The below is a full (unedited) transcript of a Youtube session / podcasting episode I recorded with Sean Henry, founder of STORD in November 2020. You can view the video/listen to the podcast on Youtube, Apple Podcast, Stitcheror wherever you get your podcasts.
Erasmus Elsner 0:07
Welcome, everybody to another episode of Sand Hill Road. I’m super excited to have with me here my guest, Sean Henry, who’s the co-founder and CEO of STORD, which is a distributed warehouse and storage network based in Atlanta, Georgia. So Sean are you ready to take us to the top?
Sean Henry 0:56
Yeah, absolutely. Really excited to be here. And thanks for having me on this podcast and excited to chat today about both what we’re building how we’ve gotten to where we’ve gotten today, but also what’s in store for us for the future as we continue to really innovate in this, this massive global industry.
Erasmus Elsner 1:20
I want to address the elephant in the room. You’ve just announced last week, a $31 million Series B round led by Founders Fund, which comes a year or so after the announcement of the Series A which was led by Kleiner Perkins last year. It must have been a crazy busy time.
Sean Henry 1:27
Yeah, absolutely. It’s been. It’s always exciting to make any any major announcements as a company, whether new product, new features, new team members nor but fundraising is always a really exciting one for me, because you really get to convey a lot of the updates that have been going in on in the business and really under the surface over that last time period, whether that’s new logos and customers, you want to highlight new capabilities, but also recognizing the team. We’ve grown a lot as a team between our Series A and Series B, and just the amount of intellectual capital team members. And then all they do for us here at Stuart is is really something we were trying to highlight through some of our some of our different announcements. And so really excited to announce that I think anytime you kick off announcement like that, it’s only a good time to remind the market really what your mission is beyond just what you do day to day, and really push that out and push that narrative out and ultimately get a lot of new customer interest market interest in more. And so it’s been a it’s been a whirlwind since we announced in 2020. For us more broadly, as you look at the market opportunities created for logistics players like ourselves. Not only did we have a lot of success in 2020, driven by that, but now when we’re able to take that package that retell our message with a with a fundraiser, and use that to reach even a broader audience. It’s just been a great accelerant in our pipeline and in our customers over the last few weeks. So our whole team is is very excited with the announcement and excited to finally unveil some of what we’ve been working on in building last year.
Erasmus Elsner 2:58
I mean, you’re one of those rare companies who had massive COVID tailwinds. But for the audience out there who is not familiar with what you’re building with STORD in the distribution and warehousing space, can you give us some some quick introduction into the company and what you’re building.
Sean Henry 3:13
The way we think about what we’re building is ultimately, we’re trying to bring supply chains, and particularly distribution networks. So all these warehouses stitched together by brands to deliver their products to you as a consumer or to another business every single day. We’re trying to bring all of that to a cloud based model. So our mission is really to provide both the best in class logistics network, where on one side, we’re a network of warehouses, trucks, fulfillment centers, delivery drivers and more. But bring both the best in class logistics network, and the best in class software to operate that logistics Nether network together in a single cloud platform. So that really, any brand can build a fast, scalable and technology driven supply chain to deliver on their customer needs and their end consumer demands. And do so in a way that’s competitive. And in a lot of ways, it’s really offering that essentially, Amazon level logistics infrastructure for every other brands so that they don’t have to build it themselves, and instead can focus on building the products that delight their customers and ultimately innovate them as a business while we do the heavy lifting infrastructure in the supply chain.
Erasmus Elsner 4:20
That’s super interesting and so many nuances to it. But before we go deeper into the business model and unpack all of this, let’s go and take a step back down memory lane for the people who are listening to this on the podcasting version only. Shawn just recently turned 24 you’re one of those overnight successes 10 or 20 years in the making, having started really early on at the humble age of seven years to trade electronic parts over the internet when your parents didn’t buy you an iPhone, which really got you into this whole warehouse and logistics side of things. Walk us through the different steps and how this To discover and uncover the problem space that you’re solving today with STORD?
Sean Henry 5:04
Yeah, absolutely. And I think you said it well at the beginning, where, if you, if you look at my age, and you look at the surface level, it’s so easy to assume kind of be the overnight success route and not calling us successful, we have a long way to go and a lot to build, but really the overnight journey into the market we’re in. And it’s really not the case at all with us. And I think even the two threads all highlight are both the electronics and the automotive and trading businesses that launched me into STORD but even if I look outside of they’re from different e commerce, businesses, online internet businesses, YouTube channels, Facebook pages, and more, I’ve had dozens and dozens and dozens of failed ideal ideas and failed business models since I was a child. And this is just something I’m passionate about. I’m passionate about creating and building new things. And so it can be easy to look at the age and think man, first one just took off. But I think it’s always such a, you have to have many, many at bats and continue to find what your passion is to really get there. So my journey really started what I like to joke that my parents didn’t want to buy me a cell phone, back when I was in third or fourth grade. And I was really pushing for it. I was about to go into middle school and cell phones were just starting to become more and more popular. And to my parents. It was absolutely not. These are new products. That wasn’t the sensitive now where almost every kid you see has felt the way I did it and ultimately realized I could get one. And the longer story is I actually sold my Christmas presents on eBay. Back in 2003. I signed up for an eBay account, I sold my Christmas presents and my parents were not happy at all, when I told them, hey, I need you to help me go to the to the ups and ship these. And they said hey, I could have just returned all these and given you the money instead of you selling them at a discount online and now having to create this complexity. And I use that to just launch this this small but small business where I was buying and reselling electronic parts. And you can imagine the parents reaction in the early 2000s. When a 789 year old as I was doing this more and more was telling them Hey, I just met this guy on Craigslist, who has all these phone parts and he can sell me and then I’m gonna turn around and refurbish them and sell them on eBay. There was a lot of trust to get the parents through to to make them comfortable with this. But I really use that as kind of the springboard ultimately realizing Hey, I can ultimately use the internet to make money and do it as a young age, especially when it’s enabling me to reach a wider audience than I can just my own network as a as a kid. And so I was building that businesses really interesting. I got to do more and more of the electronic side, especially as iPhones and others more smartphones started to come out in the mid 2000s. I started doing a lot of exporting of electronics and electronics parts to South America through this one business owner I met wanting to buy in bulk. And I got this real interest in man, the B2B side even beyond just me directly selling to consumers online is really interesting.
