Disco gets brands to boogie together on customer acquisition

As more companies establish an e-commerce presence, the stakes have never been higher for brands to cut through the clutter to land new customers.

Disco, formerly known as Co-op Commerce, doesn’t think the cost of acquiring costs should be so reliant on Big Tech platforms. Instead, Conner Sherline, founder and CEO, says that when independent brands come together across partnerships, data and merchandising, they have the buying power to produce results for everyone.

Conner Sherline, disco

Conner Sherline, founder and CEO of Disco. Image Credits: Disco

The new name was actually one that Sherline had been thinking about before the company was Co-op Commerce. The leadership team decided to change the name because the company was not a co-op, and with its focus on “discovery,” Sherline explained it fit more with helping consumers find the next thing within its network and cutting through the noise. Relating to discovery on the merchant side, it was also discovering new things about customers and other merchants.

When we talked to Sherline last August for the company’s $5.8 million round, 500 brands were part of Disco’s ecosystem that streamlines the collaboration, tracking and marketplace data that the brands can use to make better decisions around their marketing and merchandising.

This approach has now gained traction. In its first year of business, Disco saw more than $1 billion of transactions across its brand network and over 40 million shoppers as brands experienced 30% to 50% lower costs than on platforms like Facebook and Instagram, Sherline said.

The company’s first full year in business was 2021, and during that time, the company’s revenue grew 10 times, while average contract value and revenue per customer values are higher because Disco is able to reduce the acquisition costs that gobble up much of a brand’s revenue.

Disco is now working with large brands in direct-to-consumer, including The Honest Company, Parade, Lovevery, Made In, Girlfriend Collective, Faherty, Lunya, Rhone, Caraway and Milk Bar.

And, it has another round of funding, this time raising $20 million Series A funding led by Felicis Ventures. Participating in the round were Shopify, Sugar Capital, Bessemer Venture Partners, Indicator Ventures, RiverPark Ventures, Vibe Capital, Not Boring Fund and a group of DTC founders and operators. To date, Disco has raised $26 million.

The new round was preempted, but came at a good time for the company, Sherline said. A cookie-less future is inevitable, but the challenge he is seeing is that companies have not had time to react or respond, and the solution is for brands to work together to lower customer acquisition costs while also improving the targeting of customers.

“With everything happening, including iOS 15 hampering businesses to effectively do marketing and Facebook being less effective in driving acquisition costs, this is our moment to shine and bring on more people to the team to go after a larger opportunity,” he added. “Because we work with brands directly and sit on larger sets of consumer data, we are able to close that loop without cookies.”

The new capital will enable the company to grow its team. Sherline aims to go from 27 employees to 75 by the end of the year. Disco will also be testing more business-to-business marketing and getting its own marketing funnel set up to build leads.

Now armed with its new funding, Disco joins other startups, like Flip, Bloomreach and Varos, to attract funding to provide their own approaches to customer acquisition.

Niki Pezeshki, general partner at Felicis, said Disco caught his eye having been an early investor in Shopify and a dozen e-commerce brands over the years. Those investments gave Felicis firsthand insights to the struggles of user acquisition, which he said had become more expensive over the past five years.

“When we heard from Conner, we were excited about the market he was going after, the problem they were solving and that Shopify was already an investor,” Pezeshki said. “DTC is growing faster than everyone else. Shopify is a bigger marketplace, but not focused on the advertising space, or customer acquisition, which is left to social media and search engines. Disco is coming in and solving that for all of those for DTC brands.”

LiveOak Venture Partners takes in $210M aimed at Texas entrepreneurs

LiveOak Venture Partners raised its largest fund to date, $210 million for Fund III, which will enable the Austin-based, early-stage venture capital firm to double down on Texas founders.

The fund was oversubscribed — the firm originally targeted between $150 million and $200 million — and was wrapped up in less than four months, co-founder and partner Krishna Srinivasan said in an interview. Fund III brings assets under active management to almost $500 million.

“The entire thing happened over Zoom, and we could have raised more,” he added. “We finished with a diverse base of investors that included 90% from institutional investors and over 40% of investment from new investors.”

The mix of backers included pension funds, university endowments, foundations, prominent family offices, local Austin entrepreneurs and founders and executives from LiveOak portfolio companies.

Srinivasan and Venu Shamapant started the firm in 2012, and its first two funds both raised $105 million. They invest in technology across Austin, Houston, Dallas and San Antonio, pumping money into 49 companies so far, with plans to add another 25 to 30 with the new fund. The firm’s first check is between $1 million to $5 million, and will invest around $10 million during a company’s life cycle.

These companies have gone on to raise over $1 billion, Srinivasan said, and include companies like legal tech company Disco, which went public in July with a $3 billion valuation, and Homeward, which raised $371 million in debt and equity in May at a $1 billion valuation.

The firm touts this fund as “the largest institutional Texas-focused, early-stage venture fund in the past decade” at a time when funding to companies within the state is at an all-time high.

More than $90 billion was invested into Texas-based companies since 2016, according to Crunchbase data. In 2021, $14.2 billion was invested so far, and is poised to eclipse the $15.4 billion invested into companies in all of 2020. One of the largest capital infusions over the five-year period happened this month: Austin-based business identity protection ZenBusiness took in $200 million in a round led by Oak HC/FT.

“The Texas market is an exciting place right now,” Shamapant said. “We are big believers in the market, and now others are starting to recognize what we have known. That was a positive tailwind as we got into fundraising. Our results are that we have gotten to validate that strategy is right and works well.”

Equity Monday: Unionization at Alphabet, Tesla’s delivery achievement, and CRED raises $81M

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.

This is Equity Monday, our weekly kickoff that tracks the latest private market news, talks about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here and myself here — and don’t forget to check out the second of our two holiday eps, the most recent looking at what we think might happen this year.

What did we get into today? A great question. Here’s the rundown:

Mostly we’re still making sure that our brains still work and that the return of work really is here. Taking a break was nice. Now the news is coming back, so we are as well. Hugs, and chat Thursday.

Equity drops every Monday at 7:00 a.m. PST and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.