- The founders of online lender Kabbage launched a startup Monday that is meant to connect small businesses with influencers who will function as a gig economy sales force — earning a commission from the startup, Drum, in exchange for promoting a small business. Drum would keep a piece of each commission paid on its platform.
- Drum has received $11 million in seed money from investors such as American Express Ventures and Propel Venture Partners, a venture capital firm founded by Spanish bank BBVA.
- Ultimately, Drum may provide a pipeline of small businesses to which Kabbage could lend, although Kathryn Petralia, a co-founder of Kabbage and Drum, told American Banker that's "not something we're doing out of the gate."
Drum looks to fill a need for small businesses that may not be able to afford to hire a full-time sales staff, but may be seeking a more surefire model than a digital marketing campaign in which they pay for clicks but have no guarantee of sales conversions.
"Unlike almost any other advertising channel where they have to pay up front and they have no idea how it will perform and they're out of money whether it performs or not, these businesses only pay when customers activate a promotion," Petralia told American Banker.
The businesses using Drum's platform will set the amount they want to spend on offers, promotions and commissions, she said.
Drum's business model can fill a need on the employee side of the gig economy, too, by "harnessing independent contractors who don't want to have to drive their car around to earn incremental income," Rob Frohwein, CEO of both Kabbage and Drum, told Forbes.
Influencers (or "drummers," as they'll be called) can earn money by creating promotions that buyers can redeem, by getting customers to activate those promotions, and by encouraging other drummers to engage on the platform.
Drum has launched two of its three marketing prongs: an optimized browser experience for businesses seeking promotion and iOS and Android apps for influencers who are looking for project work. An app for customers is set to launch in October, according to Forbes. Drum will pilot its model in Atlanta and New York.
Small businesses, drummers and customers will be subject to a rating system, similar to that of other gig economy platforms such as Airbnb and Uber. The idea is that higher-rated drummers will get more opportunities for work, keeping the quality of promotions high.
"This is a huge opportunity to acquire customers and a huge number of direct brands that could use a physical last mile," Frohwein told TechCrunch. "Today, they use things like email lists and Facebook, but they could use boots on the ground and talking about their businesses and promoting them."
The earnings and payments structure were the draw for Ryan Gilbert, general partner at Propel Venture Partners, one of Drum's investors. The compensation model could create a complex processing system, he said. "If you are going to be central to driving up this business, you have to build a very robust and trusted payment system," he told American Banker. "Being a trusted transaction processor will be key to what they are doing."