Fast forward a little bit and I was doing the opposite. Same job. My parents didn’t want to buy me a car I said, Hey, it could be really interesting. I see if I can start buying and reselling automotive parts and services. And so I ultimately started going to every dealer and distributor I could find and kind of the southeast and greater Atlanta area and saying, What do you guys buying? Can I group together purchase orders? Can I help you in any way? Can I manage the import process and eventually was just basically acting matchmaker buying from certain factories helping important selling it to these different distributors and dealerships and ultimately making a small margin in between. and at this time, I was just about to go into college I was in an I was in high school, I was probably a sophomore at the time. And there’s just one company, he will go that I was out in their their manufacturing plant in mableton, Georgia and just making a purchase order and the guys today are CEOs here from Germany if you want a chance to meet him. And I still to this day think he only talked to me and laughed because I was the youngest and smallest customer and he was basically like what do you what are you doing here and ultimately built a relationship with him over the next few years as a again, tiny, tiny customer but saying, hey, I’d love to learn from how you’ve built and scaled and lead this business as the CEO leading a business that has 23 factories across 18 countries and does massive amount of sales working with Volkswagen, BMW and all these huge brands. And so after about three years of of wearing them down and I was about to start at Georgia Tech, where I was undergrad studying operations and supply chain management in the business school as a concentration. I said, Hey, this is what I’m going to do. I think I’m passionate about this. I’ve done it a lot in the past, but I’d really love to get in the weeds and get hands on with your company and do something in this sector, while also learning from you as a CEO. So I was massively Fortunate just to get this opportunity for almost a year and a half, through my first kind of start at Georgia Tech, I even took a semester off to do this full time to work for this company. And I spent six months in Germany to kick it off, where I was in Dusseldorf, near near Wuppertal. And ultimately, just in this factory every single day looking at how the workers walked around the machine, the quality controls the downtimes, every single thing you could do, and trying to cut out everything that was inefficient, you literally video people for 12 hours a day to write out every task they do and just find efficiencies. And then Okay, how can we go take this playbook to our other factories, so when from Germany to to France, to Mexico, to Canada, to enterprise, Alabama, and to all these different factories of theirs, ultimately looking for the same efficiency. And it was really this problem of running into, especially as a B2B manufacturer, all of your customers require you to have what’s called safety stock. So if you order 100 pallets of inventory from me a week, and I say you have to have 10 weeks of safety stock, you need 1000 pallets for me at any time. So that if there’s a disruption, like have like what happened with the pandemic this year in 2020, or your machine is down, I know, you still have inventory. For me, as an automotive manufacturer, you hold massive amounts of inventory, especially when these brands require more like 12 to 16 weeks of safety stock inventory. And so when it became time to heavily reduce our global inventory levels across such a distributed footprint globally, I started reaching out and realize, okay, we’re using a different warehousing logistics company in every single market we’re in. And every single country we’re in, they all have different warehouse management systems, some of them don’t even have a warehouse management system at all, primary mode of indicating worth our inventory levels back and forth for hundreds of millions of dollars of inventory, his email and phone calls between our patients and our sales team. And all these different logistics companies, there has to be a better way. And the fundamental problem we were running into is that we had an MRP system. And then we had all these logistics partners and suppliers. And they didn’t connect to each other at all. And so this became the AARP became a kind of financial system of record, while our actual distributed supply chain and everything going on in it essentially got relegated to manual paper processes and emails and spreadsheet workflows. And so that’s really the problem we set out to solve, which is that supply chain management software, and ultimately, logistics in the actual execution of those physical services cannot be fundamentally completely detached industries for a brand to have a really successful supply chain.
