Wish wants to be the Amazon for the rest of us; will retail investors buy it?

Most people know Wish as a site that sells throwaway doodads from China, but in anticipation of its impending IPO, the ten-year-old, San Francisco-based company has begun portraying itself as a kind of Amazon for the rest of us.

Judging by what we’ve read and heard from sources in recent months, Wish  wants to paint itself as a patriotic alternative to the trillion-dollar juggernaut and is positioning itself as the better option for the estimated 60% of families in the U.S. without enough liquid savings to get through three months of expenses. Such cost-conscious customers can’t afford Amazon Prime and are — at least in Wish’s telling — willing to wait an extra week or three for a product if it means paying considerably less for it.

We’ll know soon enough if public market investors buy the pitch. Wish registered plans this morning to sell 46 million shares at between $22 an $24 per share in an offering that’s expected to take place next week. The current range would value Wish at up to $14 billion, up from the $11.2 billion valuation it was last assigned by its private investors.

Wish has a lot of reasons to feel optimistic about its story heading into the offering. For one thing, people are clearly still discovering its business. According to Sensor Tower, Wish’s mobile shopping app was downloaded 9 million times last month, compared with the 6 million downloads that Amazon’s  shopping app saw and the 2 million downloads seen by Walmart. In 2019, across all types of apps, Wish was the 16th most downloaded app.

There’s a lot to discover once potential customers do check out Wish. According to the company’s prospectus, its more than 100 million monthly active users across more than 100 countries are now shopping from 500,000 merchants that are selling approximately 150 million items on the platform.

While many of these are the nonessential tchotchkes that Wish has long been identified with, from tattoo kits to pet nail trimmers, a growing percentage of the mix also includes essential goods like paper towels and disinfectants — the kinds of items that keep customers coming back in reliable fashion.

It’s a bit of an evolution for the company, whose early focus was almost exclusively on cheap items that didn’t weigh much. First, Wish has always worked with unbranded merchants, mostly in China, that don’t have marketing costs built into the products and like the platform because it enables them to reach new customers for free without cannibalizing their existing market.

But Wish — which takes 15% of each transaction —  had also been relying heavily on a partnership with the USPS and China called ePacket that long enabled it to send items overseas to the U.S. for $1 to $2 as long as the items weren’t unusually large or heavy. Yet that changed on July 1, with a new USPS pricing structure that now requires companies like Wish to pay more to ship their goods or else move to more costly commercial networks.

Unsurprisingly, Wish had back-up plans. One of these has involved packing together multiple orders in China based on customers’ locations, then sending them in bulk to the U.S. to a designated location where they can be picked up.

Relatedly, dating back to early 2019, Wish began partnering with what are now tens of thousands of small businesses in the U.S. and Europe that stock its products, trading their storage space for access to Wish’s customers along with a small financial bonus for every in-store pickup. (Wish will pay store owners even more if they can deliver orders directly to customers’ homes.) According to Forbes, these partnerships provided Wish with an “inexpensive distribution network practically overnight.”

It happens to fit neatly into a larger anti-Amazon narrative wherein the Goliath (Amazon), unable to disrupt convenience stores, is now trying to supplant them with its own branded convenience shops, while Wish may be helping them prosper.

It is also a very asset-lite model compared with Amazon. Wish doesn’t hold inventory; it also doesn’t have to buy or maintain a fleet of planes or trucks or warehouses.

None of these developments completely counter the challenges that unprofitable Wish is still facing, beginning with its scale, which remains tiny compared with the towering giants it faces.

While the company is showing moderate revenue growth, its filings also show steady losses owing in part to its marketing spend. (In 2019, Wish reported revenue of $1.9 billion, up 10% year over year, but it saw a net loss of $136 million.)

The company has been making inroads into new geographies around the world, but it is still heavily dependent on China-based merchants. To address this, it has reportedly begun partnering increasingly with more U.S.- and Europe-based retailers, including those with overstocked or returned items that big retailers are looking to offload, along with those looking to sell refurbished electronics. “We’d love to diversify,” Szulczewski told Forbes this summer.

