Skyrocketing Growth and Ambitious Goals – Swappie Aims to Become the Market Leader in Refurbished Electronics
Swappie’s story began when one of the company’s founders, Sami Marttinen, got scammed while trying to buy a used phone through an online flea market. While filing a crime report at the police station, he learned how common such scams had become. On his way home from the station, the idea had already formed – a business could be made out of selling refurbished smartphones.
You could easily say that entrepreneurship is in Marttinen’s blood – at the age of 15, he was already a partner in his dad’s construction business. He met Swappie’s other founder, Jiri Heinonen, while they both studied at Aalto University in Helsinki, and together they have already founded almost a couple dozen companies. Some of the ventures have only lasted over a weekend, while others have succeeded. For instance, one of them, the razor delivery startup Viking Shave Club, took off and was subsequently sold to an American counterpart.
Back to Swappie: The idea had formed at the police station, and the next day Marttinen and Heinonen were already conducting a street survey in the city centre of Helsinki. There was very little market data available on the sale of used phones, so they had to do the research on their own.
Since there weren’t players in the industry who would have already solved the critical pain points revealed in the survey, Swappie’s founders to-be knew that the market opportunity they were looking for was there.
“Companies reliable enough to revolutionise the industry simply didn’t exist. We decided to tackle the issue with quality: we check and repair each phone to make sure that the quality is so good that we can offer a warranty for the phones we sell”, Marttinen says.
A Flying Start
Marttinen and Heinonen got off to a flying start. The survey paid off – the pain points of potential customers were identified, and the company website was up on the next day. Within a few days, the founders were already delivering phones around the city by bike, gathering feedback from customers to improve the business as they went.
“From the beginning, it was clear how we wanted to split the work between ourselves. With his marketing background, Jiri was in charge of driving growth. I, on the other hand, was working on the background to build the systems that would enable us to deliver on our promises”, Marttinen says.
At first, Marttinen and Heinonen outsourced the repair services, but when the quality was too variable, they decided to carry out the repairs internally. “Quality and customer experience are at the heart of everything at Swappie”, he continues.
However, refurbishing smartphones wasn’t easy at first. They had no knowledge on the maintenance of motherboards, for instance, and neither phone repair shops nor even Apple did it.
“Our first employee firmly thought that anything and everything could be fixed. He took up the challenge with enthusiasm, and we made sure he had all the equipment he needed. At first, the repair took a full day, but now it can be done in as little as half an hour”, Marttinen describes.
Investors Join Swappie’s Growth Path
“An exceptional team and exceptional systematicity in the way they work”, describes Partner Juha Lindfors the reasons behind Lifeline Ventures’ decision to make an early-stage investment in Swappie.
By late 2017 Swappie’s sales had taken off. With only two employees, the company’s turnover had grown from zero to half a million. Convinced by the data-based analysis and meticulous systematicity at the heart of the company, the team at Lifeline didn’t hesitate, and they made an investment offer within a week.
“The founders Sami and Jiri complement each other perfectly. The systematic business processes they’ve built for Swappie are remarkably advanced – an approach that companies are often missing”, explains Lindfors.
The work together with investors will continue – Swappie recently raised a €35.8 million Series B funding round from Tesi and the existing investors Reaktor Ventures, Lifeline Ventures, Inventure and Telia.
With the funding and the help of investors’ connections and expertise, the plan is to boost Swappie’s European expansion and to accelerate the growth of its team.
Swappie’s market potential didn’t go unnoticed at Inventure either. Investment Director Lauri Kokkila, who’s known Jiri since high school, points out that there are no real contenders for Swappie in the Nordics. “You don’t come across growth stories like this every day”, he continues.
“With rapid growth like ours comes challenges, but having investors on board means that we also gain access to the lessons learned at their other portfolio companies, and that helps immensely”, Marttinen says. He adds that investors’ help has been valuable in the recruiting of key people, as well as in building systematic processes to support recruitment efforts and internationalisation.
Data-driven and Sustainable Business
Data is at the core of Swappie’s operations. Everything is carefully analysed, which means that sales bottlenecks, for example, can be identified.
“An example of this could be that we increase the capacity of our online store before important selling seasons so that we don’t lose potential customers because of a crashing website”, Marttinen explains.
In addition to their data-centric approach, Swappie’s operations are driven by sustainability.
“We’ve made a conscious choice not to emphasise it in our marketing communications, but internally one of our main missions is to reduce the environmental impact of the smartphone industry.”
More and more consumers are buying used phones because the prices of new ones have doubled in the past few years, while technological development has slowed down. Sustainability is another factor that’s important to many customers. Doubling the lifespan of a phone halves its carbon footprint.
“Responsibility can also be profitable – a responsible company often manages to hire the best talent and attract investors, and consumers want to know that the products and services they’re buying have been produced responsibly”, Kokkila says.
Better Than New
Some phone models are known to have common hardware issues, but Swappie fixes these before selling the phones. For instance, in one model, a solder joint ends up breaking when the phone repeatedly slightly bends in the user’s pocket, which leads to various issues. At Swappie, this joint is replaced with a more flexible material, rendering the phone more durable than the original. With repairs like this, phones’ lifespans are extended, and in the best-case scenario, the customer ends up with a phone that’s better than new.
”There’s a big difference between selling used phones and selling refurbished phones, which is what we do. Our customers always get a warranty on the phones they buy from us”, Marttinen says.
At Swappie, a lot of effort has always been put into recruitment. From the beginning, the founders have striven to hire employees who are “smarter than them”. By putting together teams that contain the top talent in each field, they can trust each one to make decisions autonomously.
Swappie has come a long way from having a four-person team run the whole operation. In 2.5 years, the team has grown to nearly four hundred, and an additional 400 employees will be hired within the next year. The growth of the team has been rapid, but it doesn’t come as a surprise considering that in 2019, Swappie sold more than a hundred thousand phones.
Towards New Challenges
Italy being chosen as one of the first international markets to expand to says all you need to know about the ambition and courage of Swappie’s team.
“Our market research that included 31 attributes found that Italy is one of the most difficult markets in this industry for several reasons. There, we have been able to develop our country-specific expansion plan to a whole new level, and we also quickly grew to become the market leader in the country”, says Marttinen.
Swappie’s short-term goal is to expand operations into a few new countries and become the largest industry player in Europe. The long-term vision is to become the global market leader in refurbished electronics.
“Amazon started out by selling books and expanded into a global player. We started out with smartphones”, Marttinen concludes.
This blog post is a part of our “Growth Builders” blog series. The aim of the series is to celebrate Finnish startups and growth companies and the inspiring growth stories they have built together with venture capital and private equity investors.
Swappie was also the winner of our Growth Builder 2020 competition. The Growth Builder (Kasvunrakentaja) competition is organised annually in partnership with PwC Finland.