Erasmus Elsner 12:41
That’s wicked, how one thing led you to the other and how all these different, seemingly unconnected dots in your life really led you to understand this space from an early age. And the last pre-money valuation was at, I think, $200 million already. So it’s it’s a really impressive story really inspiring story in many ways. But maybe as a next step, let us unpack the business model a little bit. And I mentioned before, it’s such a nuanced business model has so many layers. If I had to describe it, I would, I would describe it as a Saas or software-enabled marketplace model. But there’s also this distributed systems aspect to it, which we’ll get into. But let’s start with the marketplace model. If I look at STORD, I think you initially started out in many ways as a B2B marketplace. And with any marketplace, there’s always this chicken and egg problem on how you get started. on the supply side, I think there were some really unique and interesting characteristics of the supply side, in particular of the warehouse microstructure of this market. You mentioned pain a past Forbes article two years ago, you mentioned that there were 9000 warehouses across the US and out of these 9000 warehouses actually 30%. So 3000 warehouses were actually owned by 40 or 50. Large players, whereas really the other part, the 6000 are really fragmented, sometimes mom and pop warehouse owners Talk to us a little bit about this supply side first,
Sean Henry 14:11
Absolutely it is a really, really great question. And just to even note the acceleration in our industry, when you had kind of the 9000 total with 6000, fragmented and 3000 very consolidated even today, only two years later, it’s over 14,000 warehousing companies in the US, or warehouses, the United States and roughly 4200 are massively concentrated across 54 brands. And then the other 9800 out there are almost 9800 companies and massively fragmented. And so I think what’s interesting in our model, and our model is there’s kind of two types of marketplaces in my mind. One converts the actual fundamental business offering of the underlying supply and the other one converts the unit economic model of how they’re offering. So in one case, you may have like an Airbnb who’s saying, hey, you’ve never leveraged your bedroom before as essentially a replacement for a hotel. Why don’t you try that? That’s not really what we’re doing. Because these warehouses in these 3PLS being third party companies already offer these services. So we’re coming to them and leveraging their existing capabilities, what we’re doing is converting the economic model of how they do it. The economic model of a warehouse is traditionally a long term lease, these operators who are the warehousing companies, they either go buy or lease their space, and they’re almost like,
where they’re ultimately trying to get arbitrage on what they’re paying for their capacity versus how much they can put in that building. And so for you, as a customer, the best thing for that warehouse is if you sign three to five year agreements, the 56% of the contracts in our industry are three years plus 27%, are five years plus volume based space space agreements. And so it creates this stagnant nature of how companies think about their supply, similarly to cloud computing, how brands used to run all of their own data centers, and all their own racks and equipment, and you had to do all of your own capacity planning, heavy, heavy infrastructure and very long term. And so our model is let’s go to these warehouses and say, Hey, today, you’re one of these 9000 plus long tail facilities. What if we could tie you together in a network, augment your business with our technology, and ultimately augmented with our customer service, our KPIs and operational procedures, and more will bring the demand will give it the service level of top providers out there and the capabilities and will ultimately drive you more revenue, more customers and just better operations as a business, which might actually lead to better bottom line for you as a 3PL and as a warehouse. And when these brands, these warehouses out there, see that, and they see that, hey, the benefit of the largest, most consolidated competitors I have is that they have capacity in every market is that they have connected technology is that they’re able to serve these large brands. Now, through being part storage network, I have that competitive advantage. So one of the things I’m really passionate about is that ultimately, at the end of the day, we’re paying many of our warehouses, hundreds of 1000s of dollars, sometimes a year, many times a month, depending on our volume in those different respective warehouses, it’s fundamentally changes how that small business operates. I think we’ve seen a lot of these warehouses that partner with grow up and mature and accelerate their business. And so we’re passionate about it at the end of the day, because our suppliers are small business entrepreneurs who want to compete, they want better technology, they want greater scale, and there’s just such a huge pocket of opportunity on the back end, as we build this cloud supply chain offering for the brands with the inventory to sell and to ship, we’re also able to really help scale and refine how these logistics companies operate across the board. And so the way we started when it was coming to get those facilities was, again, since we weren’t converting the service offering, what their capability was, we didn’t necessarily see supply as the the constraints as much as it was, we should go build a network of the supplier on the front end. And so we quite literally locked ourselves in a room for about a week, myself and my co founder, right when we were kicking off stores and said, We need to validate that the supply wants this. And at the time, our mentors, were saying, hey, you have to get used to cold calling and selling in general, as you start to kick off and grow this business. The best way is start with the supply. You can look up all the warehouses, phone numbers, I’m sure they’re all the interested in talking to you. And you’re saying, Hey, I could give you more revenue, more technology, etc. And what we found is we started down this journey, calling these facilities talking to them partnering with working to partner with them is almost none of them are saying no. And I think that was something really intriguing to us as we had not yet validated as much of the customer pain point. It’s more what I had felt. And we’re starting to validate that but even just digging in as fast as possible and understanding is this something that supply is willing to do getting a lot of them signed up really early on and realizing Okay, if the supply is feeling this pain point as much as the demand we believe us that might actually be an accelerant and even stronger indicator of what we shouldn’t should build here. And so we did start on the supply side and ultimately going to build the network get some of the early adopters on the on the warehousing the logistics side sign up, but then it was a mad race for demand and I think the chicken and the egg problem is you don’t want to sign up a lot of supply them without without any demand. And so then at that point, it was ultimately all efforts behind demand getting our first volume moving through our network and more.
Erasmus Elsner 19:54
Let’s take a step back again for the audience to really get this clear on the supply side. There are the warehouses and Then on the demand side, these are CPG brands retailers, I think some of your clients today are Owens Corning, Dollar General and Advanced Autoparts. How did you get the first demand side user on the platform? And how was the first transaction that went through the network? Talk to us a little bit about really this early proof of concept? Because I think this is always very interesting for up and coming entrepreneurs how that went down.
