Building a Global ERP Company from Estonia: Katana CEO Kristjan Vilosius (Part 6)

Sramana Mitra: That gap was obvious when you decided to position into the Shopify ecosystem. You’d already found that gap, right?

Kristjan Vilosius: Yes. Well, we’d found that when we founded the company. By the time we had finished our basic prototype, we realized that the opportunity is there.

Sramana Mitra: How much was the Series A?

Kristjan Vilosius: Series A was in the range of ten million and was led by Atomico, the VC fund that is owned and founded by Niklas Zennström, the founder of Skype. He’s investing heavily in in Europe to support and boost European tech companies so that they can compete with North America and other regions on a global scale.

Sramana Mitra: Fantastic!

Kristjan Vilosius: We caught their attention. I believe we were one of their first Series A investments in Estonia. A few more followed after us.

Sramana Mitra: What was the timeframe of the Series A  investment? What year was it?

Kristjan Vilosius: I think it was roughly a year after the seed.

Sramana Mitra: 2021 then. What happens next?

Kristjan Vilosius: The go-to-market strategy started to shift step by step as we realized that the Shopify ecosystem strategy was bringing us a lot of this micro and the smaller, small- to medium-sized businesses. We wanted to move further up market and start to get traction from what we define as the M of SMB, which is above $10 million in revenue up to $100 million revenue.

We also realized that as we go further up market, the finance piece becomes more and more important.

Micro businesses are very much focused on tracking how much quantities they consume when they manufacture something, whether the quantities in the warehouse are correct, that they have the right level of stock due to ship on time, and no excess inventory etc. We’d covered that part.

As the businesses scaled, the finance piece of how much value of money I have in my stock became important. So, we’re tracking the cost of goods sold and the moving average cost of every SKU in the warehouse. As a result, the integration with the accounting system started to become more and more important.

Back then, we already had built the basic integrations with two leading global SMB accounting platforms – QuickBooks Online and Xero. But we realized that there is an opportunity for us to expand on those further and start building our go-to-market motion focused specifically on the Intuit and QuickBooks Online ecosystem.

So step by step, we started building out what we call tech and channel partnerships. By tech partnerships, we mean establishing relationships with QuickBooks and Intuit directly and getting access to their partnership and sales teams, introducing Katana software product, and getting them to start promoting Katana to their customers who need advanced inventory management.

Sramana Mitra: Intuit also has an app store.

Kristjan Vilosius: Yes, and we also launched on their App Store. However, that’s not a primary lead channel for us, similar to Shopify. But again, it builds trust and it opens doors. So it was a necessary step.

At the same time, we also started building out our channel partnership network. It is focused on the QuickBooks Online ecosystem, which is mostly accounting firms who are offering bookkeeping and other financial services to the customers and who are running the accounting on QuickBooks Online for customers selling or manufacturing physical goods. You know, they need those customers to have proper inventory management. Otherwise, it’s difficult for them to do a proper job at accounting and bookkeeping.

So, we started forming that partnership with accounting firms and implementation partners in the QuickBooks Online ecosystem to start bringing leads to us based on commission.

Sramana Mitra: Was there a way to segment? QuickBooks, of course, is a very large ecosystem. They are one of the largest install bases in the world, and it’s very diverse. Whereas your focus is quite narrow on manufacturing companies that are selling direct.

Kristjan Vilosius: Well, by that time, the focus started to expand firstly from direct-to-consumer manufacturing into wider manufacturing as a whole. So both direct-to-consumer and B2B manufacturing as well. Then perhaps about a year after our series A raise, we also started to expand step by step beyond manufacturing into pure online retail and wholesale distribution to other business models that deal with physical products.

But you are correct. If you look at the QuickBooks Online (QBO) install base and companies that have some form of inventory, it doesn’t matter if they manufacture it or just simply retail or distribute it. It’s perhaps only about 10%-20% of the overall QBO customer base.

Sramana Mitra: Yes. They are very big on Services.

Kristjan Vilosius: Exactly. So we were going after that 10%-20% of QBO users.

Sramana Mitra: Was there a way to identify that segment?

Kristjan Vilosius: This is still our main go to market strategy. We have to make sure that firstly, the teams inside QuickBooks online as well as the accounting firms and other partners in their wider channel partnership or ecosystem have a top of mind recognition that whenever they have a customer who’s in trouble with inventory, the solution is Katana.

So in order to get the right type of leads, we had to educate the ecosystem that we are the solution for their inventory problems. So it’s a lot of work with sales enablement and education towards the internal teams as well as the wider ecosystem.

Sramana Mitra: How do you do that? Through SEO or through content marketing?

Kristjan Vilosius: We do that through content. We also do that through lunch and learns and other kinds of direct conversations with the sales teams and partnership teams.

We have our channel partnership program where we approach accounting firms. We introduce ourselves. We show the value that we offer to the customers, formulate the partnership, and start educating their internal teams.

This segment is part 6 in the series : Building a Global ERP Company from Estonia: Katana CEO Kristjan Vilosius
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