A Product Market Fit Show | Startup Podcast for Founders
00:05:49 · Andrew Butt, Pablo Srugo
[00:05:49] S0: Sure. Absolutely. If you imagine how the supply chain works, 80% of global trade goes from a manufacturer through middle parties like distributors, buying groups, retailers, contractors and then eventually to the end customer. That's 80% of trade. There's very, very little that goes direct from a manufacturer to an end customer. Apple and Tesla might be two examples but virtually everything else goes through the supply chain. There are trading agreements between those supply chain partners so a manufacturer will have agreements with distributors, distributors have agreements with retailers and so on. Those agreements have lots of goals and objectives. It says, we want to sell this many products, certain value, certain volume to certain end customers and all sorts of other conditions. Then when those goals are met, the manufacturer will actually pay money to the distributor and the distributor will pay money to the retailer. It's like a pay for performance. It's just like in a software company, you pay the sales team a commission. Rebates are just like sales commissions, really, in the supply chain and they're all about driving behavior. [00:06:56] S1: Money flows both ways because let's just take the example of – we just did an episode last week about selling couches online. Let's take couches. Manufacturer of couches, obviously, gets an order from a distributor, who then gets an order from a retailer. The money flows that way but what you're saying is, when certain objectives are met, money then flows the other way into a form of commissions.
00:06:56 · Pablo Srugo, Andrew Butt
[00:06:56] S1: Money flows both ways because let's just take the example of – we just did an episode last week about selling couches online. Let's take couches. Manufacturer of couches, obviously, gets an order from a distributor, who then gets an order from a retailer. The money flows that way but what you're saying is, when certain objectives are met, money then flows the other way into a form of commissions. [00:07:15] S0: Yes, you're right. The way that we do actually define a rebate, what is a rebate, is, a rebate is any funds that flows back through the supply chain. Like you say, everyone understands that we pay our suppliers but this is where our suppliers actually pay us so anything where our suppliers pay us is a rebate. [00:07:33] S1: What are some of the key problems that you're seeing in the 2010s, 2015 area, right before you start Enable, around managing rebates? What's so hard about it?
00:07:33 · Pablo Srugo, Andrew Butt
[00:07:33] S1: What are some of the key problems that you're seeing in the 2010s, 2015 area, right before you start Enable, around managing rebates? What's so hard about it? [00:07:43] S0: What was hard about it is, if you are a distributor, you will have rebates coming in from many, many different suppliers and they will all be completely different because they're typically created by the manufacturer, although not always and you'll be distributing many types of products. If you are a construction company, you will be distributing bits of lumber and wood. You'll be distributing HVAC systems and boilers. You'll be distributing concrete and powder. There's so many different types of products. Every manufacturer has different rebates with different units of measure. Some of them might be – will pay you $10 per kilogram or $10 per ton or $10 per unit and then there's different tiers. It's really complex. Also, commercial teams get very creative, just like they are today. Buyers come up with all kinds of strange, weird and wonderful mechanisms that say, well, if you are selling to this customer and it's this particular product but you are not selling this other thing, then you can get this but only if – so you can imagine there was no software that could do that and all these companies were using spreadsheets to manage what was becoming all of their profit so that was the problem. [00:08:59] S1: Who in the supply chain is using this? Is it more the manufacturers who are giving out these rebates or is it the distributors and the retailers that are receiving it?
00:08:59 · Pablo Srugo, Andrew Butt
[00:08:59] S1: Who in the supply chain is using this? Is it more the manufacturers who are giving out these rebates or is it the distributors and the retailers that are receiving it? [00:09:06] S0: Where we started was with the distributors so it was distributors receiving this. Then what we quickly learned is distributors belong to buying groups and buying groups negotiate these agreements on behalf of lots of distributors. We then started actually providing software to buying groups as well. Then we actually found the manufacturers were equally struggling to manage it from the other way around so then we started supplying manufacturers. We now supply the entire supply chain but it started from the distributor perspective. [00:09:37] S1: Got it. Okay. Give me a bit of a timeline here. When do you start really moving from consulting and how do you do that transition from consulting to effectively a single-product SaaS, the classic model? [00:09:50] S0: It was very, very slow at first and the services business was, like I said, profitable. We hadn't raised any investment and it was providing a fairly nice lifestyle. [00:10:01] S1: Just so I understand, that services business, was that also strictly focused on rebates at that point or you were doing everything?
00:10:01 · Pablo Srugo, Andrew Butt
[00:10:01] S1: Just so I understand, that services business, was that also strictly focused on rebates at that point or you were doing everything? [00:10:07] S0: We were just building but it – yeah, that was a common theme of something we were building but we were building lots of other things as well. It was a comfortable business. We could see it would never be huge because it was just growing steadily and like you said, you have to always worry about where's the next customer and you're selling time so it's finite. Then it was probably somewhere like 2013 where we said, right, we should actually build a product. It was actually inspired by a Silicon Valley tour. My cofounder and I came to Silicon Valley for the first time ever and met companies like Intel, Citrix, Google, startups, DocuSign was an early startup back then. I remember meeting the founder and we thought, wow. [00:10:47] S1: What brought you to the Valley? [00:10:49] S0: We just had contacts locally who had contacts in the Valley and they organized this study tour for usually CIOs, like UK CIOs that would then bring over to meet Silicon Valley companies. That was quite inspiring. For example, we came up with the product name in Silicon Valley in about 2013 and we got a website and a domain name but it still was slow going and we were still mostly focused on the core business. I would say when we actually started writing code was probably 2015 or something – 2014, 2015 and then the official launch date of the product was 2016.
00:10:49 · Andrew Butt, Pablo Srugo
[00:10:49] S0: We just had contacts locally who had contacts in the Valley and they organized this study tour for usually CIOs, like UK CIOs that would then bring over to meet Silicon Valley companies. That was quite inspiring. For example, we came up with the product name in Silicon Valley in about 2013 and we got a website and a domain name but it still was slow going and we were still mostly focused on the core business. I would say when we actually started writing code was probably 2015 or something – 2014, 2015 and then the official launch date of the product was 2016. [00:11:26] S1: Walk me through a little bit more of that Silicon Valley tour because there's people listening from all around the world and it's harder to find but when I went through – I went to 500 Startups accelerator. This was a while ago but, I guess, similar era. It was 2013, 2014. There's something different about the Valley. I don't know how much you remember of that trip but clearly it inspired you at least to some extent. What was it that happened during that trip? What did you feel that was different there versus in your startup ecosystem in the UK?