Sean Henry 20:25
Yeah, absolutely. So for a lot of marketplaces, I’ll kind of go back to my my Airbnb analogy is not as too analogous for our business model just as another. Another market is, a lot of times the early challenge is purely supply and demand. And once you match them, you’re kind of off to the races, and they’re providing a service to each other. But an integral part of STORD is that we were actually the software workflow in between that supply and that demand, the customer service, the operations, the SLA is everything else, we essentially standardize the capabilities across all of our different supply, making it more of a standardized model for the customer, rather than you’re dealing with all this independent supply. So we stitch together the supply in a way that feels like STORD rather than feels like 1000s of disparate suppliers. And so early on in for our proof of concept, it’s really hard to both be the marketplace be the Saas workflow in between and everything else. And so at first, for a first customer, we had no software and we were very transparent to them about that and said, Hey, we are in the building process for what we think is the inventory and order management system to help you handle this workflow between the warehouses. But ultimately, it was a pen and paper for us in spreadsheets and emails for us. Because we said to that customer, we want to intimately understand your workflows and what you need to do with your warehouse from your purchase orders to your bills of lading, when the inventory goes out to your lot number and skew level tracking of all the inventory you have in that facility, if we start building, and we don’t know what we’re building, because we haven’t seen a customer in action here, then we can go on the wrong path really fast. And so we took a very, very scrappy approach not only to managing that first customer, but even to getting that first customer, we it’s it’s public data every important to the US and all the different brands out there. So when you import and go through customs with inventory at a port, for example, that bill of lading document and customs clearance document is publicly accessible the database from the government. It’s actually how, for example, Apple got busted for launching the iPhone originally is that people noticed that buys Apple importing cell phones, and cell phone parts and accessories. And this is public data. And so we started going down that list like crazy building strength tool support as many phone numbers, emails and more as we could see off of it. And after calling and calling and calling and emailing and sending out many emails a day, we finally got our first brand to engage. And our first brand that was willing to engage with us. The value proposition again, was not the software just yet at that point. So it had to be someone who really understood just the supply and demand matching as a value prop independently as well. So it was a publicly traded Chinese business, a large scale enterprise from China and the value prop of matching supply and demand when they didn’t know the US landscape with the right prices for warehousing and distribution within markets were the best service providers were just being able to match the supply and the demand was plenty of a value proposition enough. And someone willing to listen and say we’re building software around what you’re doing was was also plenty enough for them to hear. And so when we delve in from their head first, contracting them as a first customer setting up our accounts payable with our first enterprise level customer, a lot of brands say or a lot of startups go with the start with an easy customer and end consumer another startup or someone who’s not going to be a massive elephant in the room with you from day one. We were surrounded by massive elephants in the room from day one and had to quickly build a muscle of how do we work with large scale enterprise do to be laptimes publicly traded companies and that was our first customer I’ll never forget it was a I think it was a few days before before my birthday in November back in back when that when we were launching. And so I was quite literally on my on my birthday on Christmas and more sending emails back and forth with the customer in the warehouse scheduling their shipments back and forth and just being as scrappy as possible. As my co founder and CTO Jacob was was watching everything we’re doing product managing everything we were doing and building our first MVP of software until about a month into that customer relationship. We launched our our first minimum viable product from the software perspective and onboard their operations there and had already started to sign up two or three other customers at that point.
Erasmus Elsner 24:52
It’s so exciting. I mean, this scrappy approach of scraping the customer’s data and then really punching above your weight. If you like for the first customer, I really love this. And this is something I haven’t heard of the STORD story so far. So really exciting.
Sean Henry 25:07
I’ll quickly jump in and joke that I even remember our first kind of mentors and first accelerator investment from this firm Dynamo. I even remember them joking when we showed them the contract. We got it all done. Hey, do you guys even know how to invoice a B2B, large public company in China? And we were like, I guess we don’t. But we’ll we’ll figure it out.
Erasmus Elsner 25:27
That’s a good problem to have. If that’s the only problem you have as a seed stage startup as a last point on the marketplace model. I remember you mentioning in a 2018 Forbes article that you saw as the closest peer or competitor early on this, I think more pure play marketplace Flex, which is a Redpoint-funded startup, I think they raised $130 million in total. How would you differentiate your model at this stage? Is this still a good peer?
Sean Henry 25:55
Yeah, it’s a great question. So our goal is always to build this kind of broader scale distribution network and cloud supply chain offering which measures both a complex logistics network warehousing, freight fulfillment, so for small items, e commerce, and ultimately delivery, so courier, drivers and parcel and more. And it’s a complex network. And you’ll actually find startups in each of those four categories, whether it’s someone like them in the warehousing space, someone like convoy, or Uber, freight, and the freight space, ship, and more in the fulfillment, space, and so on. So when we look at those categories, we actually scan all four of them. And our question early on, and not only do we span all four of them, but we layer Saas on top of that, but our thesis early on, we kind of asked ourselves, what do we believe we need to do to win in this market and what creates the most stickiness and the most long term value proposition. And for us, it was was starting with the warehouse, it was your freight is a little more transactional, you can kind of turn on and off your freight providers as needed. Since every truck picks up today and drops off tomorrow, it’s transaction, your your fulfillment, your last mile delivery our little far downstream, we want to be as close to the inventory source as possible, which is upstream B2 warehousing, we want to be as close to B2B Enterprise brands as possible. So we can get some network effects selling to the suppliers and the customers of our own customers who are getting inventory from our warehouses. There are other leading brands. So your large CPG, you might be shipping to a large retailer that could also be a customer of store, we thought that fundamentally, the best way to optimize your supply chain is your inventory and where it’s placed relative to your supply and your demand that leads to all of your delivery costs, all of your transportation costs, your inventory holding costs and more. And so we found warehousing to be the highest leverage point to kick off and launch and start the business. But I think what was under represented and under appreciated early on is kind of how that was a stepping stone in our longer term strategy to be this broader supply chain cloud model. And from there, since then, we’ve expanded not only from warehousing into freight as well, so the trucks aren’t in our warehouses in the now fulfillment, sort of small parcels that can also go out of the warehouse, and then the actual delivery and the parcel itself. And we’ve launched our more broad and robust software platform on top of that, and allowed brands to decouple it. And as we’ve gone down that journey, our competitive landscape has has really changed. And when we’re in the customers eyes, they’re really either comparing us to the largest largest logistics provider they can find out they’re like xpo, logistics, let’s say, or they’re comparing us to their software infrastructure like a NetSuite SAP Oracle more or Manhattan associates that might be across their their warehouses. And so when we come with this kind of broad network model, the customer looks at us across those two lenses.
