How YC's Curebit Has A ?Sixth Sense? Into E-Commerce Startups That Are About To Blow Up

Bonobos. Dodocase. Warby Parker. A generation of e-commerce companies is growing up using a vertically integrated strategy where they take more ownership of the design, production, marketing and branding of their products.?But how do you know very early on if you have a hit? With a purely web-based or mobile product, startups can watch how well they retain users after a week or a month. With e-commerce companies, repeat purchases is an obvious metric, but there are also ways to track the virality of an e-commerce product. A YC-backed startup called Curebit has built a business around tracking word-of-mouth referrals for companies like Bonobos. Based on that, the company says it’s able to not only drive sales but predict hits.?What they do is create referral campaigns for e-commerce companies — like those landing pages that say you’ll get 25 percent off or $25 off your next purchase if you send a friend by e-mail, Facebook or Twitter. Curebit will optimize the landing pages, copy, art direction and then track how many people convert to making a purchase after they’ve seen the page. On that strategy, the 12-person startup has grown to about 3,000 clients and a break-even run rate. Their customers include Bonobos, Restaurant.com and Jawbone. “We still have a lot of cash in the bank,” said the company’s CEO Allan Grant. Since creating landing pages for referrals isn’t technically that difficult, the base version of Curebit is free.?The startup makes money off custom services like testing hundreds of variants for the highest-performing campaigns. For that, they’ll charge $10,000 for the first $100,000 in extra sales generated by the campaigns, then they’ll take a 10 percent after that. “Just having a basic feature set is not enough,” Grant said. “We engineer virality the way that social gaming companies measure and optimize their K-factor, viral loops and every step of the funnel.” Here what’s the funnel might look like for a client – Curebit drove 25 percent of Bonobos’ new customers last year, which helped double the New York-based company’s customer base in 2012. Over time, Bonobos had to change its referral strategy. It was centered on Facebook sharing at first, but Curebit found that e-mail converted better for the company. That’s unusual since Facebook is a stronger channel in 93 percent of Curebit’s cases, Grant says. He says the average lift in sales from referrals on e-mail, Facebook or Twitter

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