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Building a Global ERP Company from Estonia: Katana CEO Kristjan Vilosius (Part 4)

Posted on Sunday, Apr 28th 2024

Sramana Mitra: When you first started getting into the Shopify ecosystem, was Shopify’s marketplace effective in getting you in there? Were you able to put in an app in the Shopify app store to get into that market?

Kristjan Vilosius: We did put up an app in the Shopify App Store. That is how we launched back in 2018. Back then we were nothing more but just an inventory and manufacturing app for Shopify merchants who have in-house manufacturing, which is just a subsegment of all the Shopify customers.

The app itself in the App Store was not the main lead generator for us, although it did help build trust with the customers. Being an ERP like product, we need to make sure that the customers can trust us. It is mission critical.

So, we had to build the go-to-market engine around it that we were able to afford at that point in time. In selling to micros, it was obvious for us that the initial bet that we made on was very much on demand capture. So, it was Shopify App Store, but primarily it was SEO and all the keywords around manufacturing and Shopify plus the review sites like Capterra, SoftwareAdvice, GetApp, and G2Crowd. So, whenever someone searches on Google that I need manufacturing or inventory software and I’m a Shopify merchant and something that integrates with Shopify, using whatever the keywords are from that domain, Katana would pop up either with our own content or through the review sites or through Shopify App Store. It was the initial go to market which served us well for those micro businesses.

Sramana Mitra: And how long did that Shopify strategy remain the key market penetration strategy?

Kristjan Vilosius: For a couple of years. I love bootstrapping and it’s an amazing way to build businesses. However, building ERPs is very expensive. There’s a lot of investment that needs to go into product. So we unfortunately didn’t have the opportunity to go down that route. We had to raise an angel around or in the early days to be able to hire enough engineers to build an MVP. The Shopify strategy also carried us to our first VC funding, which was a seed round from 42CAP, a Munich, Germany-based VC.

Sramana Mitra: When did the angel round happen? Before you launched the product?

Kristjan Vilosius: Yes, before we launched the product.

Sramana Mitra: How much did you raise?

Kristjan Vilosius: We raised 400K euros. So close to half a million US dollars.

Sramana Mitra: That gave you enough to do an MVP, get into Shopify, and get some customers to prepare you for the seed round.

Kristjan Vilosius: Yes, precisely.

Sramana Mitra: So when did that seed round happen in that two-year cycle that you were working with the Shopify ecosystem? Where in that trajectory did the seed round happen?

Kristjan Vilosius: I’m now trying to scroll back in my head the number of years that we’ve been in the business and when was exactly the event. We started getting traction from the Shopify ecosystem. Then we also extended our angel round. So, we survived on the angel financing a bit longer than maybe maybe typically. So it was a couple of years. If I remember correctly, then the seed round was towards the end of 2020.

Sramana Mitra: The final seed round was two years into your business. So, in the two years you were doing Shopify, you basically did a first angel round before and then extended that angel round to sustain that two-year period.

Kristjan Vilosius: Yes.

Sramana Mitra: So, the total financing in the angel round was about a million?

Kristjan Vilosius: It was over a million. We did the angel round and then we added a convertible of angel on the part familiar than a convertible somewhere around a million. So, it was $1.5 million. Then we raised the seed round for $2 million.

This segment is part 4 in the series : Building a Global ERP Company from Estonia: Katana CEO Kristjan Vilosius
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