Building a Global ERP Company from Estonia: Katana CEO Kristjan Vilosius (Part 3)

Sramana Mitra: The entrenched competitors are heavy duty. So that’s my next question. What did you do positioning-wise and go-to-market strategy-wise? So that’s where we’re going to spend most of our time now, on what you are doing, on how did you break in and what was the positioning? How did you navigate the market?

Kristjan Vilosius: I think how we started and how we got into the market was a very important part of our journey. So I’m happy to expand on that.

The big idea behind it was that, you know, that Katana was born out of personal frustration. During my corporate career, I started angel investing. I’ve been an active angel investor in the Baltics for more than a decade now. I’ve invested in tech companies, but I’ve also invested in more traditional businesses in retail and manufacturing.

About seven to eight years ago, just before I founded Katana, I was helping a good friend of mine set up a direct-to-consumer manufacturing business or a factory in Estonia that makes made-to-measure doors and windows for the Nordic home renovation market. They were direct to consumer in that they were selling primarily through their own e-commerce storefront to private individuals in the Nordics looking to renovate their summer houses.

While setting this business up, I was helping him to figure out the tech stack. I was navigating through the offerings on the market, starting from the big names like SAP, Oracle NetSuite and several others from the category of business suites. The more I looked at those offerings, the more frustrated I got. As someone who is kind of used to working with easy-to-use SMB-oriented cloud platforms, services, and SaaS products, I was hoping to find a modern SaaS, easy-to-use inventory management, order management, ERP like product that I could use in this direct-to-consumer manufacturing business. It would allow me to also integrate with the other key tools that I have in my business, namely, Shopify storefront, Amazon, or any other kind of e-commerce or marketplace storefront that I use for my omni-channel sales.

We’d already picked a CRM that we want to use, you know, be it HubSpot or Salesforce or accounting platform that we prefer like QuickBooks online or Xero. I was looking for the centerpiece, the order and inventory management element that kind of fits into the middle and connects it all, but what I was offered were business suites that were built decades ago and were clunky, expensive, and hard to implement. They had no open APIs and no ability to integrate with these modern softwares from other categories.

They rather tried to sell me their version of their accounting module, CRM module, and shipping module, but I already had better tools for those. Then I saw the opportunity and realized that the ERP industry, being one of the largest software categories in the world, has been lagging in terms of cloud SaaS disruption. It’s still dominated by these incumbents that have this business suite-like thinking, which is a Jack of all trades, master of none.

We then formed the thesis that we believe that the future of ERP is not a business suite, but the future of ERP is a tech stack of best-of-breed integrated products. We believed that we could build an easy-to-use inventory and order management that integrates with best-of-breed technologies from those other categories, resulting in an easy-to-use ERP like tech stack for our customers. With that idea, Katana was born.

But of course, how to get into the market. I think the key driver behind our success in the early days was that we went in with a laser sharp focus. We started narrowing down on the target customer profile to a level where we said that although we want to build a category leader in inventory management for small and medium sized businesses, we’re not going to start with that. We’re going to start with the segment that is most underserviced and the smallest one where we can deliver value the fastest.

That segment was direct-to-consumer manufacturers selling on Shopify. That was a very small and clear target customer for us in the early days. From there, we started moving up market from micro businesses. Initially, it was micro companies with only one to ten member teams and maybe up to $1 million in revenue. We built for them and got the traction.

From that traction, we got the confidence to move further and further and then started moving up the market step by step towards bigger businesses. At some point, we also started to expand beyond manufacturing into retail, distribution, wholesale, and other business models that deal with physical goods.

This segment is part 3 in the series : Building a Global ERP Company from Estonia: Katana CEO Kristjan Vilosius
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