❓Answers to some Q's
What's been accomplished thus far?
In no specific order...
Technical components & elements: The technical implementation of shopper browser extension & API seller integrations and ad insertion (as per the video demos). Work in progress items include: decentralized access marketplace operational middleware, on-chain smart contracts (e.g.: orders.sol on Mumbai (Polygon Testnet)), mobile UI, decentralized-hashed data layer (for shopper, seller & product profile and purchase transactions) with decentralized access control backend.
Vetted seller experience: With >100 seller interviews, sign up rate post demo & pitch is >90%, totaling >1$B in seller GMV (past 12months of sales volume) signed up and waitlisted.
Vetted Shopper Interviews (the "demand"): >100 shopper interviews on trains, at conferences, waiting in line while shopping at Costco, on a plane, online. With friends, family and just about any stranger, etc... Only 1 person said they weren't willing to try (bad mood day?!?); Everyone said it was easy & a no-brainer.
Vetted Investor interest: We met with >40 investors and reached out to get feedback. Nearly all were interested. See questions on funding status for more details.
What else? All the other stuff no one should get credit for: building websites, managing seller, shopper and investor outreach, setting up repos, docs (like this one & others), DevOps; all the foundaitonal startup "stuff"!
Are you only targeting Amazon?
Our beachhead's focus is Amazon, but we're going to enable sellers and shoppers on all marketplaces (eBay, Walmart, etc...) to use Dema there. We'll then expand into CAN, UK, AUS and the EU in that sequence (for 24/7 customer support reasons). Other geos will follow thereafter. Moving physical goods is not like virtual software.
What can you share about co-founders apart from what's public?
Who else is working besides the two co-founders?
In addition to the coding, operations, marketing and other activities the founders themselves take on, we've hired Solidity, front and back end devs on a contract basis (mainly in Indonesia, Pakistan, Ukraine & Vietnam) to complement our work. We're also eyeing talent in Africa: Next on our list!
What's the funding status?
We've interacted with more than 40 investors who provided excellent feedback and were keen on the idea. We didn't align on valuation given our pre-revenue status and we didn't want to give up too much. So we decided to keep on our self-funded journey until we generated sales to go back and pick up our seed round.
Why didn't you accept the prior proposed valuations and take the money? Wouldn't it have helped?
We know this is a steady & long race; not a sprint! Learning and growing from past mistakes of all marketplaces, we want to avoid building dollar-based customer acquisition, ie.: buying customers, and instead focus on building a loyal-user base. To do that, we want to give away at least 50% of the ownership equity to our users, the sellers and shoppers!
And in so doing, we also achieve the objective of reducing by orders of magnitude both network seeding & operating costs while creating a long lasting relationship with our users.
Where did the name Dema come from?
We looked at >100 4- and 5-letter combos for quick short syllable names. Venkat came up with De (from Decentralized) & ma (from Marketplace). Dema has a friendly & sweet ring to it so it was an obvious choice after brand research. Venkat gets another kudos!
If Dema can run on <3%, why don't other marketplace?
There are four (4) primary factors contributing to higher operating costs & take rates:
Structural overhead: This includes having a 10k+ employee base to deliver low value-added incremental features beyond what sellers and shoppers need
Age-old bait and switch economics
High payment processing costs
High user acquisition costs
Asian marketplaces already show evidence of efficiency in some of these categories with at least 2x lower take rates in the 7%+ range. Quantitatively, this lights the way to how 3% is within reach.
To deliver on this, we advocate four (4) alternate pillars:
A "purpose-built" marketplace that efficiently deploys features users actually need & drive.
Decentralized control so no more "bait & switch".
Lean operations via autonomous execution & transparent rules deployed permission-less-ly.
Lean acquisition costs via the use of equity to build a loyal user base via referrals.
Why do you think Dema can run on <3% fee at scale?
Take a zero-budget based approach. Remove the 4% operating profit, 5% OPEX by removing 90% of SG&A & R&D, another 2.5% (from payment processing & customer support costs) and it's clear how one operate even conventional marketplaces at 3% vs the 15% most currently run on. In the end, we don’t need 10K+ employees nor management fiefdoms.
We're thrifty to no end. For example, we've already experienced how the exact same deliverable can cost 10x less when shopping properly for development outsourcing firms & agencies. Keeping costs down implies only creating features that sellers and shoppers really want. Marketplaces get bloated fast with this stuff. We need to have a constantly tight product-market fit for all features. Low value stuff has no home here!
It might sound disgusting but in our team, everyone needs to acquire the "cockroach mindset"; surviving on little & continuing to look under every rock, and well, "everything". We could have given up when no one would give us a credit card merchant account (we tried >20 agencies). So we looked for another payment mechanism and wiggled our way into direct online instant cash payments (when such a thing was unthinkable for a business). We have many examples but marketplaces need to be able to not just survive, but thrive, on very little. This is a cultural trait we love & filter for.
Keep CAC low, even if it means going slower
Marketplaces should be the thinnest wire connecting two parties that want to exchange value. Keeping CAC low and the experience value high means acquiring customers via social equity; not by paying for them. Same goes for sellers.
Use commodity tools or build them
Venkat, co-founder at Dema said i. We see a path to this made possible by many decentralization tools.
For example, you can get a properly collateralized fully KYC'ed loan on DeFi in <1sec and it can cost less than $0.01. Compare that versus traditional finance which takes weeks & costs... well... do we need to tell you!
