Leipzig-based start-up Lexital automatically protects online retailers from warning letters 

TGFS

01 April 2022

They hover like a sword of Damocles over the booming online trade: warning letters. Sooner or later, almost every e‑commerce provider comes into contact with the vexed business of warning letters. Competition and consumer protection associations now employ their own lawyers to systematically search web stores for violations of information requirements. They find what they are looking for primarily on Amazon and Ebay platforms, where product descriptions, general terms and conditions, cancellation policies and other legal texts are often flawed. But now store operators can breathe a sigh of relief: Leipzig-based founders Tino Kroupa and Michael Opre have developed a hitherto unique prevention software that relies on artificial intelligence. Lexi, as the software is called, automatically and continuously scans sales platforms for warning dangers and helps to eliminate them. Thus, it allows online retailers to avoid legal pitfalls from the outset. This not only saves them time, but also a lot of money. According to the latest warning study by Trusted Shops, 47% of online retailers surveyed even see their existence threatened by warning costs. TGFS Technologiegründerfonds Sachsen, represented by MBG recognizes the added value of its „Software as a Service“ solution was also recognized by. It fueled the product development and preparation for the current market launch with a TGFS seed investment in Lexital GmbH.

Lexital founder Tino Kroupa brings the specialist legal knowledge with him. Until recently, the specialist attorney for industrial property rights was a board member of the Leipzig-based Händlerbund, Europe’s largest online trade association. As a partner in a law firm, he himself looked after e‑commerce companies in legal matters. The issue of cease-and-desist letters was part of his day-to-day business, which tied up considerable personnel resources. He is therefore particularly aware of the benefits of automation: „Our fully automated detection software penetrates new spheres of performance that cannot be achieved by lawyers alone. With Lexi, online retailers can have thousands of products checked every day for a wide range of warning risks,“ says the legal expert. This software is making inroads into the growing market of „legal tech“ applications. Responsible for the „tech“ part is its co-founder and application developer Michael Opre, who chaired the Händlerbund [trader’s association] for several years as Chief Technology Officer. The IT professional explains, „Lexi makes use of artificial intelligence to effectively prevent warning letters. To enable us to serve several thousand users simultaneously in the future. We designed the software architecture from the ground up to be freely scalable.“ Above all, the capital contribution from TGFS had also made it possible to develop the software to market maturity in just a few months. 

Even when the founders presented the first prototype, TGFS investment manager Christian John anticipated a high demand: „Lexital GmbH’s anti-complaint software solves a widespread legal problem in online commerce. The high awareness level of potential customers combined with the high scalability of the software let us foresee a large market potential. Both founders, who can convince with technical expertise, many years of professional experience and a large network in their fields of expertise, also contribute decisively to our positive forecast for the future.“ The two Lexital founders are pursuing ambitious plans, as Tino Kroupa notes: „We want to become the market leader in a short time. This rapid growth can only be achieved with sufficient capital. That’s why we are very grateful for the financial initial spark provided by Technologiegründerfonds Sachsen.“ In addition to TGFS, business angel Michael Atug, who has been trading on the web since 2001, also invested. The self-proclaimed „digital rock star“ shares his e‑commerce knowledge as a speaker and organizer of specialist events such as MultichannelDay. He also runs a relevant Facebook group in which 13,500 members exchange views on current trends and developments in online retailing. At Lexital, Michael Atug already contributed valuable user feedback to the development process. With his industry contacts and wide online reach, he will now also provide marketing support. 

The way Lexi works can be compared to a virus protection program: Several bots constantly scan the Amazon and Ebay sites of online retailers for criteria relevant to warning letters. If legal vulnerabilities are discovered, the software immediately sounds the alarm and issues well-founded recommendations for action. As part of the service, merchants receive free sample legal texts that they would otherwise have to purchase at a high price. In this way, they can correct errors before the warning lawyers become aware of them. The large international sales platforms in particular, with their complex, sometimes opaque structures and dynamically changing algorithms, make it almost impossible to comply with all legal requirements at all times. No wonder, then, that according to the latest study by the Händlerbund [trader’s association], one in five retailers received at least one warning in 2020 alone. It is not uncommon for a contractual penalty to be incurred in addition to the warning fee, so that the costs quickly add up to 5,000 euros according to the Trusted Shops survey. The monetary value of Lexi is correspondingly high — but not the monthly service costs, as Michael Opre explains: „We deliberately chose a comparatively low price. Our service should also be accessible and affordable for small online retailers. Ultimately, we want to become profitable through mass usage.“ The broad mass of retailers should certainly like these future prospects: With Lexi on their side, they no longer have to read through paragraphs, but can concentrate on what they do best: their core business. 

Deal team TGFS
Christian John and Tobias Voigt

The article was published by the MBG Sachsen - management partner in TGFS.
Image source: Lexital GmbH