Lukea startup that creates price forecasting and planning tools for retailers, announced today that it has closed a $2.5 million seed round led by Menlo Ventures with participation from Y Combinator (Luca was in Y Combinator’s Winter 2023 class), Soma Capital and angel investors.
Luca was co-founded by Tanvi Surti and Yonah Mann, who worked together on Uber’s Dynamic Pricing team. Mann focused on Uber Eats pricing, while Surti led the UberPool price group.
“During my time on the Pool team in 2019, the business had poor unit economics,” Mann told TechCrunch in an email interview. “Uber was on the verge of an IPO and I was responsible for making the economics of the unit work by reconfiguring the Uber Pool pricing algorithm. In ten months, we were able to plug a huge hole in Uber’s profit and loss using pricing technology. That got us thinking.”
Mann describes Luca as a “price co-pilot for enterprise retailers.” In plain language, it is a platform that leverages AI to identify revenue and markup, make recommendations for price adjustments, and measure results.
“Pricing strategy is one of the most powerful levers retailers have to create margin and revenue growth, yet most retail pricing teams often shoot blind,” he said. Mann. “Retail pricing teams have to pull in large volumes of data from multiple channels to build strategy: sales history, market trends, competitor price changes, and inventory availability. They have to do this across tens of thousands of SKUs and multiple stakeholders.”
Necessity, and the massive addressable market, sowed the seeds for a number of price planning and optimization startups. pricefxone of the most successful providers, has raised tens of millions for its algorithmic pricing software designed for software-as-a-service companies. look forwhich focuses on price adjustment for the airline industry, recently secured an equity investment of $12.5 million.
Luca’s platform tries to optimize retail prices using historical data and other signals. Image Credits: Luke
Luca’s differentiation, apparently, lies in its pricing engine, which takes into account retailers’ historical sales and inventory data, as well as competitive signals to forecast product sales performance at different points. Price. Once his pricing recommendations are approved, Luca monitors sales volume and looks for unwanted trends.
“Unlike other players in this space, we are not a dynamic pricing company. 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 provide humans with decision-making superpowers by turning a sea of data into clear recommendations, with high levels of explainability.”
It’s early days for Luca in terms of customer acquisition: the startup has only worked with eight brands so far. But Mann claims that two of those brands are Fortune 500 retailers.
“Post of the pandemic, most retailers are feeling growth and margin pressures due to higher customer acquisition costs, reduced consumer spending and rising interest rates,” Mann said. “Most of the retail software-as-a-service tools out there rarely directly impact business metrics, while the retail executives we interviewed are actively seeking revenue optimization opportunities… That’s where we come in: our solution creates direct business value and measurable”.
The seed funding will go towards expanding Luca’s engineering and data science teams, he added.
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