Erasmus Elsner 28:57
Let me double click on the software layer that that you were alluding to already, the way I understand that you’re building really this orchestration layer, I could say you’re a software enabled marketplace. And I think initially there was some pushback when you were trying to get warehouses onto the platform because they were in the past approached by freight brokers, and that you use this software layer as a wedge into into the supply side. Talk to us a bit about this many complexities of linking into the existing warehousing DRP systems, the whole inventory management tasks that you’re helping companies with, it’s a pretty exciting topic for most people who haven’t been in this logistics industry. So maybe give us some insight on what the core offerings are there.
Sean Henry 29:43
So when we think about it, when you’re trying to help the shepherd and outdated industry and particularly really large brands within their into a new model, it’s really hard. Particularly because a lot of our customers have quite literally hundreds of millions of dollars a year of spend going into the stores. supply chain. And so it’s not something where you can just say, hey, click a button and transition all that over, they have hundreds, if not 1000s of employees operating in this sector, they have 10s, if not hundreds of millions of spend. And so early on, it was really key to us to figure out what is our land and expand model, what is our wedge and expand model that makes this really, really easy for both the supply and the demand and in the market we’re in. And so in doing that, we kind of realized our offering had to be split into kind of three broad categories. The first is the actual workflow software. The second is the actual integration layer, which I’ll talk a little bit about, which is one of the more complex parts of our business is to enable us to be very system agnostic to the networks we walk into. And the third is the actual network, which is the marketplace itself, and all the different suppliers. And so the software aspect of our business really lives within those first two categories of the workflow software to operate and execute the logistics, but also the integration layer. And so a lot of our proposition to customers is this idea of inter warehouses is this idea of connect to STORD once, and it can be your last supply chain integration that you as a brand need to do. Because we can connect our software to your earpiece system to get your purchase orders and more through one integration. And then yes, every other warehouse in our network, we ourselves have to integrate to but you as a customer don’t have to. So whereas a lot of these brands today, I’ll give you an example. Early on, we’re talking to a fortune 500, paper and packaging manufacturer, less alone names, 167 warehouses that are all third party logistics companies. After trying to integrate to all of them as an enterprise for about five years, they were integrated to under 20. And it’s these warehouses, they don’t have it teams on staff. They don’t have complex warehouse management systems that are API native, most of them run off of VDI, or flat file SFTP and more. And so a lot of our value prop we realized was for this party, how can we connect to that europei once better than anyone in their supply chain has done before and then tell them you don’t have to do this, again, everything else you do with us is under that same connection. And same thing in the warehouse, a lot of their warehouses, pushback was either one, I can’t do this without being connected to you. And without having software because like a traditional logistics broker, it just doesn’t work given how much velocity is within warehouses shipping out 1000s of orders a day. But to I also can’t replace my entire warehouse management system from day one, because I have all these other customers. And so we have to be able to build really easy capabilities to both integrate to the existing w ms that they have today within the building, we have then some products that can surround that from printing and scanning and dock door management and more depending on the capabilities of that facility. And on the other side with the customer. While there’s a lot of different systems we can connect to from er pieces, or sorry, order management systems, transportation management systems and more at the customer has, the number one we target is the VRP. Because if we can kind of burden that customer with an E RP integration, one time that we can connect to all their marketplaces, whether that’s eBay, Amazon, Walmart, and more, we can connect all their suppliers systems who are sending inbound purchase order receipts in orders. And to us, hey, this inventory is coming to your warehouse store. And we need to make it really simple for both these parties. And if we make it really simple for both these parties, not only will they start to adopt our software and our workflows more, but they’ll start to build this flywheel that because you’re on our software, you’re going to do more of your marketplace services, your logistics network with us. Because you’re doing more and more logistics with us, you’re gonna want even more and more of our software functionality over time. So not only do we have our software that enables your initial consumption and workflow, we’re charging you for the integrations and the infrastructure routing all these transactions back and forth, normalizing all the data that’s coming back from all these different warehouse management systems to make sure that transactions line up, and it can be fed back into your MRP system. But then we can continue and this is what we’re doing today. And really in 2020 and beyond layering in premium software offerings on top of the core platform. Because once you have order management system and inventory management system, and analytics, really rapid under one from optimization and network optimization to demand planning to purchase or some more limitless extensions to that core functionality, you can really drive similar to if you’re AWS and you start controlling their storage and their compute a lot of different modules you can build that company over time. So that’s a little bit of how we thought about our our software journey first being able to be really agnostic systems wise to take your order from the customer the CPG The Enterprise of the retailer routed through our network to the right warehouse for full execution, routed back. And we’re a lot in a lot of ways an ecosystem product where there’s just so many different components we have to connect to make this operation run successfully for our customers.
