In this interview, we talk with Andreas Reiffen (https://www.linkedin.com/in/andreasreiffen/) CEO and Founder crealytics (https://crealytics.com/). Crealytics is a retail performance advertising company. They help eCommerce retailers through increased transparency and control, unique insights into their business, and improved financial performance. In 2017, Crealytics generated over $3 billion in client revenue. Among their clients are Footlocker, ASOS, Harrods, Audible, Lands’end and Urban Outfitters. We talk to Andreas since he is a successful alumnus of the German Accelerator (GA) Tech in New York. Crealytics participated in the program and successfully established itself in the US, even though they had to shift their approach. Learn more in the interview.
The GA offers several opportunities to enter the United States for companies with a legal entity in Germany. One of the places where startups are supported on the ground in New York City, where the GA is located in SoHo on Broadway. The other locations, where GA supports German startups with local programs are in Boston, Silicon Valley and newly in Singapore. The next application deadline is just around the corner. Learn more about the German Accelerator below and apply for the program here: http://bit.ly/2J5uY9a
German Accelerator Tech is a three to nine-month growth accelerator empowering high-potential German tech startups to successfully enter the U.S. market with a program tailored to their needs. Through extensive hands-on mentoring, free office space, and immediate access to a top-notch network selected companies are fully immersed in the Silicon Valley or New York City ecosystem right upon arrival. In the world’s capitals for innovation and startup success, they are exposed to a dynamic and international environment. With the support of German Accelerator Tech, startups save precious time and money in building their business in the largest market on earth. German Accelerator Tech was initiated in 2012 and is funded by the German Ministry of Economic Affairs as well as corporate partners. The startups do not provide any equity or pay any fees. More than 150 companies have graduated from the program thus far. German Accelerator also supports young German Life Sciences companies to enter the U.S. market via Boston. Since early 2018, there is also a Singapore office helping German tech startups looking to expand to Southeast Asia.
0.05 Welcome to startuprad.io your podcast YouTube blog, covering the German startup scene with news, interviews, and live events.
00:16 Joe: Hello and welcome everybody, this is Joe from startuprad.io your startup podcast and YouTube blog covering the German startup scene. Today you can see I’m still not in lovely Frankfurt but I’m still in New York City. Due to the weather, we had to move downstairs here in one of the meeting rooms. I hope you forgive me for the lighting because we couldn’t make it any better. But I do have a German entrepreneur here who achieved something many startups aspire. he set foot in the United States.
00:52 Interviewee: Thank you. I am happy to be here with you.
00.55 Joe: Can you just tell us a little bit about yourself like, what you did before the startup and then we keep the story going
01.03 Interviewee: Oh yeah so before I found out critics I studied in Passau and at some point, I remember the professor of marketing was talking about Google AdWords. So, he explained how the auctions worked. And I was quite inspired by this because it was the first time that he could measure the success of something and you didn’t throw money into a black hole. And you didn’t know whether it would come back, so I was quite inspired by that and started researching.
And as you know, there are lots of these books get rich in 30 days. And I came across one of these and they told me hey that’s easy you just open your Google account, you buy traffic from Google, you send it over to Amazon and you make commissions and then a couple of months you are rich. I said okay, I’m don’t fully believe it but let’s give it a try. So, I opened my Google account, open my Amazon account, bought traffic and in the end lost all my pocket money. So, I said oh what should I do right now?
And I then figured out there was a company based in Cape Town South Africa and they did the same thing, but they grew to honour people. So, I said hey why not apply there and I want to learn how this stuff works so
02:19 Joe: Learn from the best of course.
02:21 Interviewee: So, I sent a quick message to them, had a Skype interview, and I think not even four weeks later I was sitting in the middle of Cape Town and between the startup. And I really loved it, so it was this different kind of style compared to these corporate companies where you can just do things. You have an idea, and everyone says hey cool go for it. So that’s what was the point where I said okay I want to be in the startup scene.
And when they made me a quite bad job offer, I said no I’m gonna do this by myself. So, I went back to Passau.
02:58 Joe: You went to South Africa? Went there, they make you bad offer and you said screw you I’m going back?
