Ibotta’s CEO Bryan Leach Opens Up About His Startup, Personal Pivot
Bryan Leach was in the middle of a glittering legal career. By the time he was in his early 30s, he’d graduated from Yale Law School, clerked for Supreme Court Justice David Souter, and become a partner at Bartlit Beck, a boutique law firm renowned for its commercial litigation practice.
But inside the lawyer was an entrepreneur burning to get out.
Leach had an idea. He had the connections, including the backing of one of Silicon Valley’s most influential leaders. And he had the hunger.
“I had the idea I probably would regret not doing this more than I feared collapse and utter failure,” he said. “I thought if I can’t take this risk, than who can take this risk?”
So about three years ago, Leach, now 36, leapt from law to the uncertain world of startups. His big idea: connecting retailers and advertisers to consumers with an app that gives users cash rebates and gift cards after they make purchases at retail, grocery store, restaurant, and movie theater chains. “The ad unit is changing, the way you pay for it is changing, and we’re right in the middle of that. I think it’s a $50 billion idea, I don’t think it’s a $1 billion idea,” Leach said.
Industry experts agree about the size of the opportunity, with some venture capitalists predicting mobile enabled commerce will yield the next $100 billion startup.
Right now, Leach’s Denver-based startup, Ibotta, is still a long way from $50 billion, or even $1 billion, in annual revenues. But the 55-employee company’s apps now have 3.5 million users, with 5 million expected by year-end. Ibotta works with more than 80 partners, including outlets such as Walmart, Costco, Target, Safeway, and Home Depot. The company has raised more than $33 million from investors, and year-to-year revenues have tripled.
Many startups are racing to build apps that capitalize on the disruptions the rise of mobile commerce is creating in the retail and advertising industries. While some are mobile payment systems or mobile retail apps, Ibotta is focusing on helping brands engage customers at home, work, or anywhere else through their smartphones or tablets and persuade them to make purchases, either in a brick-and-mortar store or online.
There are a few big names that are trying to do that by using digital coupons, like RetailMeNot. SwagBucks offers users gift cards for playing games and watching videos. But Ibotta is focused on persuading consumer to buy things by offering them rebates after they complete an activity that teaches them about a product. Brands like that because rebates only reward customers after they make purchases, and they can use the app to find customers and build awareness.
Users earn the rebates, typically between 25 cents and $1, by using the Ibotta app to play games or complete tasks like watching a video or taking a survey about a product. That unlocks rebates shoppers can redeem by using their phone or tablet to take a picture of their receipts after they make a purchase. The rebate is sent to the consumer’s bank account through PayPal or Venmo.
When I interviewed Leach earlier this month, he said Ibotta users have earned more than $10 million in rebates.
Creating something consumers use to seek out and be engaged with advertising “is a revolutionary idea about the give-and-take of commercial relationships,” Leach said. But while the idea sounded good, it went against decades of evidence that consumers try hard to avoid advertising.
“The question is will people spend the time and effort [to use the app,] and the answer is yes, to the tune of almost 100 million unique engagements in a year-and-a-half,” he said.
While the deals are great for Ibotta’s users, brands and retail chains are finding the app is reaching a demographic sweet spot. According to Leach, more than two-thirds of Ibotta’s users are women, and 90 percent are between the ages of 15 and 45. They’re engaged users too, with the typical regular user opening the app 25 out of every 30 days, Leach said.
Stats from outsiders back that claim up. Last year, Consumer Intelligence Research Partners found that Ibotta was the 16th most frequently used app.
Brand engagement has been a hot topic in advertising for years, and while Ibotta offers that to its business clients, it offers more. Brands know when an interaction through Ibotta results in a purchase because it is verified when the customer snaps a picture of the receipt. That gives them more information about how their campaigns are doing and a much better chance to close sales and create repeat customers.
Ibotta’s main way of making money is by charging a fee per unit sold, although it does resell data and analytics it compiles.
Recruiting an ever-growing number of users has helped Ibotta sign up more brands and vice versa. Leach said the startup is benefiting from a virtuous circle that’s fuelled Ibotta’s growth. Leach declined to get into specifics, but said the company’s revenue growth is outpacing its projections.
The national media has taken notice, and Ibotta has been featured on Good Morning America and Today. More importantly, investors have pumped $33 million into the company, including a $20 million Series B round this springs that was led by Netscape co-founder Jim Clark.
What they’re betting on is Ibotta’s ability to become an important conduit connecting brands to digital savvy consumers, especially millennials. That generation has proven notoriously hard for brands and advertisers to reach effectively through TV or print ads, so brands are turning to smartphones and tablets.
While Ibotta can give rebates to users who make purchases online (the app sends a link that directs users to a retailer’s website), it focuses on what Leach terms mobile-influenced in-store transactions. Those transactions are not about what people buy through smartphones or tablets, but what they buy at the store after doing research or seeing an ad on their device.