Erasmus Elsner 35:16
Super interesting, and if you had to map out now the software angle of what you’re building to the existing common solutions, I think there’s you mentioned it before Manhattan Associates, which is a large enterprise solution, which I think you could call it the “Oracle solution” in this segment of yours. And then there there are these smaller Saas solutions, which come for, I don’t know, $3000 — $5,000 a year, how do you differentiate your software offering with respect to these two tail ends of the spectrum? Would you say you’re somewhere in the middle also, in terms of feature sets, you’re more specialized or, or how you think about this Saas or software layer.
Sean Henry 36:01
Early on, our thesis for business was always that a lot of ways the software is the price to be the orchestration layer for these large brands supply chain. But you can’t, the fundamental problem back to the challenge I’ve faced at yo goes that you really can’t have supply chain software and supply chain services as different industries, they have to merge into one over time. However, it’s really hard to migrate existing certain logistics networks to a new software platform. So us starting with the marketplace, and starting with being the logistics providers a way to essentially accelerate brands adopting our software. And so early on, we only charged for the marketplace. Today, we charge for both the marketplace, which is the logistics services and the software, we have a Saas line of revenue, and we have just revenue. And as we think about that, it’s kind of taken a journey of going from being a free software to execute your logistics with us through the Marketplace. To a I don’t want to call it nominal software price, but kind of you’re paying to use the software, it’s not really premium Saas you’re paying to access it, and you’re paying for the logistics services. So where we are today is really worth a premium software offering as well as the marketplace and logistics network. And so how we’ve kind of commanded a growing ACV over time as we really launched and scale the Saas business is not only is not only out of the core functionality that enables you to use our logistics network, but we actually today, and this is kind of a little known fact, we actually let brands onboard their own logistics networks. If you want to bring your existing warehouses your existing repeals and more, you’re more than welcome to and you’re only going to pay a higher Saas price and you’re not going to pay us the services for that just to use us as that orchestration layer. But the value prop in why we started to do that is you kind of ran into this this conundrum that it takes a lot of time and energy to convert a complex existing logistics offering. So all your warehouses, trucks and a new provider. So we get to this point where the brand would say I have 10 warehouses across the US, five of them are through storage and through your marketplace. Can you help me? Because I really like using your software greater visibility. So we started saying how about you onboard those suppliers, and we’ll handle migrating them to our platform, just like we do whenever we’re adding the supplier ourselves. And we’re building and expanding our network. And so it’s interesting because today, we have it where your existing logistics network can be on in tandem with our logistics network. But the value prop there is, the more that’s on our platform over time, the more we can ultimately migrate towards our network and our marketplace offering over time.
Erasmus Elsner 38:50
Let’s move on now to the last missing piece of this business model, which is, as I mentioned in the beginning, very nuanced. And that’s the distributed systems part in computer sciences, you have distributed systems, which are networks of servers and computers, which interact with each other through a middleware that makes sure that the whole system acts as one coordinated unit. It is really this orchestration layer that helps with load balancing helps with system resilience. And one key benefit, of course, is that it it can turn a fixed cost into a variable cost. You mentioned this analogy, this great analogy before with AWS, Amazon Web Services s3 cloud storage units where you as a user, as a consumer don’t really recognize when you’re spilling over one unit think this is really one of the most interesting aspects of storage. Maybe we can dig a little bit into that one and how you think about this on a daily basis.
Sean Henry 39:49
Yeah, I think such a great question. Your understanding is so spot on because it’s it’s very nuanced. And when you’re building this kind of marketplace type service mix with the software Product often can be hard to define what it is in the very short term. When AWS, for example came out, you’re having to define what is cloud computing. And I heard a great quote once where, whereby, shifting from managing your own it networks in tech stacks moving to a cloud computing network is as much of a cultural shift for you as a customer as it is a just business decision. It’s just an entirely different way to do that aspect of your business. So the same way that brands used to have to plan for their their peak capacities on their servers and on their computing networks, it’s the same thing and light chains. Today, a brand goes and they either contract 100,000 square feet of warehousing space in the northeast us and then when it comes to, hey, I’m, I’m lagging on not getting my packages to the west coast fast enough. But I don’t have enough inventory to open another 100,000 square foot building center in that market. And I’m stuck here or quite the opposite, my demand just spiked. And I’m now capacity constrained to my four walls, I can’t handle all this fulfillment volume I have. So I’m going to be days and days behind on my orders. We take it and shift this kind of economic model from this very least driven space driven model to more like the cloud service. And I think fundamental to any cloud like services, taking any kind of complex digital or physical service, abstracting away the complexities for the buyer and the customer and giving them infinite scalability. And I think whether it’s AWS or us, there’s there’s kind of five attributes that I think are massively important, I think it’s you have to take away the capex, so that you’re not just spending millions or 10s of millions of dollars on fulfillment centers. In doing that, you have to convert it to a variable cost model from a fixed infrastructure to a kind of pay as you go model and more like a utility, you have to give it true elasticity, and both being able to scale up but also scale down as you need. So for example, on that, on that note, we’ve had brands like one of the largest chemicals companies this year, scaling up to handle 10s of 1000s of additional pallets of hand sanitizer products during code in the pandemic that after this, they’re gonna have to scale it out. And if it wasn’t for storage, whereby they could open, I think they have over