Why Lightspeed is leading Seel’s Series A round
Nearly all small-to-midsize ecommerce businesses have at least one thing in common: They hate returns.
When customers return items they’ve bought online, it eats into a store’s already razor-thin margins. Yet the competitive pressure to match the 30-day free return policies offered by the ecommerce giants, like Amazon, is overwhelming.
Seel offers a clever solution for the 5 million+ businesses that operate on platforms like Shopify, Magento, or WooCommerce: Insurance against the risk of product returns. For a nominal fee, consumers can purchase a generous return policy from Seel during checkout. If customers end up returning the product, Seel refunds the purchase price directly to them — retailers pay nothing.
The creation of a new category of insurance makes Seel a unique solution in an increasingly diversified Fintech market. But what sets the company apart is its ability to aggregate unstructured data across multiple ecommerce sellers, analyze the risk of return for each purchase, then determine which customers can be safely offered the option of a more generous return policy.
Seel can also offer similar protections directly to sellers without passing the cost onto consumers. Its Net Sales Guarantee means merchants no longer have to wait 60 days or more for all returns to come in before they can close their books. Perhaps more significantly, Seel’s neural-network-based risk assessment engine can be applied to a range of other potential high-frequency/low severity (HFLS) risks, such as on-time delivery assurance.
Seel’s basic Return Assurance product for SMB and mid-market retailers alone represents an enormous opportunity. The potential ceiling for reducing the risk that comes with everyday inconveniences and other HFLS use cases is even higher. For these reasons and more, I am excited to announce that Lightspeed is leading a $17 million Series A round for Seel, with participation from existing investors Foundation Capital, Afore Capital, and West Loop Ventures, as well as a group of fintech and ecommerce operators.
Returns without risk
On average, processing returns consumes up to 8 percent of a store’s total margin. As a result, approximately 60% of the 1.75 million stores on Shopify don’t offer a blanket 30-day refund policy, and virtually none offer refunds for products sold during inventory closeouts or end-of-season promotions.
Seel’s generous return policy offers are inherently sticky. One in four shoppers who are shown the offer choose to purchase it When they return to shop the second and third time, the opt-in rate is even higher.
Besides saving money for online merchants, Seel’s Return Assurance results in fewer abandoned shopping carts and a 5% lift in conversion, as well as fewer complaints and higher Net Promoter Scores. Because Seel aggregates data across all sites that employ its technology, it’s able to dynamically price offers to each order, as well as identify potential fraudsters and other bad actors who abuse store return policies (who are then not shown the Return Assurance offer).
As more stores adopt Seel’s technology and the trove of aggregate grows, the accuracy and profitability of these algorithms will only increase over time.
Why we’re leading the Series A round
A huge element of every investment decision revolves around the founders, and Seel is no different. Co-founder and CEO Zack Peng is exceptionally smart and ambitious, with experience creating underwriting engines in the insurance industry, which typically protect people against rare but expensive events such as a fire or an automobile accident. One of the key insights that drove Zack to create Seel was that consumers face many more high-frequency but low-cost risks, which collectively can add up to a lot of money.
Zack has assembled a top-notch team around him. Co-founder and COO Bill Liu is building a strong team and a GTM effort. CTO Mo Chen is a former Google engineer with deep technical prowess and the ability to attract strong data scientists. Advisor Brad Selby, who used to lead business development at Affirm*, is a seasoned and tested go-to-market leader.
Another factor in our decision are the trends we see in the marketplace, including:
- The nature of risk is changing. As people continue to work, play, and socialize online, they encounter new risks as well as new ways of measuring that risk. The ability to track and analyze behavior in real time using neural networks makes it possible to underwrite everyday inconveniences and sell insurance against them.
- Online shopping continues to grow. The spike in ecommerce activity spurred by the pandemic shows no signs of slowing. Online sales as a percentage of total retail is projected to increase from 18% in 2020 to nearly 24% in 2025. Ecommerce accounted for nearly half of all apparel sales in 2021, where returns due to poor product fit or color match are endemic.
- Product advantages will increase as the company scales. The ability to follow shopping behavior across multiple merchant sites enhances Seel’s ability to predict buyer return behavior. As more merchants sign on and the pool of available data grows, Seel’s underwriting engine will perform better and better over time.
We believe that HFLS will become the next big category in underwriting, and Seel is the leader in building toward that future. I look forward to working closely with Zack, Bill, and the rest of the team to carve a new path in Fintech.
* A Lightspeed portfolio company
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