Seel Raises $17M to Revolutionize Product Returns with AI

Addressing the E-commerce Return Challenge

Product returns continue to present significant difficulties for numerous e-commerce businesses. Several companies have adopted innovative strategies to manage this issue. For instance, Amazon established partnerships with retailers like Kohl’s and Stein Mart to facilitate in-person returns.

PayPal further addressed this challenge by acquiring Happy Returns, a provider specializing in returns management.

Seel's AI-Powered Return Underwriting

Seel is focused on providing merchants with greater control over the returns process. The company is utilizing artificial intelligence to develop unique underwriting software.

This software leverages hundreds of data points to forecast the likelihood of a return immediately upon order placement, as explained by co-founder Zack Peng.

Merchants can implement “return assurance” after a sale, effectively transferring the risk of returns to Seel. Should a return occur within 30 days, Seel will handle the refund, rather than the merchant.

Consumer-Driven Return Assurance

Customers also have the option to purchase this assurance for a nominal fee during checkout. This allows them to return items even if the merchant doesn’t natively offer such a service.

Traditionally, merchants are unable to determine their actual revenue until the return window closes, typically six to eight weeks post-sale. This necessitates reconciliation of refunds and adjustments to financial records and marketing strategies.

Seel offers an alternative: a variable return assurance fee paid at the time of sale, instantly securing net revenue and simplifying revenue operations.

Market Opportunity and Growth Potential

The U.S. e-commerce market is projected to reach $1 trillion in value by year's end. Between 10% and 30% of merchandise purchased online is typically returned, leaving merchants exposed to financial risk.

Peng believes Seel has the potential to underwrite over $100 billion in returns and refunds annually, given the industry’s substantial growth.

The company, operational for two years, currently serves nearly 200 merchants, ranging from small boutiques to large marketplaces, following a five-month private beta period.

Approximately 20% of shoppers are opting to add the return assurance to their orders, resulting in a 5% increase in conversion rates for merchants.

Series A Funding and Expansion

Seel is launching its Shopify app, supported by $17 million in Series A funding led by Lightspeed Venture Partners.

Existing investors, including Foundation Capital, Afore Capital, and West Loop Ventures, also participated in this funding round.

Peng highlights Seel’s position at the convergence of fintech and e-commerce, both rapidly expanding markets. He emphasizes the suitability of Lightspeed’s investment, given their prior involvement with Affirm and Justin (Overdorff)’s experience at Stripe.

Seel aims to establish a prominent fintech brand in underwriting, mirroring Stripe’s role in payments and Affirm’s in credit.

Future Plans and Vision

The newly acquired capital will be allocated to team expansion, product enhancement, and the development of a robust go-to-market strategy. To date, Seel has raised a total of $24 million.

The company experienced significant growth in 2021, increasing its workforce from five to 25 employees, and anticipates doubling that number in the coming quarters.

While currently focused on e-commerce, Peng envisions extending Seel’s risk underwriting capabilities to encompass a broader range of everyday consumer activities, such as online shopping, work, and entertainment.

“We anticipate that frequent, low-value risks will emerge as a major category in underwriting, and Seel is positioned as the leader in building towards this future,” Peng concluded.