Retailers have traditionally onboarded their drop-ship, marketplace and wholesale suppliers using electronic data interchange (EDI), which is a fancy way of saying information that is sent from one company to another electronically.
However, setting up this process can take months, time most retailers don’t have if they want to get ahead in Amazon’s world.
In contrast, Convictional is developing what co-founders Roger Kirkness and Chris Grouchy called “supplier enablement” technology that puts those drop-ship, marketplace and wholesale suppliers at the center of the onboarding process. Instead, they connect their products and inventory to retailers using Convictional’s guided workflow and one-click integration.
This way, retailers can more easily discover and change out inventory. It also enables their retailer customers, like Indigo and Harry Rosen, to get going in as little as 10 days versus three months. Moving that fast means retailers can identify emerging brands before they wind up on big-box store shelves, Grouchy said.
“Most enterprise retailers onboard third partner vendors for drop-ship and could maybe only onboard three suppliers each quarter,” he added. “With Convictional, they can onboard 20 to 30 brands a quarter, which is a vastly different gross merchandise volume growth for businesses.”
Kirkness, who graduated from high school at 16, started his career at GNC, starting and running the company’s e-commerce business. That was when he personally saw how difficult it was to connect GNC’s software to a supplier — the company was sourcing from thousands of suppliers, but the connection process took so long that, at the time, they were only able to get fewer than 100 up-and-running.
Convictional is not the only company finding success in this space. Logicbroker, an e-commerce company focused on drop-ship, marketplace and EDI, secured a $135 million growth round from K1 Investment Management last October.
At the time, CEO Peyman Zamani told me that “electronic data interchange is now at the heart of e-commerce,” and “the concept today is the same, but what I envisioned was this taking place in the cloud, but no one was focusing on the connectivity and automation in a scalable way.”
However, while some $5 trillion is estimated to be generated through EDI across a U.S. B2B e-commerce market, valued at $9 trillion, not every company has access to EDI, Kirkness explained.
That was something he and Grouchy wanted to figure out. They met each other at Shopify where they were in a group working on new markets, in this case, B2B, trying to figure out if what Shopify built would translate to that sector. That’s how they learned that the struggle to connect with EDI was due to not having any APIs.
“APIs are the hot style format for people learning computers in the web world,” Kirkness said. “We thought about making an API for doing EDI, but when we talked to customers, they wanted a way to source, onboard, integrate and trade with suppliers all in one system.”
So they designed Convictional so that suppliers can choose their own connection path of least resistance, API or EDI, he added.
There are two customer sides to the technology: the buyer side where retailers engage with consumers and look at brands, and the seller side, the manufacturing side, where suppliers need to upload product information, receive orders and share information to get paid.
Meanwhile, five months after announcing $6.7 million in Series A capital, the company Thursday secured $40 million in Series B funding, led by YC Continuity, with participation from existing major investors, including Lachy Groom, that led the Series A and an earlier seed round, and FundersClub. In total, the company has raised just under $49 million, Kirkness said.
At the time of the Series A, Convictional had just closed its first enterprise deals, but had not activated them. Today, Kirkness and Grouchy say they also have activated five enterprise customers and are poised to add 20 more this year.
In addition, more than 1,000 suppliers joined the platform in 2021, prompting usage to increase by 26% month over month and the number of orders to jump seven times compared with 2020. The company also increased its headcount by four times.
The new funding will go into R&D and its sales and marketing efforts for new customer acquisition. Kirkness and Grouchy filled the role of marketers and are now hiring across the board to replace themselves in key functions.
As part of the investment, YCC’s managing director Ali Rowghani is joining Convictional’s board of directors. Rowghani said that he often looks for two characteristics in companies: virality and network effect, of which Convictional has both.
“I’ve known Roger and Chris a long time, and they are strong about their vision and passion, which is the profile of a company to put a shoulder behind,” Rowghani said. “If they become a big company, a lot of people win — the sellers that can integrate into more distribution points, while buyers can grow assortment for their customers.”
Comment