over 10 different warehouses across the US to pocket and hold that inventory regionally, to rebalance it on a weekly basis as they run out of inventory in certain markets or need to open new warehouses. If it wasn’t for us, they’d be just taking down massive leases, and trying to accommodate all this fixed infrastructure to handle a spike in demand or spike in need. So you have to take it to true elasticity to both scale up and scale down. And then the last two, I actually think are two of the most critically important. One is speed to market and giving the customer the ability to be faster and more innovative and faster to market. And so like AWS, you can scale up tomorrow, taking six months to invest data next data center. For us, the average warehousing contract launch time is closer to 46 months where our customers can launch a new warehouse in 24 hours. So I think fast time to market then the last one is the one I’m really passionate about if you take it all the way back to my days as an eBay seller as an e commerce seller and more, which is that you ultimately need to kind of democratize access to the same level of infrastructure for brands of all sizes. And the importance there is that so many brands spend so little time on what actually differentiates them in their products and services. And they spend so much time on all the heavy back office and back end infrastructure. Well, if you can flip that model and take these heavy infrastructure like your supply chain and outsource it, like model, it gives the brand more time to focus on the products and services that delight their customers and grow their business. And way less time managing that infrastructure rather than building investing in it and more. And I think the the last kind of point I would make is that before cloud computing models, everybody was on their own unique it stack. You were the only one on your your it network, your computing networking. Same thing today, you’re the only one running your supply chain. It’s your warehouses, your integrations, your warehouse management systems, New York piece systems and more. And that’s a fragile place and a scary place because you’re not optimized necessarily. You don’t have collaboration across other brands. You can’t combine your overall volume to get better economies and efficiencies of scale. Well on a cloud, you’re ultimately accessing, again, the same level of infrastructure, even if you’re a small brand, that maybe the the largest brand out there is accessing and leveraging. And so I think when I think about storage as a cloud model and kind of changing this era, on heavy infrastructure, long term contracts, build it yourself to connect to us once and get infinite scalability. That’s where I think the kind of AWS type analogy really is a salient point that that resonates a lot with our, with our customers in the markets right now.
Erasmus Elsner 45:16
I really love this, “building the backend of e-commerce and small DTC brands”. I think this is really music to the ears of many aspiring entrepreneurs, maybe as a last element here, which really, I think ties all of this together is this logistics angle that we haven’t talked about yet. And this summer, in the midst of of the pandemic, you actually acquired another company Cove Logistics, when I looked at this transaction, I was wondering, should I think about it in marketplace terms that you are now sort of turning from a two-sided marketplace into a three-sided marketplace? But when I looked at it closer, it turns out that what you’re using this acquisition for is to basically handle the intra-warehouse transfers? So basically, really being this operating system in between capacity spikes? Is that the way you think about this acquisition? Or how should we think about this logistics angle that you’ve added or expanded on this summer?
Sean Henry 46:20
Yeah, absolutely. So I kind of go back to what we saw really four categories of broad supply chain, which would be the warehousing, the freight shipping, so the acquisition, and I’ll talk through really the whys, the fulfillment in actual small items out bound to the customer. And the finally the delivery and the parcel, which is working with regional carriers, large carriers like UPS and FedEx, and more in courier drivers. So for us, we started in the warehousing space, ultimately, to, like I said, Get the inventory moving with us hold one of the most valuable pieces of the supply chain. However, everything coming and going to and from a warehouse rather than a fulfillment center where it’s leaving on a parcel, it’s coming to and leaving the warehouse on a truck. And so every single time any inventory was entering our system. Ultimately, there was a there’s a freight transaction. So you had a lot of customer demand, not only to just facilitate those inbound and outbound shipments, but also we were looking to overlay on top of, Okay, we have five different warehouses now for you. Dynamic inventory balancing, network optimization. So we can actively recommend moving your warehouse from one node to another to save money, time and speed of delivery. However, in doing that, and you’re not offering the shipping and the freight in between, you’re basically telling the customer every time I here’s a burden to solve on your own, here’s something you should. And so for us to ingest the freight capabilities overall, it was okay, now we can actually connect all these different nodes and dynamically rebalance inventory handle the shipments in and out for our customers abstract away more and more of the complexity, complexities in layer in more premium software around least cost routing, network optimization, dynamic inventory, rebalancing, and more. Because we’re not just the nodes of space, with the nodes, and also the connection in between each of those. So that’s really what drove our decision. And the build versus buy was ultimately, hey, we can spend a few months hiring all the right people building all these capabilities in house, or ultimately, we can go leverage people who are already the experts at that smaller company than us and quickly adjust and get those capabilities.
Erasmus Elsner 48:32
Sean, you raised the Seed round being outside of Silicon Valley. So this is a pretty challenging situation. And everybody who’s ever raised from venture capitalists knows this. Typically, you need a warm introduction. Then you have some of the top tier Silicon Valley firms on your cap table with Kleiner Perkins, obviously, Founders Fund now coming into the Series B. So maybe start all the way at the beginning. I think the first sort of accelerator incubator round you raised was was from a local firm, Dynam. And then you had a Seed round, which was in part led by Susa ventures. AndI mentioned to you I had Leo Polovets on, big fan of him. And I think they were in Flexport as well, very early on, one of the reasons why they came with a inherent understanding of the logistics industry and the challenges. Talk to us a little bit how this funding journey went for you.
