The post was originally published in Russian on Startup of the Day. Alexander kindly agreed to republish what we think is of great value to our readers.
Tailor Brands, the American startup of the day, automates the generation of logos. Naturally, you can’t get an Apple- or Twitter-level masterpiece in 2 minutes and 15 clicks, but even Facebook could already use this service and nobody would know the difference. And the target clientele, small businesses, generate their logos in pretty much similar steps, except there’s a lazy freelancer instead of a snappy robot on the other side of the wire.
The user enters the name and the product category, reveals their preferences in style and format by rating examples, and picks an icon from the collection. Smart algorithms (Tailor Brands isn’t shy to talk about artificial intelligence and machine learning) connect the icon with the text, choose the color and the fonts, and the logo is ready. If necessary, the client can finetune the result – in case the robot got the palette wrong.
The direct monetization of such a toy is self-explanatory: it’s free to make something, but downloading it in high resolution costs 20 dollars. It’s impossible to set a higher price, a human freelancer will do the same work for 50. To keep the economy viable, client acquisition should cost no more than 10, and that couldn’t be scaled and we wouldn’t have a startup to talk about.
Tailor Brands did it smarter. The logo is indeed generated for free, the downloading is indeed behind a paywall, but what’s for sale is not a high-resolution file but a subscription. Other than ‘Download now,’ the startup reinforces the subscription with several options directly connected to the logo – such as calling card design or season variation of the logo, as well as some marketing tools that are quite distant from the basic service – Facebook posting planner etc.
The minimum price to download, log out, and forget is 10 dollars, which is smaller than the 20 that I suggested, but if every fifth forgets to unsubscribe and pays for the year, this already makes an average 30+. However, aside from fraud on lack of attention, the subscription also brings honest money. The owner of a small coffee shop never knew there was a Facebook posting planner and never look for one on purpose, but after a trial it might grow on them, why not, the tool is quite useful. As a result, logo automation is not a stand-alone business but rather a method to attract clients to regular subscription services that aren’t too competitive on their own, it wouldn’t make a lot of economic sense to advertise them via Google directly.
Today, about half a million new users go through Tailor Brands daily, the number of paying ones, unfortunately, isn’t revealed. USD 5M of investment were spent, another 15.5 brought in in a recent round.
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This is a rerun from 2018. In 4 years, the startup changed its positioning, now it’s ‘small business set-up made easy’ and not just some logos. At that, the product remains the same – first a survey, then logo generation, then a subscription offer for the possibility of downloading , and other services. Sounds quite simple, and the company is valued at USD 200M after last year’s round.
Translation: Kostiantyn Tupikov
Alexander made his career in Russian internet companies including Mail.Ru, Rambler, RBC. From 2016 to 2018 he was Chief Strategy and Analytics officer in Mail.Ru Group. In this position, he worked on M&A, investments, and new project launches. In 2018 he became Deputy CEO in Citymobil, a Russian Uber-like company that was invested by Mail.Ru Group and Sberbank (the biggest Russian bank), then he left the company to launch his own projects. Now Alexander is a co-founder of United Investors – the platform for co-investments in Russian early-stage startups. His blog #startupoftheday (#стартапдня) is one of the most popular blogs about startups in Russia.
