Lootsie, one of several startups that allow developers to add reward programs to their games and other apps, is announcing that it has raised $3.5 million in seed funding.
Co-founder and President Brandon Werber told me that Lootsie has been raising the funding gradually, in batches of a few hundred thousand dollars, and the announcement really marks the point where the startup is closing out the seed round and starting to think about a Series A.
Its competition includes companies like Kiip — in fact, the last time I wrote about Lootsie was when it hired its first chief operating officer, Steve Cho, over from Kiip. At the time, Cho emphasized “the power of choice,” i.e. the fact that Lootsie gives users Lootsie points that can be redeemed for a variety of rewards.
Choice was also a theme in our conversation about the funding, but Cho also pointed to Lootsie’s increasing focus on user loyalty. That may sound kind of obvious, but the industry can be a little tricky, because it also treats these rewards as a form of advertising — hopefully the kind that users are actually happy to see, but advertising nonetheless, which developers include because it brings them revenue.
Lootsie doesn’t reject that approach, but Cho said it also works to divide an app’s users into different segments — the casual users get Lootsie points and rewards as described above, but the most valuable ones get big-ticket items to keep them loyal and entice them to continue using the app. (One of the example rewards that Werber used in our conversation was a fancy bicycle).
Werber added that given all the attention to reengaging users, Lootsie’s approach makes sense because it should prevent users that are important to your business from leaving in the first place, rather than trying to “bring them back after people have already left.”
The average Lootsie rewards program sees around 7 percent of users convert and actually redeem a reward, he said.
As for the funding, it comes from investors including Tim Kendall (head of product management at Pinterest and former director of monetization for Facebook), Michael Liou (founding partner at Anvil Capital), angel investor (as well as manager for the musician Nas) Anthony Saleh and Brad Schwartz (founding partner at SLP Ventures).