Nudge Rewards Inc., a Toronto startup that connects restaurant, retail and hospitality companies to front-line employees through their smartphones, has raised $11-million in venture capital, making it one of the few Canadian technology firms led or co-founded by women to secure eight-figure private financing.
Nudge, which counts Rogers, Telus, Roots, Samsung and Golf Town among its 20 corporate customers, is announcing the funding Friday, led by Chicago-based Jump Capital. Previous investors Brightspark Ventures, Generation Ventures, StandUp Ventures and the Business Development Bank of Canada’s Women in Technology Fund also participated. Each of those five backers has at least one female partner, a relative rarity in the male-dominated venture-capital sector, and Nudge is one of the few venture-backed Canadian firms to have both a female CEO, Lindsey Goodchild, and chief technology officer, Dessy Daskalov.
While Nudge has been championed by female-oriented investment organizations as a trailblazer since its start in 2012, “we’re at a stage now where the company speaks for itself,” Ms. Goodchild said. “From a really early phase we just wanted to prove that we were solving a real problem and it was working.”
“We look for scalable [companies with] smart, hustling leaders and big ideas and that’s what we’ve found” in Nudge, Jump managing partner Michael McMahon said.
Nudge offers a user-friendly app that front-line workers download to their smartphones, enabling employers to reach them with quick, digestible messages meant to drive better performance, such as pop quizzes on featured items and messages about sales contests. Employees are rewarded for logging in to the app and viewing the content.
The company says customers have seen adoption rates exceeding 80 per cent, with employees at 6,000 locations checking in on average 10 times a week. The average contract size from customers has tripled in the last three years and Nudge’s annual revenues increased by 200 per cent in each of the past two years, to the mid-single-digit million level. Customers typically spend between $65 and $85 per location a month for the app.
“Our biggest competitor is the old way of doing things," said Ms. Goodchild, who came up with the idea when she was a consultant to the hospitality and tourism industry. She noticed companies typically communicated in a top-down fashion from head office to location managers, who used bulletin boards and binders to pass on messages to staff that typically didn’t have corporate e-mail accounts or access to company intranets. “It was frustrating," she said. “You’d come up with big plans, need everyone to get behind them and take action, but it was falling flat. At the same time, everybody had a smartphone in their pocket.”
She set out to employ “nudge” behavioural science championed by U.S. economists such as Richard Thaler and BJ Fogg, and that she had used as a consultant, by deploying simple, positive messages to peoples’ phones aimed to drive positive business results while incentivizing employees with the promise of small rewards such as gift cards. The company, originally called Greengage Mobile, initially sold its services as a way for companies to communicate corporate social-responsibility initiatives to workers; initial results were so positive customers encouraged it to expand its applications to other areas of their business operations.
“The key to success is it’s enabling head office to communicate their business outcomes in a tangible, digestible way for front-line employees to consume in an engaging, ‘gamified,’ fun, rewarding manner,’ said Laura Lenz, a partner with Generation Ventures. “Both sides are winning.”
Fred Lecoq, chief marketing officer with Sporting Life Group, said Nudge has become “the backbone of our communication with the front lines” at its 47-store Golf Town chain, which is three years into its turnaround since Fairfax Financial and funds managed by a division of CI Investments bought it out of bankruptcy. He credits the app with helping to improve the rate of visitors who make an in-store purchase to 50 per cent from 42 per cent, and said 70 per cent of staff surveyed said Nudge has helped them to improve how they interact with customers. Eight out of 10 employees use the app and 70 per cent interact with it regularly, which is much higher than other software-based platforms on the market for engaging front-line staff, he said.