03:05 Interviewee: I’m going back and am gonna do the same thing by myself. Went back to the University knowing with my business administration and business computing Studies, knowing I’m not the real tech guy. So, let’s look for someone who can write code and build software. And so how do you do this? And then I remembered okay the first semester we had to learn to program see and there was that guy who taught a bunch of people among others myself how this worked.
And that dude participated in a statistics exam and I think 90 something percent of our participants failed and there was one with a 0.1 degree and that was Christoph this is my guy.
03:55 Joe: And for everybody who’s not from Germany, having so many people failing in exam is not unusual because like when you enter studies and when you leave studied it’s like 60% get kicked out that.
04:08 Interviewee: That was exactly the thing, yeah.
04:09 Joe: It’s, we don’t use a curve, so if you know everything you get 100%. If you know nothing you get zero.
04:15 Interviewee: Exactly! So, I started talking to Christoph and Christoph is a tech guy and I’m probably the rather, I’m an outgoing passionate entrepreneur. So, I told him hey I have this great idea and he always suggested ok understand it. And after my two hours of monologue, he said I will think about it. And I said this won’t work. And he got back to me a couple of weeks later and said you know what I’m doing my PhD thesis but it’s also not the most exciting thing. So, let’s just do this. I found this, some internship at the University sorry, some scholarship at the University of Paso.
So, let’s just give it a try, apply and we got it. And that’s weather, that was the point of time when we started dedicating our time to running the startup. Buying traffic from Google and monetizing it through Commission deals. This was the origin, and this was how we found the company in the end.
05:18 Joe: And what are you doing right now?
05:21 Interviewee: So right now, it’s a completely different thing. We are kind of still in the same industry, but I’m running now a company with hundred and seventy people. We have two offices in Germany, one in Berlin the bigger one, a smaller one in Passau, where we founded the company. Then we have roughly, just a sales office with five people in London. And now in the New York office, we are gonna grow soon to 20 people. And what we do is we have a clear enterprise-level focus. We work with large retailers and help them to get better results out of their huge Google AdWords or search spend.
So, it’s split into PLA the product listing ads and the more traditional text ads. So, what we usually do is we cover all different layers and to end so first as a strategic component which is kind of forgotten in the market. So how do you predict customer lifetime value of customers? How do you align traffic acquisition with future sales coming in? Then there’s this executional layer where we have people trained to execute campaigns and handle our own tech. Which is the third layer enabling, and there’s a whole, we have a development team of roughly 35 people and built a highly specialized complex technology for retail advertising in the end.
So, it’s compared to what we see in the market. They’re advertising tools, trying to address problems for everyone. Whether it’s insurances and automotive and retail. We had one point of time said, let’s just narrow the market but gain a decent share within this narrow retail vertical. So, the product is highly aligned with pricing inventory management so it’s it goes very deep but it’s narrow and not like the rest of the tools. And this has proven to be quite successful. And I think in 2014 we went to the UK, then not even two years later we made more than fifty per cent of our revenues from the UK. And then we said hey the UK market is kind of like the US market.
So, what happened what worked out well in the UK will work out in the US. So, we moved here, and it took a little longer, but it picked up incredibly well.
07:51 Joe: So, from what I understand, please correct me if I’m wrong. You first came here with the German accelerator program?
07:58 Interviewee: Yes, yes mid-2016 there was me and a new hire called Mark Schwartz. Someone from the US which is probably a key to success to have someone on the ground here dedicated to the market who understands the mentality who has a network here. And instead of just coming alone by yourself and trying to figure out everything.
08:27 Joe: I know they have some arcane rules from time to time everywhere in like business regulation taxes. What was, did you set up a legal entity here?
08:38 Interviewee: Yeah, we, before we what we did prior to the German accelerator to the start of the German accelerator and we set up a legal entity. Three months before I moved we started hiring or even four months I think and when we started here we had this Managing Director Mark already here. We had the legal entity, so it was everything was already set up.
09:04 Joe: Okay and what do you think was the most challenging part of getting set up here? You told me it took a little bit longer than you expected.
09:19 Interviewee: So, I mean you have to be just aware that initially, you have no reputation. Nobody knows you the whole network does not exist, and I think at least in our case over time you forget how your network plays for you when you have it. Because of this, they’re constantly inbound leads. They’re constantly happy clients who refer you to other new clients and you start forgetting this and when you when you arrive here you see that all this does not exist. So, you must start reaching out than they want to see references. You only have European references.
