Kinnek, A Small Biz Marketplace, Raises $20 Million Led By Thrive Capital

Kinnek, a New York-based marketplace for small businesses to find suppliers and manage purchasing, has just raised $20 million in Series B funding led by Thrive Capital.

It already looks like a smart bet.

The company currently has 20,000 businesses and 2,000 suppliers using its marketplace, and they’re striking millions of dollars worth of deals every week, says cofounder Karthik Sridharan. Considering the company’s age and the fragmented landscape in which it’s operating – think restaurants to distilleries to manufacturers – that kind of traction is meaningful.

It’s also just the tip of the iceberg, apparently. According to a spokesperson for the company, Kinnek “conservatively” estimates that U.S. businesses with up to 100 employees and $20 million in yearly sales spend more than $2.2 trillion annually on machinery, equipment and physical goods based on data from Visa, Intuit, and the Bureau of Labor Statistics.

While we can’t vouch for the accuracy of that number (there are lots of different figures floating around out there), what is clear is the competition, or lack of it, facing Kinnek. A preliminary search by DataFox, a business intelligence company, turns up just four upstarts trying to connect small businesses with suppliers online in recent years — Kinnek, BuyersBestFriend, SupplyBid, and SupplyHog — and the last three are focused on specific verticals. (SupplyHog, for example, is a platform for the construction industry.)

It’s easy to understand Kinnek’s value proposition. Most small companies are stuck buying machinery or other bulk supplies from the same outfits they’ve always worked with. Kinnek plugs them into a world where they can easily get customized quotes from numerous suppliers who, because they’re competing, presumably offer better pricing.

Buyers don’t pay a dime to use the platform. Only suppliers are charged a broker fee, as well as a cut of each transaction. (It varies depending on the product being sold.)

Kinnek doesn’t seem terribly concerned about disintermediation, either. The key, it says, are incentives like ratings and reviews that build up businesses for suppliers.

“In the [business-to-business] world, there’s nothing like a Yelp to help you understand the reputation of a particular factory,” says Sridharan. Because suppliers can establish a name for themselves through Kinnek, it drives more business and keeps them from going around Kinnek for a deal or two.

Indeed, going forward, Kinnek aims to create more of a social graph for its customers. The company already hosts Q&A forums where buyers can ask questions and suppliers can answer them for “reputation points.” The company next plans to address groups of business owners based on their common business-related interests, with an eye toward facilitating much more interaction between them. It also wants to handle more in terms of payments, the partial showing of catalogues, and invoicing.

And Kinnek plans to beef up the types of businesses on the platform, with targets that include hotels, motels, farms and other agriculture-based companies.

The 30-person startup will use some of its new capital to hire salespeople toward that end, but Sridharan says some are likely to find the company on their own. “There’s so much latent demand for a purchasing tool like this, it feels like it’s been decades in the making,” he says.

Along with Thrive, Kinnek’s newest funding comes from earlier backers Matrix Partners, Sierra Ventures, Version One Ventures, and Angelpad, as well as individual investors, including AngelList cofounder Naval Ravikant. To date, it has raised $33 million.