Why we invested in Israeli usage-economy company Tulu.
AGP invests in Israeli founders and helps accelerate their growth in the United States. Our approach has been described as a "pull" strategy: We spend hundreds of hours with our U.S. corporate partners to understand their technology needs, which drives and derisks our deployment of capital.
During our conversations with large U.S.-based consumer packaged goods companies and retailers, we discovered two converging priorities:
1. A drive and desire to understand and test shifting consumer behaviors.
Baby boomers and Gen X have a very specific approach to consumerism: "I want, therefore I buy."
That's not the case with Millennials and Gen Z, whose approach is "I need, therefore I use."
This paradigm shift in consumer behavior — reflected in the convenience models of companies such as Uber — is having a spillover effect to ancillary markets, and we found executives at CPG and retail companies eager to experiment with models of distribution that leverage this "usage economy."
The reason for this, however, is driven entirely by a desire to increase customer touch points and sales. As one executive of a $3 billion CPG told us, "When a customer touches our products in a store, we convert at higher than 60%. But sales conversions on the Web still hover in the low single-digits. So how do we create more opportunities to enable customers to touch our products in different places? That is one of challenges we're looking to solve."
And that's a challenge, in fact, that Tulu solves, by enabling residents to "rent" products, try them out, and become future customers.
Founders Yishai Halevi and Yael Shemer had a deep and profound understanding of these customer behaviors, and how they intersect with the needs of manufacturers and CPGs.
Equally important: It was clear that AGP had a network of manufacturers and CPGs that it could introduce to Tulu to accelerate their product growth strategy.
2. A drive to understand customer usage
"Amazingly, we have absolutely no idea how, or how often, our products are used," said one executive at a $10 billion home appliance company. "Once our sales are completed via retail or online, that's it."
Imagine, for example, that you buy a vacuum cleaner. Obviously, the manufacturer has no idea how often you use it, what times of day, or for how long.
Manufacturers and CPGs are desperate for this information; they currently collect data via focus groups and customer panels, but those interviews are not the same as real-time usage data.
Tulu has been collecting real-time usage data on all the products in its kiosks. The company knows who's renting, what they're renting, on what days, at what times, for how long, and more. Supplementing its real-time usage data with elegant mobile-first surveying and feedback data, Tulu has created a treasure-trove of product information CPGs, manufacturers, and retailers lack.
This is priceless data for manufacturers and CPGs looking to understand the demographics and utilization rate of their products. The response we received from our corporate partners when discussing Tulu made it even more clear that the founders were tapping into a data asset that enriches the value proposition — and valuation — of the underlying business.
Conclusion: Direct match with our corporate relationships
There was much to like about Tulu when we invested: A great team, proven traction, live customers who raved about the product (both property owners and residents), a scalable model, an enormous market opportunity, and pent-up demand for which capital was clearly needed.
But the intersection with the needs of our corporate partners in the U.S. market made the investment even more clear. AGP was able to quickly validate the opportunity with executives at large enterprises, and it became readily apparent that our network in the U.S. could be an asset to Tulu — in other words, we could help.