Sean Henry 49:29
Absolutely. And I think you kind of hit the nail on the head that warm introductions are your best friend in venture capital. However, at the same time, they don’t have to start with you knowing that venture capital firm, that’s something I want to be really, really intentional about because, frankly, when we started STORD, I didn’t know any venture capitalists and I barely knew anybody who knew any venture capitalists. And none of my warm introductions to these leading VC firms came from people I knew prior to STORD and so early on as a founder, so much of your job is to build a network, build relationships and more. And it can’t be over-emphasized enough, because while to some people, you may view it as a distraction to the short term of building your initial product and more, at the end of the day, if you foresee this becoming a massively, you have to be able to surround yourself with the right mentors, peers, advisors, and more very early on. And so from kind of the earliest days of STORD, I was relentless about just reaching out to people and asking for help asking to buy them a coffee asking to get to know them, and very similar to how I ended up working at Kyoko just asking for an opportunity to learn. And that’s really the path that I took with, with with launching some of these investor relationships as well. So the way I went about identifying what venture firms I wanted to work with was very ethos aligned, ultimately trying to look for other VC firms that I felt aligned on the same mission that we had here at storage. And my best way to identify that was look at peers in the space, other leading companies and who some of the investors were. So you identified, for example, that Susa was an investor in flexport, and a few in Robin Hood, and and della and a few of these other brands that I personally looked up to as a founder and some of which, like flexport, were in my space. And so I started going across all of our network and everyone I could find and ultimately asking for warm introductions and trying to meet some different people who had met them had worked with them, and who knew them. And so I got a fairly indirect introduction into Susa, and ultimately started building a relationship with with with Chad Buyers on their team was the lead partner, for STORD, and I think from from day one, I just felt really aligned to how they felt as a firm and the types of companies that we’re looking to partner with our first meeting. Chad did not ask me really much at all beyond, hey, here’s an empty whiteboard. And we don’t need to go through your deck. What are you guys building? And what does this look like over time, and it was challenging to map out everything in supply chains, all that we’re going to touch and create a cohesive narrative on an on an empty whiteboard. But it was a conversation in a partnership. And that’s really what i what i was valuing and looking for is these founder friendly investors who understand the market we’re in understand what we’re trying to build, and ultimately are leaning on you as the founder, rather than coming in with all these preconceived notions of exactly what should be built here. And so again, it was ultimately leveraging as many people as I could find, and there’s many warm introductions as I can find that that first institutional seed investor that was based in Silicon Valley, and I have to be honest, at the end of the day, it’s it’s kind of like a domino effect. And ultimately, that’s what enabled subsequent rounds and subsequent rounds and more. And so while in that seed round, yes, we did meet plenty of other leading venture firms, some through cold outreach directly from myself, many of which through warm introductions with people I had met over the last few months, like other founders in Silicon Valley, and more. But after that, I really leveraged our existing investors like Susa as much as possible when it came to raise the Series A, and who would we believe are the best investors for this market at that time, and really searching out for who do we think is going to back this is we tried to build an industry defining an iconic company, although potentially hard to understand, early on, because we’re a very complex business. And we really, truly looked up to Kleiner Perkins, when we were in the market deciding who to partner with and, and ultimately, the way they think, as a brand, as a venture firm, the way the partners operate Ilya Fishman on their team and getting to know him and getting to learn from him as an operator. And very similar. Met Ilya built a relationship for a few months in advance of a fundraising. And yes, while we were doing a little bit of a roadshow meeting, a lot of other firms out there is really just trying to build that one on one person. With that with that venture capitalists and that investor, who you’re going to partner with, for many, many, many years to come. And my number one kind of piece of advice when it comes to not fundraising, but actually closing the round and deciding who to partner with if you get to the term sheets is I just encourage every founder to try to try to ask that that investor, what does this look like in 510 years in your mind based on all the data we’ve gone through all the presentations, we’ve gone through market discovery, and more. What do you see happening here over time, and every single person we chose to partner with from, from Dynamo and Susa, to Kleiner Perkins to now Founders Fund and more. We’ve just been so mission aligned and what we’re trying to build over the long term and very long term oriented that it’s been, it’s been a no brainer for me and really excited to partner with these investors.
Erasmus Elsner 54:48
We’ve been talking for over an hour, now let’s wrap up the session. You’ve just raised a Series B growth round, the sky’s the limit and maybe give us the quick version of where you’re taking STORD.
Sean Henry 55:02
So it’s kind of layered throughout this discussion, I think, a lot of what we’ve done before. Now, in before this, this financing has been laying a lot of the early foundational pieces of the company, from our software capabilities, our logistics capabilities, our team to execute on moving all that inventory through our network every single month and more. And I think where we are today is, we’re really seeing it all come together very fast into the product services mission that our customers need, and that are ready to kind of sees the gap in the market that exists today. And so moving forward, it’s basically how can we really continue down our mission of essentially keeping our brands and our customers focused on innovating, delighting and obsessing over their customers really pushing their supply chain challenges to the cloud and to storage? And how can we really both embody what it means to be a cloud platform and a cloud service offering, but only but continue to do that not only for a lot of the leading enterprise brands we’ve started with, but taking now the infrastructure economies and efficiencies of scale that we have through working with some of these really large brands and starting to extend that down to more the mid market and smaller and smaller brands who need to access that same level of capability. So really excited for what the future has in store for our team. We started 2020 around 40 people as a company, we’re now over 130 team members holistically. And we have a decade plus of building what needs to be built in this market to come in. We’re all strapped in and excited.
Erasmus Elsner 56:38
Thank you so much for taking the time. Sean on your way to the moon here. We’ll be looking forward to follow your journey. Thanks