Swedish start-up Formulate, a SaaS company focusing on artificial intelligence (AI) for retail promotions, has closed a €3.7m late-seed round.

The round was led by HenQ with participation from Industrifonden and J12 Ventures. The funds raised will be invested in international expansion and growing the team.

It began in 2016 with a pile of research papers and a consultancy project focused on analysing a retailer’s sales data. The founders of Formulate soon recognised that the need to improve promotion analysis within retail was huge. Most analyses and forecasts were done on gut-feel alone, without proper tools to manage, analyse and visualise quantitative results to make data-driven decisions.

Since then, Formulate has designed, developed, and begun to sell Retail DecisionCloud, a cloud-based AI SaaS offering. Current customers include leading Swedish retailers, such as Coop and Apoteket.

Promotions are important to retailers; often 20 to 50% of turnover is discounted or in other ways activated. However, determining whether or not promotions are profitable, and whether they truly drive incremental sales after all side effects are accounted for, has, until now, proved very difficult. By using Retail DecisionCloud, users get a comprehensive analysis of all their past promotions, and reliable forecasts of all their planned promotions. They can also simulate the effect of promotions in the ideation phase. This lets retailers continuously improve and collaborate with suppliers in an innovative way.

The additional €3.7m will be used to introduce Retail DecisionCloud to the European retail market. To accelerate growth by expanding into several European countries, Formulate was keen to find a European lead for the round.

“It all came together when we met HenQ,” said Andreas Willgert, CEO of Formulate. “Their fund is focused on B2B enterprise software, they are skilled in supporting companies like ours in international expansion, and they know what is required to eventually enter the USA. Right now, we are super focused on bringing Retail DecisionCloud to the European market. Retail as an industry is changing, and leveraging data is at the core of that change. Retail analytics is a €3bn industry, and it is rapidly growing. Our promotion analytics is tackling a classic retail problem with state-of-the-art technology, and the potential to create value is significant.”

Together with HenQ, two other firms have participated in the round; the established Swedish evergreen fund Industrifonden, which already has equity in the company, and the newly created Stockholm-based fund, J12 Ventures.

”We believe that the market opportunity is huge and the problem that Formulate solves is really significant for the retail market,” said Coen van Duiven, founding partner at HenQ. “I think in a couple of years’ time we’ll look back and say that the team at Formulate has initiated a gigantic change in how retail is executed.

Formulate is based in Stockholm. The growing team of almost 20 is a mix of skilled tech and retail professionals. The company’s three founders, Andreas Willgert (CEO), Arvid Stenback (CRO) and Robin Bartholdson (CTO), pictured with early hire Anna Blomdell (CPO), make up the company’s leadership team.