A group of start-up companies, most that are trying to bridge the digital and physical shopping experience, begin a three-month boot camp this week at Target Corp. headquarters in downtown Minneapolis.
One of the Target + Techstars retail accelerator start-ups is an online tailoring service that receives instructions via text message. Another company has an app that helps people match their skin tone to the right foundation color. Others use machine learning to do the same for clothes based on your body type and deliver recommendations for footwear based on the shape of your foot.
One wants to come to your home, pick up your unwanted merchandise and take it back to the store for you.
And, unlike the inaugural class last year, the start-ups include two local companies — St. Paul-based Local Crate, which offers a local spin on meal delivery kits popularized by Blue Apron, and Minneapolis-based Upsie, which offers customers warranties for tech products.
Frank Jackman, CEO of Local Crate, hopes to leverage the Techstars program to figure out how to scale his concept to other markets outside the Twin Cities while still keeping true to the meal delivery kit’s focus on using local ingredients and partnering with local chefs and nonprofits.
His company, which launched in November 2015 and has six full-time employees and 10 part-time workers, recently moved to St. Paul from the North Loop to move into a bigger facility where it now has a test kitchen and can film videos.
“We are already a profitable business today,” said Jackman. “Our goal is to become the first local, national food company in America.”
While Target has pared back some of its other innovation efforts in recent months, it has remained committed to its partnership with Techstars, a Colorado-based accelerator program, to run a retail-focused incubator on its campus for early-stage companies. In the process, Target hopes to learn how to move faster like a start-up and to perhaps pick up some good ideas and partners along the way as it retools its own business for the digital age.
That’s what ended up happening in the first year and Target expects that to be the case this year, too, said Katie Boylan, a Target spokeswoman.
Target cast an especially wide net last year with the Techstars group, but this year it decided to narrow the focus of the boot camp companies to align more closely with the company’s focus, she said.
“We did filter the ideas based on the priorities and strategies we have placed as a business,” she said. “We felt this struck the right balance for us in being wide enough but also making sure there was a clear connection or tie back.”
“The 10 that have been selected, it’s pretty easy to see that a lot of these ideas could have some terrific staying power,” she said.
They have a big act to follow. The 10 start-ups in the inaugural class in 2016 have raised a total of $32 million, one of the largest by any Techstars class within the first year, according to Ryan Broshar, managing director of the Target + Techstars program.
That’s a reflection, he added, of how much interest there is in investing in start-ups amid a rapidly changing retail landscape.
“There’s a lot of disruption happening and there’s lots of innovation happening, too,” he said.
Not surprisingly, other mature retailers are also looking to start-ups and entrepreneurs to push them to stay current and relevant as they chase Amazon. Earlier this year, Walmart announced the formation of a tech incubator called Store No. 8 that is focused on virtual reality and other up-and-coming technologies.
In Target’s first Techstars class, two of the companies relocated to Minneapolis: Branch Messenger, a mobile staffing and scheduling tool that is now running a pilot program in 130 Target stores; and Inspectorio, a platform for improving factory inspections for quality assurance that is also now working closely with Target. In fact, Target invested in Inspectorio, leading a $3.7-million round of seed funding for the company.
Another of the companies, ItsByU, has a wreath-making kit that will be in 300 Target stores by September.
Drawing on the Techstars experience, Target is now beginning to launch its own mini-accelerators. In May, it hosted 10 health-focused start-ups for a week in a program called Target Takeoff. Target is planning to do more down the road.
The Target + Techstars program will culminate with a Demo Day, which will held this year on Oct. 11 at First Avenue. Last year, it was held at Orchestra Hall.