Luca is a startup that develops price planning and foresight tools for retailers. Today, it announced that it had closed a $2,5M seed round, led by Menlo Ventures. Y Combinator was also a participant, as were angel investors and Soma Capital.
Tanvi Surti & Yonah Man, who previously worked together in Uber’s dynamic price team, co-founded Luca. Mann was focused on Uber Eats pricing, while Surti led the UberPool pricing group.
In an email, Mann stated that the business’s unit economics were poor during his time working with the Pool team. “Uber Pool was about to go public and I was responsible for re-configuring the price algorithm in order to get unit economics to work. In just ten months, we were successful in plugging a huge hole into Uber’s profit and loss using pricing technology. “That got me thinking.”
Mann describes Luca as a “pricing pilot for enterprise retail.” It’s an AI-powered platform that uses revenue and profit margin headroom to make recommendations on price changes.
Mann said most retail pricing teams tend to shoot in the darkness. “Retail pricing teams have to incorporate large volumes of data from multiple channels to build a strategy — sales history, market trends, competitor price changes and inventory availability. They have to do this for tens of thousands SKUs, as well as multiple stakeholders.
The need — and the massive addressable market — sowed the seeds for a number of pricing optimization and planning startups. Pricefx, one of the more successful vendors, has raised tens of millions for its algorithmic pricing software designed for software-as-a-service businesses. Fetcherr is a specialist in pricing adjustments for the airline industry and recently received an equity investment of $12.5m.
Luca’s platform tries maximizing retail prices using historical data, other indicators and other signals. Image Credits Luca
Luca’s differentiation is ostensibly based on its pricing engine. It uses historical data, such as sales and inventory, from retailers as well as signals coming from competitors, to forecast the sales performance of products at different price points. Luca monitors the sales volume and looks out for any negative trends after its pricing recommendations are approved.
We do not offer dynamic prices, unlike other players in this space. We just don’t think that’s the right user experience for retail — yet,” Mann said. “Our solution is complementary to the human decision maker and our goal is to give humans superpowers in making decisions by turning a sea of data into clear and explainable recommendations.”
It’s early days for Luca in terms of customer acquisition — the startup’s only worked with eight brands so far. Mann claims that two of the brands are Fortune 500 firms.
Mann said that most retailers are facing growth and margin pressures “post pandemic”, due to higher customer acquisition costs, reduced consumer spending and rising interest rates. “Most retail software-as-a-service tooling out there rarely directly impacts business metrics, whereas retail executives we’ve interviewed are actively looking for revenue optimization opportunities … That’s where we come in – our solution creates direct and measurable business value.”
He said that the seed money would be used to expand Luca’s engineering team and data scientists team.