Chemical StartUps Series #17: echosystem

Please introduce the value proposition of your company. How will your company disrupt or dramatically change how things are currently done?

Chemical manufacturing and distribution is heavily regulated, logistically challenging, extremely fragmented, and is subject to pricing volatility due to ever-changing feedstock supply/demand imbalances. The market is rife with inefficiencies and lacks both pricing transparency and market liquidity. Distributors are additionally burdened with endless compliance paperwork, document management, and manual customer service workflows.

The market is eager for a platform that both increases market liquidity and streamlines internal business practices. Previous attempts by large B2B platforms looking to enter the space did not consider the complexities inherent in the chemical industry and thought they could shove them and their needs in with the likes of companies selling mops and drills.

EchoSystem provides the necessary customized functionality for businesses in the chemical industry to take their commerce online. These functionalities include: API connections with native ERP systems, client web portals, integrated payment and logistics solutions, real-time shipment tracking for both customers and suppliers, integrated regulatory/compliance workflows, and a patented broadcast control system that allows each company to decide which companies can view their inventory in the marketplace and at what prices.

The result is a platform and marketplace that replicates the industry's best practices within a private digital ecosystem. Echosystem users can now reduce their cost to serve, take advantage of the power of networks, and streamline their workflows all while adhering to responsible distribution practices.

Who are your customers and how large is the addressable market for your products/services?

EchoSystem’s point of entry is the North American chemical distribution market. Echosystem has signed a two year strategic partnership with the highly respected National Association of Chemical Distributors (NACD). NACD’s member companies account for approximately $32BN of the $40BN US distribution market. NA distributors can utilize EchoSystem to better serve their clients, increase inventory turns, streamline their compliance and document management, and leverage the power of networks to increase EBITDA without significant capital investment or risk.

We believe there is a significant value proposition for the chemical producers as well as other participants in the supply chain. While the $40B NA Distributor Market is a large number our long term focus and strategy is bringing value to the entire $5T global chemical market through our tools and solutions.

How scalable do you believe your company is?

The sky's the limit for EchoSystem. APAC is the largest chemical market on the planet at roughly 1.5T, and it is primarily made up of SMEs. Distribution across Asia is highly fragmented and there is plenty of opportunity for EchoSystem to provide value by creating a standardized and seamless bridge for commerce connecting APAC and North American companies. We have our heads down and focus on North America at this time though as we feel once we can hit critical mass we will have a long term defensible position.

Can you summarize the journey of your company up to this point?

In 2016 we built and sold a very similar B2B platform to LiveNation/Ticketmaster. That technology is now being utilized by the NFL for their open distribution and will soon be adopted by the other major leagues and artists.

While looking for my next project I happened to reconnect with two business college colleagues who had spent their careers in the chemical industry. After a brief conversation that included the words “two days for a price quote” and “fax machines” it became immediately clear that there was significant demand within the chemical industry for a platform similar to the one I had just built.

After meeting with several key industry executives we were able to validate our assumptions. Industry leaders had mentioned the efforts of Amazon B2B to capture market share in the chemical sector but voiced that Amazon’s open platform and one price for all customers approach would not work with chemical distribution. We believed that our private network and custom broadcast controls that we had previously built could be the solution to making companies finally be able to adhere to responsible distribution and feel comfortable with e-commerce and chemicals.

We incorporated in 2017 and have raised two oversubscribed Series Seed rounds to fund the development of the MVP. We launched our MVP in November at this years NACD’s Annual Meeting in Marco Island, FL and had to create a waiting list due to the amount of companies immediately looking to sign up for accounts.

What is pivotal for your success going forward?

We are absolute believers in product/market fit. In fact, this is the precise reason that platforms before us have failed. Previous platforms have tried to impose their functionalities (open networks, buyer-centric networks) onto an industry that simply can’t use them. We’ve spent the greater part of the last two years travelling the country, meeting with industry experts - ranging from forklift drivers to C-suite executives in an attempt to learn exactly what functionality they need from a platform. With the industry’s guiding hand, we’ve built a product that allows the industry to re-create their best practices digitally.

As millenials rise into positions of authority, they will gravitate towards vendors and customers whose business processes match the functionality of other parts of their digital life. If, for instance, a chemical distributor wants to better serve the new generation of millennial purchasing agents, they are well advised to adopt a platform that is capable of satisfying their desired purchasing patterns.

In lieu of this, we have worked to engage the members of NACD’s Emerging Leaders Program. These emerging leaders are the future of the chemical industry and will be instrumental in driving change within their organization. We have worked hard to engage the emerging leaders, and will further work with them to develop and implement our platform within their organizations.

As far as impediments to adoption, two concerns that we heard from distributors were A) regulatory compliance and B) the risk of accepting offers from new clients and not having enough time vetting their credit worthiness. We listened and held off releasing the MVP for two months as we integrated the regulatory catalogs of the DEA, DHS, DOT, EPA and other state bodies so that all the info follows each product within the marketplace. We secondly partnered with an insurance company to provide credit insurance of a minimum of $50,000 on every order to eliminate the risk of unpaid receivables. Lastly, each participant of the Pilot is also gifted a $1,000 credit to make their first purchase to stimulate the first few transactions.

Can you provide some KPIs that helps understand the size and growth of your company?

• Strategic Partnership with National Association of Chemical Distributors (Completed June 2019)
• Partnership and Integration with Globaltranz 3PL (Completed September 2019)
• Integration of Regulatory Data from DHS, DEA, EPA and DOT (Completed October 2019)
• Partnership with Project44 (Completed October 2019)
• Completion of MVP B2B Platform (Completed November 2019)
• Onboarding of first 15 Distributors for Pilot Program (Currently happening)
• Project44 Integration (January 2020)
• First 100 Sales (April 2020)
• Release of Customer Management Portals (July 2020)
• 50 Distributors onboarded (January 2021)
• Completion of Blockchain Platform and Integration (March 2021)

We are looking for proof of concept in North America, but look to quickly expand into APAC and Europe as soon as we feel we have hit critical mass with the NACD and North American distributors. There are obviously large opportunities in connecting these markets. With appropriate funding we can begin those expansions even sooner.

How can strategic partners from the chemical industry or financial investors contribute to your success?

While we still have a good amount of runway left from our past raise we are opening the doors to our Series A Round. The industry has spoken and told us they are ready for what we have built. We just need to assemble a large enough team to handle the opportunity that has presented itself.

We are looking to raise $5MM. That will give us the runway to develop a robust business development team and will fund future development. In order for EchoSystem to benefit from network effects, we will have to scale both supply and demand quickly. Customer prospecting, onboarding, and customer service will be essential to the long term adoption of the platform.

We feel that by taking the past two years to listen and respond to the wishes of the industry that we have finally created an e-commerce solution that will be adopted and embraced by this $40B North American distribution market and are looking for the right investor that can help us maximize the potential of what we have created and also provide our clients with the tools they desire and deserve as fast as possible. For those investors looking to invest in Platform Effects, Regtech, Blue Collar Software, or Smart Logistics to add to their portfolio we feel we are a strong Vertical SAAS product that will be a category killer and a good David vs Goliath story.

Who is the primary point of contact for investors and strategic partners?

• Scott Barrows
• CEO
• [email protected]
• 312.919.9922
• www.echosystem.com
• https://www.dhirubhai.net/in/scott-barrows-0ba4341/

Disclaimer: The sole responsibility for this content is with the company profiled.

If you would like to profile your Chemical StartUp in this series, please reach out to [email protected]