With its self-scanning solution, the Munich startup Scansation is supporting brick-and-mortar retail in the process of digitization. In November 2019, they pitched to potential investors on the VOX show “The Lions’ Den” — but without success. In our interview, the founders tell us more about how their startup began, their TV appearance and their plans for the future.
With the smartphone app Scansation, the Munich-based startup by the same name has developed a digital shopping companion for consumers. With functions such as shopping list creation, sale item tips, customized coupons and even feedback for retailers, the product covers the entire customer journey. The heart of it all is self-scanning, which users can employ to scan their items. All they have to do at the grocery store register is to have the code generated by the app scanned instead of putting all of the items on the conveyor belt. That not only accelerates the check-out process for customers and cashiers, but also gives participating markets important information about their customers’ buying behavior — which is of course anonymized. Scansation was founded by the two business mathematicians Andreas Klett and Leo von Klenze in 2016.
Munich Startup: What made you decide to found your startup?
Scansation: Andreas had been interested in startups since his time at college, but the projects were never pursued at full speed back then. In late 2013, he made a last attempt and looked to see if anyone in his group of friends was interested in a startup. Ten of us then went to the village Reit im Winkl in the mountains, where we rented a cabin and held a private startup weekend. We explored our options, who had what idea to offer and which of them we actually wanted to attempt.
The start of Scansation
Munich Startup: Ten friends in a cabin over the weekend sounds more like a party than work.
Scansation: That was Andreas’ concern, too, but it was really productive and super professional from start to finish. The weekend basically went as follows: The participants had agreed ahead of time that everyone should come with their ideas and prepare a mini pitch. That was how we collected more than 80 ideas which became a longlist of 15 ideas. We then evaluated them, meaning we looked at the competition, whether it was already on the market and how it could be monetized. In the end, we put together a short list with five ideas. Back in Munich, we evaluated that shortlist in more detail. Then three or four weeks later, the decision was made to start working on self scanning. Interestingly enough, it was actually one of the ideas that Andreas brought along on that weekend.
Munich Startup: What happened after that? You didn’t turn into a founding team of ten.
Scansation: As is often the case when you still have a job, one or two bail out and the group gets smaller and smaller. At that point, we all still had jobs and that obviously took priority — in our free time, we looked at how we could implement our idea in terms of IT, how to build an app, how to work on register integration and so on. Leo, by the way, wasn’t even on board yet — even though I had asked him if he wanted to come to the cabin, he was too involved in his corporate job at that point and it was too much for him to work on the side. But as soon as it became clear what we were doing and what the technical problems were, I was able to lure him in to face the challenge. He thought the whole thing was interesting and got on board. Then in early 2016, we had reached the point where we could live out our technical ambitions.
From spare time project to business
Munich Startup: That took quite a while.
Scansation: Like we said, Scansation had been a spare time project until then. We never wanted to neglect our jobs because of it — they were always top priority. It was only when the time had come for marketing and we needed normal business hours to talk with customers that a decision had to be made. Either we let the project die or we quit our jobs and turn it into a real business. We’ve been a GmbH since July 2016, and have both been working full time since October 2016.
Munich Startup: You found your first partner in 2017, the Isargärten Edeka grocery store in Munich. What did you learn from the first practical use of the product?
Scansation: At that store, we unfortunately chose to put the customers who had self-scanned their items in the same line with normal shoppers. That was not the ideal solution, because customers don’t see the advantages they have from it. They’re still there objectively, but are no longer perceived subjectively because you still have to stand in line behind the normal shoppers. We give new partners the recommendation to open an extra register exclusively for Scansation customers or to use a terminal.
Scansation meets the lions
Munich Startup: With your product and first partners, you then went on the “The Lions’ Den” (the German version of Shark Tank) in November 2019, but that didn’t lead to any investments. How did you experience the show?
Scansation: We were on the show for just under an hour, a good 20 minutes of which were aired, including the introductory banter and follow-up conversation. We were on with the lions for maybe fifteen minutes, so quite a lot was missing obviously. I think they conveyed the fundamental mood well. The lions ask very specific questions, but they don’t always wait to hear the answers. They especially do that with each other, where one asks a question and you want to answer, but then a new question is already asked. And then it isn’t addressed later on. I think we basically would have needed to moderate things a bit more.
Munich Startup: In contrast to normal pitches, the “Lions’ Den” also has to be entertaining.
Scansation: And that should be considered. We managed to get the lions to make some comments, which was good, because that was what ensured we were on TV at all. They overproduce to a certain extent, which means not everyone who is filmed actually ends up on TV. We managed that and were at least given the platform and achieved a level of recognition — but that was unfortunately not enough for a deal. And the comments they made are things that would never come up in a normal investor meeting.
The weeks that followed
Munich Startup: What happened in the weeks after the show aired, without the deal you had hoped for?
Scansation: We got so many emails in which people simply said the lions were wrong and that we should please continue. A lot of market recommendations were sent through our website, and we also had a lot of positive input on Facebook. People also got in touch with us who wanted to work on our technical IT aspects and also sales experts who wanted to work with us. I think we wrote back to everyone. We really tried hard and took our time. We’re even still in contact with some of the potential partners from different areas.
Munich Startup: Were you disappointed by the lions’ judgement?
Scansation: We knew from the start that finding an investor would be difficult with our figures. But nothing ventured, nothing gained. We might have had better luck with one of the other lions. And even though we left the show without a deal, our appearance wasn’t in vain. An audience of roughly three million saw us and we also had news coverage with different interviews we gave, post reporting and all the blogs that focus on it. An investor would have been the icing on the cake. But we’re not totally naive. We knew having two stores in three years would make it tough to lure a lion out from behind the couch.
Munich Startup: What impact did that have on your strategic plan for the company? You not only wanted to gain money, but also the lions’ expertise to strengthen your sales.
Scansation: That’s basically where we are right now with the partnerships I mentioned. We have some appointments with retailers here and there where our potential sales partners will come along. We’re going to see how that works out and how to monetize that for both parties.
Self-scanning in the corona crisis
Munich Startup: You just recently named the tools you offer retailers your ‘Retail Suite’ — is your rebranding a reaction to the Lions’ Den, or was that already on the agenda?
Scansation: We always knew we needed a collective term for the various tools we now offer. And self-scanning alone only generates a small amount of value for retailers. What’s valuable for them in the end is the data they can work with. And it’s always a matter of finding a really good compromise on how to use that data as anonymously as possible so user data is truly protected. And it was in this area that we asked ourselves how we can represent it all to make it clear that retailers really can improve their marketing with it — that is ultimately what we have to offer. And we knew before the Den that it needed to be done, but only actually did so after the show.
Munich Startup: How have you experienced the corona crisis?
Scansation: We obviously follow the news in private life and are trying to adhere to the recommendations as much as possible. The crisis actually presents opportunities for Scansation — after all, our solution is contactless: Consumers scan the products themselves, which means they don’t go through the staff’s hands at the register or have to be placed on the conveyer belt where all the other items from all the other customers already were. You might say we provide a “contact free check out process”. To be honest, we had really neglected the hygienic aspect before corona, but it will presumably be an important factor in brick-and-mortar retail after the pandemic. We would be pleased — even over the short term — to assist retailers and make our contribution to keeping their employees and customers safe.
Munich Startup: One question to wrap up: Do you have a tip for future founders? What is crucial to keep in mind?
Scansation: We’ve learned that it’s often the little things that cause the most headaches. For example, Pantone colors in logos. Yes, they might look nice, but without them, you’re going to save yourself so much trouble when producing rollups, flyers, goodies and so on.