Bobby Figueroa knows what brands should do to optimize their presence on Amazon’s marketplace, perhaps better than almost anyone. The product marketing veteran spent the past four years leading global operations for Amazon’s fast-growing advertising platform that online retailers use to drive attention to their products.
So when Figueroa left the tech giant earlier this year to launch a startup that helps brands maximize sales on Amazon, investors took notice.
Seattle-based Gradient today announced a $3.5 million seed round led by Flying Fish Partners with participation from Pioneer Square Labs Ventures, MDC Ventures, and Black Jays Investments.
Gradient, a spin-out of Seattle startup studio Pioneer Square Labs, uses machine learning to analyze hoards of data across the Amazon marketplace and elsewhere — pricing, product pages, competitors, categories, ad formats, keywords, reviews, ratings, rankings, etc. — to give brands guidance based on their desired sales outcomes.
Figueroa, who previously worked at Procter & Gamble, Microsoft, Google, and Yahoo before landing at Amazon, said that a majority of online purchases — which reached $453 billion last year in the U.S. — happen at “point of sale.” In other words, most shoppers buy the first product they see on a digital shelf that matches their search query, regardless of exact brand or packaging.
That’s why Amazon’s advertising arm has grown into a billion-dollar business, as retailers try to get their products in front of consumers. Amazon is now a leading e-commerce search engine, a place where shoppers begin their online shopping journey.
Brand advertising on Amazon is a different beast than traditional online platforms such as Google and Facebook, given that it is a shopping destination versus a pure search engine or social network.
Figueroa called Amazon a “very complex black box” in regard to how it ranks products. The CEO said he can’t discuss or use confidential knowledge he learned while at the company. But he added that Gradient’s algorithms are built to “work in tandem” with Amazon’s platform, helping brands improve both their organic and paid results.
“Our system, in a way, is an important unbiased third party that allows brands to validate all their work and help them compete against not just other brands, but also brands managed by Amazon,” said Figueroa, referencing Amazon’s growing list of private label products.
Figueroa met his co-founder, Vikram Oberoi, through Pioneer Square Labs. Oberoi previously ran engineering for Harry’s Grooming, a direct-to-consumer business for men’s grooming products, where he learned about how brands attract awareness from consumers.
“This is a huge opportunity in a really large market,” Oberoi said of Gradient.
Gradient has a handful of early customers that are mostly larger brands with big advertising budgets, said Figueroa, who was born in Mexico City and relocated to Seattle from San Francisco five years ago. The 8-person company will focus initially on Amazon but the vision is to address other big e-commerce channels.
Another new Seattle startup, Downstream, also aims to help marketers navigate Amazon’s marketplace and recently raised investment. Figueroa expects a number of startups to specialize in different aspects of the e-commerce experience on Amazon.
Pioneer Square Labs launched in 2015, using the concept of rapidly testing and validating new ideas before recruiting an executive team to build out a spin-off company. The firm earlier this year expanded, raising a $80 million venture fund called PSL Ventures. Recent spin-outs include NextStep Interactive and Shujinko.