In the spring of 2016, we had just established Dynamo, were in the process of closing Fund I and were running our homonymous accelerator program (which we no longer run). That spring, I met Sean Henry and Jacob Boudreau for the first time — two 18 year olds who had turned away higher education (despite merit scholarship) to build their own company. We admitted them into our accelerator and very clearly let them know that their business-to-date was not very interesting but we wanted to work with them on something bolder.
A pivot and nearly two years later, I’m proud to announce that Dynamo co-lead Stord’s $2.4M seed round alongside Susa Ventures with participation from an amazing roster of investors including Rise of the Rest, Engage VC, and Chris Klaus. Stord is creating a better way for companies to distribute product at scale. They operate a software-enabled network of independent warehouses and distribution centers through an enterprise-level software to drive inventory insight and efficiency.
Why Did We Invest?
A rockstar team of do-ers, not talkers. Sean and Jacob have proven their mettle from Day 0 where they pivoted their business and exposed themselves to the antiquated state of the warehousing industry. At our accelerator, they would hit the phones starting and 8am and were often roadmapping their product till 8pm. The beauty of their team is that they are both complementary yet on the same page when it comes to evolving the business in a meaningful way.
In the last year and a half, the team developed a customer-centric vision where they spend time with customers and suppliers to build a solution that satisfies the needs of both parties. In the process, they’ve built a software-enabled network that customers say they’re amazingly impressed and happy with.
Their team’s grit and relentless focus on execution is remarkable. It shows when they pause a conversation to help a customer with their product or take a follow up sales call in the middle of lunch or after-hours for their international clients. Their product and sales updates aren’t linear but exponential which makes any venture investor excited.
Lastly, the team has the intangibles that will allow them to scale themselves. They are constantly absorbing new information, lessons learned, and leveling up their skill set to grow with the company. The brutal honesty as to what they know, don’t know, and are great at is astonishing. As a result, they have attracted an amazing roster of supporters, made impactful early hires, and are continuing to look for rockstars to help them transform the global distribution industry.
Today’s businesses have dynamic needs and as a result, rigid and inflexible warehouse/distribution practices are under-serving the needs of customers. Every product we consume gets warehoused and distributed. As a result, the US warehousing market is one of the largest industries, estimated to be $141B (including warehousing and 3PL services) across 9,000 facilities accounting for 1.9B sq feet of space.
We estimate that ~100 companies either own or are primary sublessors of roughly half those facilities. However, this concentrated group comprises a minority of total square footage in the industry. The long-term leasing model ends up driving the business model of larger players as they finance (and re-finance) new facilities. Shippers, (the companies that use warehousing/logistics services) tend to get stuck with 3 to 5 year leases even if their needs are short-term in nature. In fact, 57%+ of facilities require minimum 3 year agreements. As a whole, these rigid structures cost shippers over $10B each year in underutilized capacity that they have contracted for.
Now juxtapose this to an often overlooked part of the industry — the independent warehousers who own 1- 10 facilities and provide the exact same 3PL services on site. These outfits account for over 57.6% of warehouse square footage in the US across 5,000–6,000 sites. Furthermore, they are able and willing to provide more flexible terms to shippers in an effort to maintain high utilization.
Now add to the list a a lack of understanding and transparency around warehouse-level operations — people don’t necessarily have intelligence on how their materials are being handled by these third party facilities. It’s estimated that the inability to make rapid, data-driven decisions costs shippers almost $20B per year in under-optimized distribution. The hyper-fragmentation of the asset base has led to inconsistent experiences and dated technology holds back improvements seen in other industries.
Our belief is that as economic velocity is only increasing and the backbone of our economies need to stay nimble, it is due time for an upgrade in how companies distribute their products.
The product is on a path to virtualize warehousing resources and provide a more nimble/flexible relationship without losing sight of customer service. Enter Stord, a team who have built a software solution that increasingly allows supply chain managers to scale their warehousing needs to the demand they see. I liken it to the virtualization of web infrastructure and the rise of AWS, Azure, etc. Speaking with customers and warehouse partners, this tech-forward approach didn’t forsake a fanatic focus on customer service. In an industry built on relationships, technology alone doesn’t cut it.
The Stord team have ramped a network of independent warehousers who are able and willing to provide flexible terms to shippers to maintain high utilization. Stord standardizes the operating systems of each facility, sets a operating level standard, and acts as an aggregation layer for a variety of disparate facilities. Shippers have piece of mind with this model and are even able to request various types of product distribution through the platform: palletized, dry bulk, hazmat, cold, etc.
Furthermore, the team is ramping an effort to interface with age-old warehouse management systems to provide operational transparency and intelligence to drive more informed decision. The vision for the long-run is powerful and only empowers the supply chain manager and increases the revenue opportunity for independent warehouses.
Through Stord’s SaaS platform, shippers have direct insight into their inventory, orders, and general warehouse operations. If you’re a manufacturer, your facility footprint can scale up and down based on your businesses’ needs. For example, one customer has a need to test out new markets as they respond to new retail contracts. Now they can use Stord’s solution to ship their product to a new market, maintain smooth operations through the same dashboard, and scale up as they start to succeed in the new market.
Stord’s business model scales with usage and as a result, is very attractive to both medium and large companies. We’ve spoken to both customers and partners who both discuss benefits of such a network, the costs they’ve saved, and business they’ve gained. You could say they’re building a product people love.
Sean and Jacob are proving they are solving a real problem and transforming the status quo. We are delighted to support them on this journey to serve the evolving and dynamic needs of shippers while bringing light to a more flexible and forward-thinking group of independent warehouse owners.