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08-12-2010, 05:54 PM
Fits.me’s Robot Uprising (http://news.err.ee/sci-tech/3fc9c9bf-6039-4ce4-8a05-e00d562737f5)

With 18 humans and four robots, Heikki Haldre’s Fits.me is leading a virtual retail revolution. It’s a revolution that’s gaining momentum. And in their hometown market, they’ve turned heads with their ability to obtain venture capital financing.

“If popular culture has taught us anything,” writes Daniel H. Wilson in his book, How to Survive a Robot Uprising, “it is that someday mankind must face and destroy the growing robot menace.” Wilson describes robots’ “ingenuity, adaptability, and social instincts.” In Estonia, there is a robotics company who shares Wilson’s enthusiasm, a company whose chief executive will place a copy of Wilson’s robot manual in your very hand. In a fourth-floor business incubator on Tallinn’s Veerenni Street, CEO Heikki Haldre is among the robots, designing, building, and marketing them, and then dispatching them abroad in his quest to rule the e-commerce planet.

Robotics in Retail

Originally conceived as a solution for tailors, Fits.me’s robots have been re-tasked for the world of e-commerce in order to improve the virtual shopping experience. In addition to Fits.me’s Haldre, the team is led by co-founder and CTO Paul Pällin. Scientific development is led by Professor Maarja Kruusma, head of the Center of Biorobotics at Tallinn University of Technology, and Alvo Aabloo, head of the Intelligent Materials and Systems Laboratory of the Institute of Technology at the University of Tartu. Led by these four humans, Fits.me’s robots are pushing their way into the eCommerce category of retail clothing sales, an industry which generates 31 billion dollars in sales annually.

Currently, with only seven percent of clothing sold online—contrasted with 50 percent for computers and 61 percent for books—the business is wide open for development. The barrier: online clothing purchase lacks appeal for many consumers since clothing can’t be tried on. And online sales are a headache for retailers as well. Roughly 30 percent of all purchases are returned, mostly due to poor fit.

Haldre’s robots make e-commerce more human friendly by creating a virtual fitting room where consumers may "try on" clothing before purchase. An internet shopper inputs his measurements directly into the clothing retailer’s site, and Fits.me’s technology generates images of how different sizes will hang on the specific shopper’s body.

How effective is Fits.me’s robot army? The company claims its virtual fitting room, when employed in trials with partner retailers, increased sales more than three times and reduced returns by 28 percent. Consider that without the assistance of Fits.me’s robots, one in every three clothing items is returned to the virtual retailer, and the potential of the product is clear.

Currently, retailers ship their clothing to Estonia for a robot fitting—requiring a surprisingly few five garments-per-brand with generic fit samples—and the robots’ 100,000 possible body shapes allow the creation of a copy of a consumer’s unique body. Although the firm’s four robots are currently in Estonia, Fits.me’s robots will soon be dispatched to invade the abroad, where they’ll take their place in virtual fitting rooms in major markets like the UK and the United States.

Not just S, M, and L. Fits.me's robots
take 100,000 shapes.

According to Haldre, the virtual fitting room is the future: “By 2018, one out of every four brick-and-mortar clothing stores will close.” And experts predict that by 2018 the portion of clothing sales handled online will surpass 25 percent.

Funding the Invasion

What makes Fits.me’s success story more interesting is that while the company’s 18 employees are of six different nationalities, the company’s founders and original investors are Estonian. Locally, the story of Estonia’s most famous brand, Skype, is often told with Estonians conquering the world with key assistance from a Swede and a Dane. Outside Estonia, the story is generally told with the Scandinavians in the starring roles. But wherever Fits.me’s story is told, there is no dispute of its Estonian origins. What makes it rare may be its international ambitions.

“People come around once in a while and speak of entrepreneurship and talk about a great idea that will conquer the whole of Estonia and part of Latvia,” says Haldre. “And then if we’re really successful we’ll go to Lithuania. And that’s it. Not many companies think of doing bigger things. Honestly, it takes just exactly the same effort to think big things as it does to think small things. I’m surprised when their dreams end at the border of Latvia. Why stick here? It’s dangerous to stick here. The Estonian market is just too small to support any idea, no matter how great it is.”

But it isn’t just a lack of dreams that can stifle local success. Haldre believes cultural differences serve to limit some of his contemporaries. “There’s a Danish guy who lives in Estonia who told me he rarely sees his neighbors. He said, ‘When I step out of my apartment, occasionally I hear feet shuffling and doors closing, but I’ve never seen any of my neighbors. But then I realized it’s not by coincidence. When I step out and my neighbor steps out, they quickly step back in so they won’t have to see me.’”

Other foreigners may or may not share Haldre’s Danish acquaintance’s extreme experience, but the example is certainly illustrative of a reluctance in the culture to engage other people. Haldre believes this is a crippling aspect of the Estonian culture when it comes to doing business. “There are few great companies which have built their business around never seeing anyone else,” he says. “Nokia and Skype are two.”

Haldre is not shy and his dreams run big. Fits.me’s first round of financing, in 2009, raised 1.3 million euros, half of the investment made by the Estonian government’s Estonian Development Fund, the rest by “a bunch of angels,” all of them Estonian businessmen. Fits.me will soon close its second round of fundraising, a round of bridge financing from existing investors intended to get a better valuation from venture capitalists through better market traction (“more clients, revenues, and a better proof of the business model”) and an improved cash position. Round three, set for next year, will raise six million dollars, part of it for the express purpose of entering the US market, where Fits.me's most pressing issue is acquiring the skill set required for efficient business-to-business sales. “This requires contacts, culture, and discipline in building up the sales organization,” says Haldre. Fits.me has already added an experienced apparel executive to its American team.

Estonian investors will not take part in the third round, says Haldre, since there is simply a lot less money here. To emphasize the significance of the million euros raised in his first round of financing in Estonia, Haldre likens it to "as if every single person in Estonia gave us one euro.” And for entering the US market, Fits.me requires a lot more than money from its investors. The venture capitalists who put up the six million will also have to bring expertise concerning IT and/or retail in the US market.

Certainly one of factor in Fits.me’s ability to raise financing is Haldre himself. The energetic 36-year-old has already owned five companies, some of them successful and some of them less so. Like his American tech entrepreneur counterparts, Haldre sees the demise of a business as a valuable learning experience rather than a failure. Haldre also seems born for the stage and has a deft hand when it comes to meeting journalists (and surely investors, too).

There is a popular local joke about the difference between an Estonian introvert and extrovert: the introvert stares at his shoes; the extrovert stares at your shoes. But for Haldre, who has spent time at six universities (earning two degrees—“in Business-something”) on at least two different continents, the joke could not be further from reality. Haldre has performed the feat of transcending nationality: though he may carry an Estonian passport, he is Entrepreneurial.

While Haldre will admit he is, by any standards, quite ready for prime time, he is quick to point out that success with venture capital financing can be elusive to even the best. One may be the best showman on earth with an excellent idea and still fail to get funding. “Benchmark Capital looks at 20,000 projects every year,” says Haldre, naming one of the world’s most well known venture capital firms. “But they fund only five.”

Winner Take Planet

“Most of today’s robots are either bolted to factory floors or exiled to outer space—but that is changing,” writes Daniel Wilson of the robot uprising. Haldre’s robots are key in that change, as is Haldre himself, whose every email ends with the text, "The best way to predict the future is to invent it."

Next year, Haldre and his partners will board planes for the circuit of dog-and-pony shows required to obtain venture capital financing. And then, with six million dollars in hand, their robots will invade the planet.

“Silicon versus gray matter,” writes Wilson, “winner take planet.”