Spotify Vets’ eCommerce-Focused AI Startup Raises $10 Million

Behavior intelligence company Malachyte has closed a $10 million seed funding round.

The company was co-founded by the team behind the behavioral intelligence infrastructure that powers the bulk of Spotify’s recommendations and aims to bring the same technology to retail and eCommerce brands, Malachyte said in a Thursday (Aug. 6) news release.

“The raise comes as consumer e-commerce faces a conversion problem,” the release said. Advances in machine learning-driven ad targeting on Google, Meta, and TikTok “have made audience acquisition more precise than ever, yet the website experience most shoppers meet remains static.”

At the same time, modern digital personalization stacks can’t read shopper context or identify first-time visitors, while customer acquisition and marketing costs continue to rise.

“Brands are paying more than ever to acquire customers, then trying to convert them with a stack that only understands the fraction it already recognizes,” Malachyte CEO Sidd Motwani said in the release. “Our technology reads behavior instead of logins or cookies, so it understands every visitor before their first click, and keeps sharpening with every action. That’s infrastructure built for how commerce works today.”

The release also cites projections from McKinsey projects that AI agents could orchestrate up to $1 trillion of U.S. retail by 2030, which makes understanding shopper behavior more valuable.

“As commerce enters the agentic era, two major forces are converging: consumers have so much less patience when website or search experiences are not tailored to their intent, and agents are increasingly shaping the buyer journey,” said Maha Malik, vice president at Bessemer Venture Partners, which led the funding round.

“Yet most commerce infrastructure is not built to understand buyer intent in real time, whether that’s for a human or an agent. The Malachyte team has spent their careers solving some of the hardest problems in personalization at massive scale making them exceptionally well positioned to help brands meet this much higher bar for relevance.”

The funding comes as AI continues to become part of mainstream shopping, as research from PYMNTS Intelligence has found.

Close to half of all online shoppers turned to artificial intelligence during their most recent buying journey, according to “Global Digital Shopping Index: The AI-Powered Shopper Has Arrived.”

The same report found ChatGPT quickly becoming a major product research tool, with usage jumping from 2% to 30% in a two-year span.

“Consumers are also looking ahead: 64% expect to use AI shopping agents within two years, especially for tasks such as comparing products, managing loyalty programs and handling returns,” PYMNTS wrote.