Indigo Fair raises $12M to connect wholesalers with smaller retail outlets with a smarter service

Max Rhodes was walking around that weird little parklet in Hayes Valley in San Francisco after taking a break from a five-year stint at Square to figure out what he wanted to do next — and he kept seeing Square registers everywhere.

It was spotting them over and over again in smaller retail shops dotted throughout the city that made him think about the connections between the average product maker — that kind of small group making a bespoke funny candle — and those retailers. That’s what prompted him to start Indigo Fair, a platform that connects those two entities in order to streamline the process of getting those products into smaller retail stores that are looking for just those kinds of weird candles throughout major urban areas. The company said it has raised $12 million in new financing from Forerunner Ventures and Khosla Ventures, with Forerunner’s Kirsten Green joining the board of directors.

“I started to think about the fact that you have all these stores adopting cloud-based PoS systems and inventory systems and, generally all their data is becoming available through their media profiles and inventory systems,” Rhodes said. “If there were some way that you could get all that data and know what is selling where, you could actually predict how well a given product is gonna sell in a store. That was the starting point.”

As so-called “big box” shopping increasingly shifts online, the theory is that there will be more and more niche retail outlets looking for interesting products that try to capitalize on the core original shopping experience, which is more social and curated.

Indigo Fair receives hundreds of applications from makers every week — though, as more and more tools become available to create more complex products, that’s probably only going to increase — and the team accepts about 5 percent of those applications. Part of the reason is to keep a good handle on the company’s growth and still make sure it has that curated feel for retailers, who know they are getting their hands on a good product. They send in some information and then start getting orders, print out a shipping label and then start sending the product out to those retailers.

On the retailer end, the shops sign up and immediately have access to those products available through those wholesale makers. Indigo Fair aims to cut out the process of spending tens of thousands of dollars on trips to trade shows with makers to find the right products and then get them in their stores with the hope that they’ll sell. If you go into one of the stores on Valencia Street in San Francisco, you’ll probably find quite a bit of weird stuff that those stores hope to sell. Indigo Fair looks to try to streamline that process and make it easier to get those products in-house without all the travel and hassle.

Of course, even using public data as a starting point, gathering the data to make the model defensible is the harder part. After all, there are a lot of online platforms looking to empower wholesale makers to get their goods into the hands of consumers, though the company today said it’s actually partnering with Shopify and Square. But as the company gets more and more information about what’s selling, what isn’t and who’s returning what, it gets a better sense of consumer demand for a product — and where to put it — to keep the cost for both of those entities down.

“In so many ways it’s the age-old challenge of marketplaces,” Green said. “I think it requires you to be very scrappy, it requires you to find good customers that believe in the proposition and the potential for the product that they’re willing to start working with you in that regard. There is a lot of info you can readily access online today. Just having the patience and the commitment to try to put a bunch of that together on your own platform so you can start building the data set is just some of the heavy lifting involved.”

Rhodes’ hope, amid increasing competition and different models and approaches like Simon — which wants to help startups get pop-up shops in malls — is that with his experience dealing with the problems first-hand, and with enough data, Indigo Fair will become a go-to service for both retailers and product makers. Rhodes, a former consultant at Bain who helped build Square Cash, with his co-founders Marcelo Cortes and Daniele Perito, look to lean on everyone’s experience getting an expensive umbrella in stores and selling it across North America to enable every product maker to get the same thing done.