Zaulson Lee



  Zaulson Lee

  

  NEWSLETTER ON LINKEDIN

  The Startup Conversation

  By Frederick Daso

  Open this article on LinkedIn to see what people are saying about this topic. Open on LinkedIn

  It ’s Eze To Trade Smartphones Thanks To These Two Y Combinator Founders

  

  Want news on the hottest startups delivered to your inbox three times a week? Subscribe to my mailing list, Founder to Founder (F2F): f2f.substack.com. Check out my latest F2F story: Startup Spotlight # 74: Realtalk.

  The rapid innovation cycle and planned obsolescence of smartphones have produced a growing secondary smartphone market. Whether you're an individual trading in his or her own personal cellphone, or a vendor buys and sells smartphones in large volumes, navigating the used electronics space is difficult  The informal, fragmented market lacks transparency and has untrustworthy actors participating. Most importantly, prices for these used commodities fluctuate wildly. Josh Nzewi and David Iya created Eze to address to secondhand smartphone market's inefficiencies.  used smartphones. The San Francisco-based startup recently completed Y Combinator's accelerator program.

  Frederick Daso: When did you first discover the problems surrounding the exchange of secondhand smartphones? What's unique about the reuse of smartphones versus other electronics?

  Josh Nzewi and David Iya: We were first introduced to this space in late 2017 shortly after the launch of the iPhone X. David had upgraded from his 7 Plus and was trying to get the maximum value for it. After several visits to various carrier stores  Seeing this as a way to make additional income, and calling different pawnshops, he discovered a vast disparity between the prices phones were selling for locally vs. online. We saw an arbitrage opportunity, and we both started buying phones locally and selling them online.  I pulled out money I'd saved up while working at Shell as a Reservoir Engineer, and we began aggressively buying as many used devices as we could.

  We were living in separate cities at the time (New Orleans and Jacksonville), so we each had a client base in our respective municipalities. The business grew as we expanded our network of buyers and sellers. By mid-2018, we had clientele throughout  The United States. As we moved to expand the business further, we started attending trade conferences, which exposed us to a whole new world of traders. Some of the companies at these conferences were selling well over 1 million devices a month, which blew us  But the craziest part about it was all the complaints we heard; inventory was stagnant, traders were untrustworthy, and trading channels were disorganized.

  At that point, we started thinking about what we could do for the industry at a macro level, not just the individual trading of phones, and so we began to dig into the market dynamics. What we found shocked us: over $ 46 billion worth of  used smartphones were sold each year globally (growing 13% YoY), but there was no price transparency; prices would vary by over 40% for the same device between different sellers, trading was incredibly informal; and million-dollar trades would happen through WhatsApp  , Facebook groups and forums.

  We knew we had to do something about it — so we created Eze, the first commodities exchange for smartphones.

  They're so common, everyone has one, and a significant portion of those people get a new one every two years — some even sooner. With the price of used devices depreciating by almost 50% the year after they are released, it's a no  brainer to purchase used equipment instead. Due to technological advances, the average smartphone is currently passed between 2-4 users before the end of its life-cycle. My iPhone 7 that I bought in 2016 still works great, and it's 4 generations old.  Used smartphones are ideal for users who don't want to spend an arm or leg on upgrading their device and aren't concerned with having the latest and greatest product, or can't afford it.

  Daso: How has the market for these recycled items been cultivated through only the use of social media networks and apps like Facebook and WhatsApp? Why is there an absence of infrastructure to facilitate the exchange of these items?

  Nzewi and Iya: There's an ancient school of thought. This industry has been around for decades. The companies that have dominated the space are ones that have long-standing connections. As a consequence, these companies have not implemented technology to help them scale or  market themselves effectively. Additionally, the industry lacks technological solutions that allow for safe and efficient trade.

  Daso: Why has Eze defined its business as an exchange rather than a marketplace? Is there additional value beyond connecting buyers and sellers at the scale that's implied with an exchange than just a marketplace? An exchange seems to be more focused on the price at which  commodities or, more generally, securities, sell at, versus a marketplace to connect buyers and sellers.

