If you can’t be bothered to fill out your credit card and address details when shopping for jeans online, the Nate app sounds like a service you might want. The company bills itself as an “artificial intelligence startup” that uses AI to auto-fill customer information for $1 per transaction, saving shoppers a few minutes when completing purchases through the Nate app.
But instead of using high-tech methods to complete purchases, Nate transactions were often handled manually by workers in the Philippines, according to a deep dive by The Information. Speaking to two people with direct access to Nate’s internal data, The Information reports that “the share of transactions Nate handled manually rather than automatically ranged between 60 percent and 100 percent” throughout 2021. One person with knowledge of fundraising efforts told the outlet that the company didn’t share its manual process with some potential investors while the company was trying to raise money.
People with direct knowledge of the technology used by Nate told The Information that bot blockers on retailer sites were a problem. “Nate’s software needed to figure out how to locate specific buttons on the page, such as the one that adds an item to the shopping cart,” according to the report, which resulted in a large bulk of transactions going through manual entry by actual humans. Some orders were placed hours after Nate users pressed the “buy” button, The Information reports.
That didn’t stop Nate from raising millions in its quest to make something that’s already very easy even easier. Venture capital firms Coatue Management and Forerunner Ventures invested $50 million in Nate over the past two years:
One consequence of the pandemic-fueled shopping boom is that venture capitalists —facing fierce competition for deals and paranoid about missing the next Stripe — began practically hurling money at startups that promised to make e-commerce smoother, even ones with questionable business models or technology. Today, amid slowing e-commerce sales and macroeconomic challenges, many startups face a reckoning.
“Across the startup landscape, there is a realization that a lot of companies had a great story, but their reality” wasn’t, said Keval Desai, an investor at InterWest Partners who previously backed e-commerce firms such as The RealReal. “People are waking up and saying these valuations cannot be sustained.”
At the end of last year, with only around 100 transactions a day, Nate decided to run a promotion to boost its business and presence, buying ads on TikTok, TV, and public transit. Users got $50 to spend on select websites when they downloaded the Nate app and created a profile, and transactions ballooned — up to 10,000 a day.
But users had figured out a way to game the system by creating multiple accounts with the same banking information but using new email addresses and phone numbers. After the company removed duplicate users and ended the promotion, daily transactions went back down to 75 to 100 a day.
A Nate spokesperson told The Information those figures — as well as the 60 percent to 100 percent range — were incorrect, “and the claims questioning [Nate’s] proprietary technology are completely baseless.” But it wouldn’t be the first time a startup claimed that machines were responsible for work done by humans — and casts “the magic” of Nate in a whole new light.
Read The Information report here.