Wish has always been plagued by quality control issues, too, which it has yet to fully resolve. In fact, there are YouTube channels — some very funny —  focused entirely around what Wish products look like in reality versus how they are presented to shoppers online. (See below.)

Largely, it’s a cultural issue. For example, at a 2016 event hosted by this editor, cofounder and CEO Peter Szulczewski talked about having to educate Chinese merchants about American customers’ expectations.

“It’s true that consumer expectations in China are very different,” Szulczewski explained at the time. “Like, if you order a red sweater and you get a blue one, [shoppers are] like, ‘Eh, next time.’ So we have a lot of merchants that have only sold to Chinese consumers and we have to educate them that it’s not okay to ship a blue sweater because you don’t have any red sweaters in stock.”

Wish has been working to close the gap, as well as to tackle outright fraud on the platform. Just one of many moves has involved hiring a former community manager at Facebook as its own director of community engagement, a task that reportedly involves organizing Wish users to weed out bad apples. But Wish has surely lost plenty of shoppers burned by their experience along the way.

In the meantime, plenty of public market investors will be watching and waiting. So will the venture capitalists who have provided the company with $2.1 billion in funding over the years, including Formation 8, Third Point Ventures, GGV Capital, Raptor Group, Legend Capital, IDG Capital, DST Global, 8VC, 137 Ventures and Vika Ventures.

For her part, Anna Palmer of Boston-based Flybridge Capital Partners — who does not have a stake in Wish but who is focused very much on so-called commerce 3.0 — thinks that Wish “serves a different use case and a different customer need” than the Amazon shopper.

“If you look at the strong retail performance of the off-price and discount market —  think of retailers like Dollar General and Dollar Tree — it bodes well for the continued growth of Wish, especially since the discount market has been a tough one to bring online because of the additional logistics costs involved.”

Outfund, the revenue-based finance provider for online businesses, raises £37M

Outfund, the revenue-based finance startup that wants to help online businesses fund growth without giving away equity, has raised £37 million in a “late seed” investment. A mixture of debt and equity, the round is led by Fuel Ventures, alongside TMT Investment.

Outfund says it will use the funds to offer larger financing to more businesses, and to invest in new finance products and grow the team. It is also committing to lending £100 million to e-commerce and subscription-based businesses in the next 12 months.

Co-founder and CEO Daniel Lipinski, who previously founded and sold logistics platform ParcelBright, says existing financing solutions for online businesses are far from optimum. “[There’s] organic growth which is slow and cumbersome; bank loans which force directors to give personal guarantees and put their home on the line; or venture capital, where you have to give up control of the business and dilute your shareholding. Sadly, none of these are aligned with company goals of revenue generation and equity retention,” he argues.

To remedy this, Outfund has set out to create a fairer — and better aligned — way for online businesses to grow fast. Based solely on revenues and performance, and targeting businesses that take online payments, Outfund offers between £10,000 and £2 million of funding. Companies must have a minimum of £10,000 monthly turnover and to have been trading for at least six months. Outfund then charges a share of revenue, starting from 5 percent and factoring in projected payback time, although the fee is fixed even if it takes longer to pay back the loan.

To assess risk before deploying funding, the fintech’s algorithm pulls information from multiple data sources to determine how a company is performing. “Outfund uses live data as the backbone of our lending decisions, making us non-biased and fast,” adds the Outfund CEO. “This allows us to provide funding of up to £2 million within 24 hours. And, as we use unfiltered data sources, this helps reduce risk on our side meaning we can provide the cheapest possible fees over the longest possible repayment period”.

On direct competitors, Lipinski cites Canada’s Clearbanc, which recently launched in the U.K. “They are based in Canada, [so] it’s a real challenge for them to provide the speed and responsiveness that a U.K.-based company like Outfund can provide,” he claims. Another relatively new local player is Uncapped.

“Outfund is very different in the market in that we provide one fixed fee from 5% regardless of how you spend the funds. For example, other providers in the space charge an increased fee if you use the funding for stock as opposed to marketing. We are focused on technology to make the best lending decisions and means we can advance the cheapest fixed rates on the market regardless of how you spend it”.