SaaS Interviews with CEOs, Startups, Founders
1527 Supply Chain Risk Company Hits $7m in ARR, 130 Customers
29 Sep 2019
Chapter 1: What is the main topic discussed in this episode?
risk methods helping 130 customers with supply chain risk management each customer pays about five grand a month so doing call it 650 grand a month today that's up over 2x year over year they're doing about 300 400 grand just about a year ago they've done this with about 20 million dollars raised economics are healthy net revenue retention well over 110 most that expansion coming from their three very unique product lines that build on each other in terms of aggressiveness and acquiring customers 60 000 cac up to that at least which is less than a 12 month payback period they got about a
360 grand in lifetime value with their team of 140 people based between Munich, Boston and Poland. Hello, everyone. My guest today is Heiko Schwartz. He's the founder and managing director of a company called Risk Methods. He's an expert in both software and strategic purchasing.
Chapter 2: What is supply chain risk management and why is it important?
and has spent 20 years successfully helping supply chain and procurement organizations implement solutions to increase performance, reduce cost, and minimize risk. He's been honored with the Pro to No Award from Supply and Demand Chain Executive for his forward-thinking approach to the topic of supply chain risk management. Aiko, are you ready to take us to the top? Great. Thank you, Nathan.
Thanks for the introduction. You bet. So for people that are not in the weeds in your space, just describe why supply chain risk management is important.
All right, we'll do. Supply chain risk management is extremely important for companies, mainly for the companies that produce goods. And as supply disruptions or reputational noncompliance within their supply networks lead to manufacturing stop, which means these companies are no longer able to serve their customers with the products that they have promised to serve.
which leads to increased cost to firefight and fix these problems and loss of revenues at the same time. So if you imagine these consequences do pair up, it means at the end of the day that a company is losing revenue while the competition is jumping into this lack of product delivery and cost increase. So it's really the worth math.
from an economic perspective, and that's probably not a space in which manufacturing companies want to end.
And Heiko, what are these kinds of risks? I mean, when I think supply chain risk management, I think Apple and Foxconn, and then, oh, whoa, there's unsafe worker conditions. Oh, whoa, we have to stop using Foxconn. I mean, is that the kind of risk you're identifying?
It is part of it. So we cross... look from a holistic perspective on everything that damages the reputation of our customers or disrupts the supply chain. So to become a little bit more precise, we look into an area which we call delivery. So everything that disrupts the delivery, it might be a strike at a supplier or sub-supplier site.
It might be a strike at a seaport, airport, distribution center, warehouse. And there might be a fire at a production site or assembly line of a business partner that really physically disrupts the supply chain. Or a hurricane or something. Hurricane, any kind of natural disasters, flooding, earthquake, fires, probably actually a big topic in the US.
So, aside of these physical disruptions, we also consider everything that is... putting the business partners in struggle because of financial health. So cash flow developments, fines, penalties, lost lawsuits, which are really bringing a financial risk to the viability of business partners is another area where we are looking deep into. Got it.
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Chapter 3: What types of risks are involved in supply chain management?
Yeah, absolutely. It was really an all-in decision. And as I can say today, I'm married with Risk Methods. That's good.
So how much total raise to date?
So far, we raised north of $20 million through in Series A and Series B. We went through in Series B springtime last year, and we raised around $15 million into the Series B. Okay, so $1.5 million.
One, 5 million. Series A was about 5 million for 20 total. Yes. Correct. If you did that, if you did that last spring and most people, once you're on the venture capital treadmill, you're raising every 12 to 18 months. That means right now you're about to announce or you're in the middle of fundraising or you're in acquisition talks with a competitor. Which one is it?
Um, it's neither nor. Oh, come on. I got it.
Um,
Even if... Are you in a spot where you don't need to raise capital or are you cash flow positive at this point?
We are getting really close to this spot and we have no several options on the table that we are discussing and we believe that a good option would be that we... Potentially extend our reach with some additional funds, but not going to in series C right now and which would be more probable to do maybe end of 2019.
By the way, this is getting more and more popular to do kind of a bridge round in between series B and series C to kind of grow valuation more before you go out and do a big $20, $30 million series C. Right, right. Would you ever use, I don't know what it's like in Europe, would you ever use venture debt to serve as the bridge so it's non-diluted or would you definitely go out and raise equity?
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Chapter 4: How does the software identify and manage supply chain risks?
You probably use that every day. Number four, how many hours of sleep do you get every night? Excuse me, could you please repeat the question? Sure. How many hours of sleep do you get every night?
Oh, this really depends. Like I'd say between three to six.
Three to six. Okay, very good. And then we'll call there four or five average there. And then what's your situation? Married, single, kiddos?
Um, I'm single, but I'm living together with my girlfriend.
That's great. Not married, no kiddos. And how old are you? I'm 42. 42. Last question, Aiko. What do you wish your 20 year old self knew?
Um, could you please repeat the question?
I'm not sure. What do you wish you knew when you were 20?
I think I would do exactly the same again and again. And if I were 20 right now, I would do my studies and stick my nose into the business life. And just as I did in the first years of my career, try it out as much as I could. And finding out which areas of the professional life are fun and interesting.
what makes me a satisfied and happy person, uh, also from terms or from a perspective of the private life.
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Chapter 5: What is the pricing structure for supply chain risk management software?
They've done this with about $20 million raised. Economics are healthy. Net revenue retention, well over 110%. Most of that expansion coming from their three very unique product lines that build on each other. In terms of aggressiveness and acquiring customers, $60,000 CAC, up to that at least, which is less than a 12-month payback period.
They got about 360 grand in lifetime value with their team of 140 people based between Munich, Boston, and Poland. Thank you so much, Eiko, for taking us to the top.
Thank you so much as well. Take care, Nathan.