We definitely don't like the crypto casino (and related overly-hyped & crazed fads of numismatic NFTs). We love non-numismatic NFTs though. Very useful and necessary in the future we envision.
Decentralization tech (e.g.: DeFi) on the other hand is useful and effective at reducing costs while accelerating the speed at which we can get loans, swap currencies and trade goods. Dema is striving to be one such example of stellar incentives to enable marketplaces to operate at <3%.
Setting up automated processes that cover even the most infrequent of corner cases so sellers and shoppers can permission-less-ly, autonomously & instantly connect to a marketplace means we can run efficiently. Those tools are now in sight!
Investor Types
Today, we seek out a growing number of investors that favor establishing & nurturing decentralization goals. We want to ensure sellers and shoppers can have a seat at the table & align the practices that "break" marketplaces today.
What is Dema's monetization model?
As a marketplace, we receive selling fees from sellers. Initially, we charge 7.5% to sellers from which we provide shoppers 5% incremental incentive (above what a seller may additionally offer) to shop through Dema. As we scale, the incentive drops from 5% to 0% & seller fees go to 2.5%.
In addition, sellers have a path to reduce fees and get additional discounts, as well as use points to acquire more ad slots. They do this through tokens they can get from the open market. Ultimately, that drives value for all network participants, including builders, investors, sellers as well as shoppers holding marketplace ownership.
Do sellers have to change how they manage logistics?
Dema does not manage or provide forward/reverse logistics services (shipping/returns, etc...). Sellers already manage this through their existing ERP systems (connected to the 3PL services they outsource logistics to, one of which is Amazon). Dema simply plugs into that via an API. In fact, this is one of Dema's value propositions to the seller: i.e.: No change to their existing processes; and our sellers by far love this! We have integrations available for any ERP by virtue of the architecture we've built to wrap around any 3PL's ERP API via wrappers we've already created. It simply takes one day to complete the testing and verification.
How do Ads work on Dema?
You can check out the Demo B - Free Ads demo. Here's a more detailed explanation.
Dema offers FREE ad slots. This works because we can insert ads into any page the shopper is on, mobile or desktop without paying for those ads either! Simply client-side injection; think how an Ad Blocker removes content, or an extension overlays content on a page, e.g.: JungleScount or Helium10 on desktop or mobile).
So sellers can stake (lock) their Dema points (their unit of ownership, basically a share) & critically, shoppers/sellers can lend their points through an open market to increase the amount of advertising slots they can rent. Dema envisions a parabolic limiter function because we don't want any one seller to dominate advertising if they had too many resources and shut out competition. In any case, such rules would be voted on by shoppers and sellers.
The utility of Dema's points creates upward demand pressure for increasing the network value. Dema does not get involved with what that value should be; the market forces dictates this.
Another operating principle (we'll talk about in more detail later) is how Dema avoids dictating ad placement costs; after all, this is one of the symptoms at Amazon, Walmart, Google, Facebook, Etsy, etc...) we pointed out in our root cause analysis.
Why would Amazon allow Dema to use its API at all?
If you're referring to the demo video and how/why Amazon would allow such an integration for sellers orders to come through, let's explain what Amazon Seller Central is and what its API does.
Amazon Seller Central is a logistics hub as much as it is a store mgmt hub: Ignore that Dema exists for the moment. For years, Amazon has been encouraging sellers who sell on Walmart to have their logistics done through Amazon. Amazon needs scale in logistics to be able to offer profitability to their own FBA/Prime business, so they encourage sellers who want to setup shop on DTC (Direct to consumer) or other marketplaces to use Amazon for logistics. This is the integration in the extension you see in the demo. It enables sellers on the backend to automatically receive orders if they use Amazon for logistics. Amazon already knows that many sellers use Amazon Seller Central just for logistics. Moreover, most large sellers have their own logistics mgmt ERP (ie.g.: Netsuite, Odoo, Brightpearl, etc...) i.e.: the very largest of sellers do not depend on Amazon for fulfillment alone & don't manage fulfillment through Amazon Seller Central only, but through a combination of ERPs that Dema integrates with.
Can Amazon block the shopper's desktop extension or mobile app? In one word: No! Amazon servers are simply unaware nor capable of blocking client side extensions or mobile app experiences. If anyone could block client side tools, ad blockers wouldn't work and the website would simply block the blocker from working. The only time an ad blocker is detectable by a website is when the ad blocker sends such a signal to the site. Otherwise, most ad blockers are undetectable. The Dema extension/Mobile app runs on the client side (on a desktop, similar to an Ad Blocker, or say, Rakuten, the coupon cutting extension). Amazon is unaware it even exists and cannot distinguish if a Shopper has Dema's or any other extension installed. Note: To wit, Amazon tried to dissuade shoppers from installing the "Honey" extension (now acquired by Paypal) in 2020 associating it with security risks & malware. This campaign only resulted in growth for the Honey user base. We believe if Amazon could block the Honey extension from operating on its site, they would have done that already. However, technically speaking, this is not possible.
Can we send in more questions?
Of course you can!
Even though we've fielded Q's from >40 VCs/VC funds over the past few months in informational discussions, we want our thesis to be pressure-tested in the hardest possible manner!
Now what?
You've actually read this far! Kudos to you! 😎
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