Startup founders Adam Kitain and Drew Marconi spent four years at the ridesharing company Via Transportation, where they ran pricing strategy — Marconi setting profitability targets and Kitain writing the algorithms to meet them.
The duo worked well together, and in 2020 they decided to jump into entrepreneurship. They founded Intelligems, which uses the pricing strategies Kitain and Marconi used at Via and introduces them to e-commerce brands. The founders graduated from a Techstars accelerator in 2021, and more than 120 brands have used their technology so far.
On Monday, Kitain and Marconi announced they raised $4.2 million in venture capital to bolster their technology, expand their business and go after bigger brands. Vinyl Capital and Boulder-based Matchstick Ventures led the round. MergLane Ventures, SuperAngel.Fund and Techstars Boulder also participated, as did several e-commerce founders, including Klaviyo founder Ed Hallen.
"As we go into 2023, there's so much to do," Marconi said. "We're taking this lens of, 'With profit-optimization, what other tools can we build in to help people be smarter about this?'"
Intelligems, which is co-headquartered in Denver and New York, introduces dynamic pricing to brands that sell on Shopify, such as the Colorado-based companies Sheets & Giggles and Shinesty. Dynamic pricing refers to businesses adjusting their prices to account for changing demand. At Via, that meant incorporating surge pricing during inclement weather and other times of high demand, Marconi said.
When developing the idea of Intelligems, Kitain and Marconi interviewed about 100 e-commerce companies and discovered many were setting their prices and keeping them the same for months or years.
"That's when the idea for Intelligems coalesced. We thought, 'Hey, let's like give these direct-to-consumer brands a suite of tools that helps them optimize their profit, optimize their prices,'" Marconi said. "We saw how powerful dynamic pricing was, and we thought we should be able to bring that to other industries."
Dynamic pricing became more essential as inflation surged last year, driving up the costs of raw materials, labor and shipping, Marconi said. Intelligems' platform tests the prices of products to help brands make a data-based decision about pricing, rather than guessing at it. In one case, a brand decreased its price by 5%, which boosted its sales by more than 20% and led to an additional $2 million in profit, according to Intelligems.
The startup also helps brands determine their shipping fees and weigh the benefits of discounts. Intelligems has assisted brands to decide whether free shipping was worth the cost, and whether they should participate in events like Black Friday.
"Sitting and leaving a price doesn't really work, and it especially hasn't worked over the last year with inflation and the rise in marketing and shipping costs," Marconi said. "Pretty much all the companies we're working with have found ways they could improve profitability."
Kitain and Marconi don't have immediate plans to hire additional staff. Because of the difficult fundraising environment, they want to be deliberate with their spending and give themselves as much runway as possible, Marconi said.
The startup operates on a remote-work model. Kitain is based in Denver, while Marconi lives in New York. Their 11-person staff is split between those two cities, and a few workers are located in Chicago, Bozeman, Montana, and Vancouver, Canada.
"We want to try to conserve this cash because once it's spent, it's gone," Marconi said. "We're fine with a little bit slower growth if it means we're being responsible and we're able to survive [the downturn], whether it takes one year or multiple years to blow over."