So, in our specific case what we tried to do initially is focus on the mid-market segment. So, I rather target smaller companies but there are lots of them. So instead of chasing elephants rather go after the,
10:18 Joe: Like Walmart or Costco whatever yourself,
10:20 Interviewee: We didn’t target these guys, we decided let’s target the mid-market. We identified 10,000 companies, built the whole sales machine, started reaching out and started also onboarding new clients, closing deals. But it was always a relatively small-ticket size and we figured out that the customer acquisition costs plus the ongoing cost to keep them, to keep them alive to service them. And the turn rate we then saw is, we made it profitable, it grows but it it’s not what we figured out, it was not was what we needed in order to really grow the company to the point where I wanted to grow.
11:06 Joe: For the non-startup people so basically, the customer acquisition costs us all the money you must spend before you
11:12 Interviewee: In sales and marketing
11:14 Joe: Before you have a client, and then maintenance costs like people who take care of the clients, call them hey how you are doing. You know, a new offer and stuff like this. And then you come to turn rate, the rate you burn money at basically spending money.
11:31 Interviewee: So, in theory, this was all, this was gonna work out all perfectly well. Because the tool is was a success tool. It was fully automated, relatively easy to handle. But there was probably one mistake. that for a small customer paying let’s say 20k a month on AdWords, that’s pretty much the same as for Walmart paying I’m 20 million per month. So, they keep you as busy as one of the big guys and this was probably,
12:07 Joe: Because it has for them the same importance.
12:10 Interviewee: Exactly, and so it was not as lean as we thought so I think we are pretty good at one thing we immediately realized this.
12:20 Joe: Ok so you switch the whole marketing approach and moved like up the food chain a little bit to the bigger guys.
12:27 Interviewee: Yeah, so instead of having this a marketing approach gear to acquiring or to targeting 10,000 companies we then picked 200 companies and switch to account-based marketing. Which means research every single target, every single stakeholder. Approach them with yet dedicated messages and provide value. Send them over reports and start a conversation and we knew that the sales cycle would be long, but we now see that we have a huge impact. So, we already closed one of the one big deal and we own Borderlands and then we have a big pipeline currently with five of the top 20 companies.
It, yeah, it turned out to work well and we are seeing the credits right now, so it was the right decision. And it, it just took a while after switching but yeah, we see that it had a huge impact.
13:31 Joe: That is interesting especially switching your approach. What I just want to focus on a little bit is your software as a service company. So basically, you make money renting out your software.
13:46 Interviewee: We have two distinct models. We have one pure software service model, so we give our clients the text and they can do whatever they want. This does not include the executioner layer like people sitting in front and handling it and, this is more important. It does not include any strategic layer what we see today. We the market does not have an AI machine learning automation problem. The market has a problem when it comes to applying these technologies in the right way.
So, aligning what they do on the marketing side of the overall business strategy and these are for example things, like how does the budgeting work from at the interface between finance and marketing. And they usually have a supply-based budgeting approach. So, what did we buy, we know we will sell all this, we know we must mark down a part of it. We know that search will be a certain percentage of it. So, here’s the budget and here are the targets.
It’s not the way it should work. So, we help to better align this and to slice the marketing budget and in a smarter way. So instead of just running fast with a technology AI machine learning, we make sure that we run fast using our tech but also into the right direction, which is a huge difference compared to a pure SAS offering. So, we’re offering both some companies just want to run it with a solution but some of the very big guys they request more than just a product and an automation tool.
15:25 Joe: And you are externally financing?
15:29 Interviewee: Yes, so we had several financing rounds over the time. Last one significant about nine million dollars beginning of last year.
15:41 Joe: Oh, very good and you right now not looking for any external investors?
15:46 Interviewee: No, we don’t.
15:47 Joe: You don`t, okay.
15:48 Interviewee: We believe that this money will be enough. We will become profitable by next year. So, we have no plans currently to raise further money.
15:59 Joe: Okay, well the only thing for me left to say is best of luck here in New York.
16:05 Interviewee: Right, thank you and best of luck with your other interviews here.
16:09 Joe: Thank you
6:11 Interviewee: Thank you
6:16 That’s all folks. Find all news, streams, events, and interviews at startuprad.io
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