This morning, Alloy Automation, a Y Combinator graduate focusing on linking various e-commerce platforms, revealed that it has closed a $20 million Series A led by a16z. The startup described the funding round as quick, in contrast to its 2021 capital round, which was more difficult to secure. Alloy raised a $4 million seed round at a $16 million pre-money and $20 million post-money valuation, which TechCrunch published just over a year ago. Simply said, Alloy has raised the same amount of money as it was worth a year ago.
Sara Du, Alloy’s CEO, and Gregg Mojica, the company’s CTO, spoke with TechCrunch about the round and how their company’s pitch has improved over the previous year. When Alloy went out to finance, the co-founders noted that it had been more conservative in terms of cash burn than other companies of its size. That reality didn’t hurt the startup’s financing prospects as the venture market rediscovers price — and thus spend — discipline. And Alloy had a strong fourth quarter, which didn’t hurt, according to Du and Mojica.
Why did the company need to raise more funds? According to the company’s founders, there are a few reasons behind this. Cash is, of course, always a good thing to have more of in a developing company. But the signal that having greater money and a16z in its cap table provided Alloy was nearly as crucial. Both helped develop the company, according to the co-founders, allowing it to gain collaborations. With the current cost of talent, having greater total finance allows Alloy to hire the individuals it needs without having to worry about short-term financial flow.
Alloy focuses on the e-commerce market with its automation technology — a technique of tying apps together to allow organizations to develop automated workflows — due to early client demand. The company now markets itself as a control panel — or operating system for e-commerce coordination — that works across applications. The automation industry is a large one. Remember how Appian, another workflow and automation business, recently defied the pattern among public software companies by posting growth that investors appreciated; typically, accelerating growth over time would achieve that. Appian’s recent success means that TAM will expand, which is something that both entrepreneurs and investors want.
Previously, e-commerce firms were more inclined to construct their own tech stacks, according to Du and Mojica. Third-party software, on the other hand, is now the norm. That trend is likely to make place for what Alloy is developing; the more software services an e-commerce company employs, the more probable it is that they will wish to combine and complement one another. Alloy now employs little over 20 employees, but it has ambitious hiring goals, as one might expect. According to the corporation, it expects to increase its workforce this year.
Alloy is a rather neutral actor in the e-commerce software market, preferring to sit in the midst of the web rather than producing all of the strands. Given this, it’s no surprise that Mojica was in Texas for a BigCommerce event when TechCrunch got up with the company’s founding team. BigCommerce, a headless e-commerce software firm that went public recently, has a similar approach to Alloy in that it aspires to be mostly customer-choice neutral. This openness approach varies slightly with the revenue models of certain other companies that rely on first-party solutions for things like payments. In the e-commerce world, Shopify is an apparent example of this.
From a partner and customer standpoint, it will be interesting to see how Alloy handles its neutrality as it strives to build its centrality. Certainly, the company currently has enough capital to last the next four to six quarters. Let’s see how far it can go before heading back to the venture capital pits.