Using an app to get customers into stores might seem like a subtle distinction from apps customers use to buy things directly, but it’s a huge difference in the number of transactions and dollar amounts. In April, market research firm eMarketer estimated that mobile commerce sales will hit $57.8 billion this year and that total e-commerce sales will hit $304.1 billion. It’s a fast-growing market segment, but it is still dwarfed by the $4.4 trillion in sales expected from brick-and-mortar retailers.
But those “real world” transactions are increasingly being influenced by what shoppers do online, whether it’s reading reviews on their computers at work or using their smartphones to compare prices while in a supermarket aisle. A study published this spring by Deloitte found that digital research influenced 36 percent, or $1.1 trillion, of in-store sales, and that 19 percent of sales, which totaled $593 billion, were influenced by smart phones.
Both trends look sure to continue, and that presents a huge opportunity.
“The idea of being the most widely used pre-shopping tool for influencing in-store transactions is absolutely a multi-, multi-, multi-billion dollar opportunity, if you talk about the addressable market,” Leach said.
A market that big doesn’t go unnoticed, and Ibotta likely will have competitors. Leach, though, thinks the startup’s fast start dissuade rivals. For the idea to work, he said, a startup needs to both find millions of users and forge partnerships with major retailers, grocery stores, restaurants, and brands. Ibotta’s achieved that, and along with its VC reserves he believes it’s enough to protect the company from competitors.
That’s all why investors are betting big on Ibotta now, but when Ibotta launched in late 2011 following a $3 million angel round, what they really were betting on was Leach.
“I had $3 million, two paragraphs on a piece of paper, no prototype, no team, and no prior experience,” he said.
That’s all true, but it also was an understatement, as Leach had established an impressive resume outside the tech world.
Leach was born in Nairobi, Kenya, to a British father. When Leach was a child, the family moved to the U.S., and he would end up at Harvard. After graduating, he earned a prestigious Marshall Scholarship that enabled him to study at Oxford University.
But Leach didn’t spend his school and college years with his nose in a textbook.
“I was a semi-professional actor, a public speaker in debate, and I was a tour guide. That’s what I like—talking to people and convincing them of things. But I still didn’t realize I wanted to go into business,” he said.
When Leach returned to the U.S., he had to pick a career.
“I probably should have thought about what I wanted to do with my life a little more carefully, but I decided I wanted to go be a lawyer,” Leach said.
That led to Yale and a year as a clerk for Justice Souter. A coveted job as a Supreme Court clerk typically is the start of a sparkling legal career, and that was the trajectory Leach was on. At Bartlit Beck he made partner and helped build its international practice.
By his early 30s, Leach had a great career and was starting a family in a city he loved, but he discovered he wanted something different.
Law “was satisfying, but it was uni-dimensional. It was one set of challenges, over and over again,” he said. “It wasn’t inspiring to me, even though I loved my partners, and I really loved being able to try cases in Singapore and London, China and Japan, and yet live in Denver.”
During that time, Leach became increasingly interested in the possibilities of e-commerce and the ways mobile devices and data analysis about transactions could remake the retail industry. As he went through ideas for companies, he debated whether it was worth giving up his legal career for the risk that comes with being a tech entrepreneur.
But it was not a rash decision. Leach had some experience in tech companies and as a small-time entrepreneur. When he was growing up, he worked at his father’s tech company. That company was named Harbinger, an early e-Commerce firm that went public in the late 1990s before selling for $1.2 billion in 2000. Leach’s father was a co-founder and eventual CEO.
Leach got an up-close view of what it took to build a successful tech company, and the experience left a lasting imprint on him, even if he didn’t always know it.
“I worked there and got the bug. In the back of my mind, I always admired entrepreneurs, and I watched the company be built and pivot and evolve,” he said.
The bug never really left him. Leach started a few businesses in college, including one leading tours around Harvard’s campus. It was a pretty humble operation, but it worked.
“I would stand with a tripod and a plastic sign and sell people on the idea of coming on my tours,” Leach said. “I would literally pitch 500 people and get 50 of them to come on my tour, and they’d pay me at the end. I would pride myself on getting 90 percent retention.”
Leach’s career helped him build an extraordinary network of connections. His former legal partners and friends through the Marshall Scholars program would become angel investors. Family connections also proved important, as his father’s colleagues helped him raise money and invested.
But it was a connection through his wife that would be the most pivotal. Through her family, Leach was introduced to Larry Sonsini, a Silicon Valley lawyer who has represented a long list of top tech companies including Google and Apple. Sonsini’s behind-the-scene influence in the industry is so great he was once called “the most powerful person in Silicon Valley” in a New York Times profile.
Sonsini became a friend and mentor for Leach and would give him “the big push” to make the jump from law to a startup.
“I sat in his office and said, ‘Larry, I love my law partners, I love my practice… but I have this idea, and I think I’m going to go crazy if I don’t do it,’” Leach said.
According to Leach, Sonsini originally urged him to be cautious, but immediately changed his mind after Leach outlined his idea. Sonsini offered his help and through his connections Leach quickly raised the first million or so of what became Ibotta’s $3 million seed round.
Leach said that day marked the end of one promising career and the start of another.
“That was the beginning of Ibotta,” Leach said.