Y Combinator-backed Luca aims to optimize retail prices at enterprise scale

Luca, a startup constructing worth planning and prediction instruments for retailers, as we speak introduced that it closed a $2.5 million seed spherical led by Menlo Ventures with participation from Y Combinator (Luca was in Y Combinator’s winter 2023 class), Soma Capital and angel buyers.

Luca was co-founded by Tanvi Surti and Yonah Mann, who labored collectively on Uber’s dynamic pricing crew. Mann was centered on Uber Eats pricing, whereas Surti led the UberPool pricing group.

“Throughout my time on the Pool crew in 2019, the enterprise had dangerous unit economics,” Mann instructed TechCrunch in an electronic mail interview. “Uber was on the verge of an IPO, and I used to be answerable for getting the unit economics working by reconfiguring Uber Pool’s pricing algorithm. In ten months, we succeeded in plugging an enormous gap in Uber’s revenue and loss utilizing pricing tech. That bought us pondering.”

Mann describes Luca as a “pricing co-pilot for enterprise retailers.” In plain English, it’s a platform that faucets AI to establish income and margin headroom, make suggestions for worth changes and measure the outcomes.

“Pricing technique is without doubt one of the strongest levers that retailers need to create margin and income development, but most retail pricing groups are sometimes capturing at midnight,” Mann mentioned. “Retail pricing groups have to include giant volumes of information from a number of channels to construct a method — gross sales historical past, market developments, competitor worth modifications and stock availability. They’ve to do that throughout tens of hundreds of SKUs and a number of stakeholders.”

The necessity — and the huge addressable market — sowed the seeds for various pricing optimization and planning startups. Pricefx, one of many extra profitable distributors, has raised tens of tens of millions for its algorithmic pricing software program designed for software-as-a-service companies. Fetcherr, which focuses on pricing adjustment for the airline trade, just lately landed a $12.5 million fairness funding.

Luca’s platform makes an attempt to optimize retail costs utilizing historic knowledge and different alerts. Picture Credit: Luca

Luca’s differentiation, ostensibly, lies in its pricing engine, which takes in retailers’ historic gross sales and stock knowledge in addition to competitor alerts to forecast the gross sales efficiency of merchandise at completely different worth factors. As soon as its pricing suggestions are permitted, Luca retains tabs on gross sales quantity, searching for undesirable developments.

“Not like another gamers on this area, we aren’t a dynamic pricing firm. We simply don’t suppose that’s the correct person expertise for retail — but,” Mann mentioned. “Our resolution is complementary to the human choice maker and our purpose is to supply people with choice making superpowers by turning a sea of information into clear suggestions, with excessive ranges of explainability.”

It’s early days for Luca when it comes to buyer acquisition — the startup’s solely labored with eight manufacturers up to now. However Mann claims that two of these manufacturers are Fortune 500 retailers.

“Submit pandemic, most retailers are feeling development and margin pressures as a result of larger buyer acquisition prices, lowered shopper spending and rising rates of interest,” Mann mentioned. “Most retail software-as-a-service tooling on the market hardly ever instantly impacts enterprise metrics, whereas retail executives we’ve interviewed are actively searching for income optimization alternatives … That’s the place we are available in – our resolution creates direct and measurable enterprise worth.”

The seed funding can be put towards increasing Luca’s engineering and knowledge science groups, he added.