  Nzewi and Iya: We believe that since these devices are traded as commodities, the marketplace should be governed by commodity rules versus a marketplace, making transparency more difficult. Commodities are defined as uniform products that can fluctuate in price according to supply and demand. Surprisingly  , smartphones are traded as such. Traders will split out different types of models and apply a grading criterion: for example, on our platform, a Grade A1 means that the phone has zero scratches or blemishes. Due to COVID, the prices of used smartphones  have risen. Individuals are unable to trade in their devices, so there has been a lack of supply, but people are still buying devices, so there is more demand vs. supply.

  Daso: What motivated the need to create criteria to grade buyers and sellers? How does this promote transparency within the exchange Eze maintains?

  Nzewi and Iya: We believe that traders should be motivated to act with integrity on our platform and should be rewarded for doing good business. Most importantly, setting standards and consequences for inappropriate behavior discourages fraud and other desirable behaviors and ideally eliminates them.

  Daso: How do you leverage machine learning to verify the integrity and quality of products being bought and sold on the platform?

  Nzewi and Iya: The machine learning program we are building can identify scratches, dents, and other abnormalities a device may have. Using advanced proprietary software, it grades a device based on 14 different parameters. In this industry, each company has its subjective grading  Through our machine learning algorithm, we will be introducing the first objective grading standard to the market. The work we're doing here lines up with our overall objectives of creating transparency in the industry. By moving away from the subjective grading scale currently  used, we believe that buyers will feel more confident in the purchases they're making, ultimately making the exchange more sustainable and desirable for all parties.

  Daso: How did you two come together to create a solution for this problem anyway?

  Nzewi and Iya: Our parents are best friends, and we were born ten days apart. The story goes that when our mothers hugged while they were pregnant with us, we would hug too. So we've known each other since the womb. David  And I have always been fascinated by business, particularly entrepreneurship. We have worked on several companies, including Releaf, a Y Combinator-backed tech-enabled palm oil processing plant based in Nigeria. David called me one day, telling me that you could buy  Devices locally and resell them online. We both started doing it in our respective cities. As we began to realize just how big the market was, we dove headfirst into it together. Before we started this company, we were traders ourselves in this market,  where we traded more than $ 8M worth of smartphones.

  Daso: What were some of the key insights that led you to understand the critical problem related to participating entities with limited information?

  Nzewi and Iya: The underlying issue in the space is access to information. Players in this space don't understand that others exist. At Eze, our mission is to lower the barrier to trade by offering sellers and buyers a safe platform to transact directly  It is a demand-side problem, but that doesn't fully explain the issue. The underlying theme in the space is the heightened friction to trade. Players in this industry, for one, don't understand that others exist. In the  rare case that players do discover each other, there still lies a fear of being scammed. As a consequence of this, sellers often sell at cost or even at a loss to maintain liquidity. At Eze, our mission is to lower the barrier to trade  By offering sellers and buyers a safe platform to transact directly. On top of that, we want to bring as much liquidity into the market as possible. We do this by showcasing the lowest-priced devices first through our commodities exchange.

  Want news on the hottest startups delivered to your inbox three times a week? Subscribe to my mailing list, Founder to Founder (F2F): f2f.substack.com. Check out my latest F2F story: Startup Spotlight # 74: Realtalk.

  If you enjoyed this article, feel free to check out my other work on LinkedIn. Follow me on Twitter @fredsoda, on Medium @fredsoda, and on Instagram @fred_soda.

  Join the conversation

  Know someone who might be interested in this newsletter? Share it with them.

  

  Unsubscribe | Help

  You are receiving LinkedIn notification emails. The newsletter author can see that you are a subscriber.

  This email was intended for Zaulson Lee (Sales Chieftains). Learn why we included this.

  

  © 2021 LinkedIn Ireland Unlimited Company, Wilton Plaza, Wilton Place, Dublin 2. LinkedIn is a registered business name of LinkedIn Ireland Unlimited Company. LinkedIn and the LinkedIn logo are registered trademarks of Dublin.