription-based business models are booming right now for e-commerce companies and Austin-based startup Cratejoy is aiming to capitalize on that.
Co-founders Amir Elaguizy and Alex Morse just landed $4 million in funding on top of their initial $2.2 million in seed funding. The newest round of funding was led by Boston-based Charles River Ventures, which has seen success before with their previous investment in Twitter. Cratejoy is e-commerce software that automates subscription processing and transactions for online merchants. The venture firm’s faith in the startup is not surprising, as Cratejoy claims to already have over 3500 merchants on the waiting list to use their software.
Co-founders Amir and Alex are no strangers to success. In 2011, they sold their startup MarketZero Inc. to Zynga, the massively successful game development corporation. The two are convinced that subscription-based pay models are the way of the future. It’s hard to disagree with them after seeing the success of companies like Dollar Shave Club and LootCrate. According to them, the business model is far superior to others, primarily because subscription customers are already loyal to the brand and the company. They have basically committed to a recurring payment which means they are likely to end up spending more money on the company’s products.
Amir and Alex came up with the idea when they were in a California-based incubator called Y Combinator which was also one of the initial investors in Cratejoy. After building out the prototype for their software in only three months last winter, they already had 800 e-merchants lining up to get their hands on the software.
Cratejoy will charge customers a small fee (less than $1) for each transaction as well as a small percentage of the customer’s revenue. Customers also have the option of paying Cratejoy a monthly fee of their own in order to reduce the transaction fees and revenue percentage.
On top of handling all of the financial transactions for their customers, Cratejoy also provides services like inventory management/shipping tools, brand-building assistance, and in-depth analytics.
The idea behind Cratejoy is hitting the market at the perfect time. They will make the subscription model a reality for many small online merchants that wouldn’t otherwise have the means to implement a subscription payment model of their own. The startup’s goal is to help the little guys running their e-commerce businesses out of their garages.
On their website’s blog, Elaguizy outlines the different plans available, one of which is custom pricing for companies with more than $500,000 in monthly revenue. They hope to grow from 17 employees to almost 100 by the end of 2015 with much of the funding going toward engineers.
As of this Tuesday, merchants are now able to register for the public beta.