From left: Upstock co-founders Matt Watson, Philip Fierlinger and Duncan Ritchie. Photo / File
A Wellington startup has just topped its target for its second major capital raise - and one of its founders is pitching its platform as a tool for helping the Government bust the supermarket duopoly.
Upstock co-founder Philip Fierlinger says his firm was looking to raise $5 million by August to fund further expansion into Australia and the US, and double staff numbers to 30. It's now reached that target, but will keep its round open until its scheduled close in August.
The firm created an online system that lets cafes, bars and restaurants restock from multiple food and beverage suppliers through a single system, with just a handful of clicks.
Upstock is free for buyers in its basic version, while suppliers and wholesalers are charged $1 per order.
It was founded in 2019 by two of the original Xero crew - Fierlinger and Duncan Ritchie - plus Matt Watson, who had experience from the supplier side of the fence from founding Foxton Fizz.
Fierlinger says the business has landed thousands of customers during the pandemic, at first in New Zealand but now with expanding beachheads in Australia and North America.
On one level it was a scary time to launch a restocking platform as hospo reeled, but was also turned out to be good timing, in a way, as the Covid squeeze forced many operators to look for every possible saving - including systems that would automate re-ordering.
The US ex-pat won't give detailed numbers, but Upstock's growth was good enough to attract $3.5m in a 100 per cent over-subscribed raise last year, while this year's raise is now anticipated to bring in at least $6m.
Investors include Icehouse Ventures, Enterprise Angels, Sir Stephen Tindall's K1W1, newcomer NZVC - founded by Ukrainian-in-Queenstown Mark Pavlyukovskyy, and founders from marquee tech firms including Vend, Karbon, Campaign Monitor and Sharesies.
Vaughan Fergusson, founder of point-of-sale software Vend (sold to Canadian company Lightspeed for $455m last year), says "Working with retailers at Vend, we saw a major technology gap in the way wholesale orders were managed. It always frustrated me. So when I saw the solution Upstock created, it was obvious why they were getting such awesome traction, and why their customers are so passionate about the product. I knew I had to get behind it in a big way." (Fergusson also recently put money into another startup, EasyRent as he continues to recycle funds from his Vend payday into the local startup ecosystem.)
Upstock has also named two new signings to its team: Larrissa Paris, who was the founding salesperson at Xero, and later sales head for its WorkflowMax subsidiary, and Chad Richard, who joins as an adviser. Richard is a current senior vice president for business development at Yelp, and earlier spent eight years as a product marketing director at Apple.
The $5m-plus from Upstock's latest raise will be used to double staff to 30, and develop new business at home, across the Tasman and in the US - where Fierlinger says the market is so big that incumbents tend to focus on one vertical, such as alcohol for restaurants, whereas NewZealand's smaller market means Upstock has had to evolve as a one-stop-shop.
And the founder also sees an angle for the Government and the Commerce Commission - should they want to pursue it - to use an online marketplace like Upstock as a mechanism to pry open the supermarket sector's wholesale market.
"Regulation seems pretty inevitable. Even the duopoly acknowledges that," Fierlinger says.
"With Upstock, we're in an ideal position to provide supermarkets a wholesale channel that's a fair playing field for them and for suppliers too – there's no fixed pricing and being digital our shelves are unlimited so everyone has equal access."
He adds, "Upstock also helps the suppliers massively slash costs with the software to streamline their logistics."
As things stand, Upstock both cooperates and competes with one of the big two supermarket operators - Foodstuffs - depending on the context.
Upstock has direct integration with Foodstuffs online systems, which Fierlinger uses as a selling point. He says without Upstock, it could cost a business the price of customising it own systems, which could run to tens of thousands.
"With the Foodstuffs integration, all orders, from all of the Foodstuffs outlets – all the New World, Pak'nSave, Four Square, Gilmours and Liquorland outlets – arrive in Upstock for the suppliers to fulfil. The Foodstuffs orders appear alongside all their other orders from various other grocery markets, restaurants, cafes and bars – all in Upstock."
He says Best Ugly Bagels and other Upstock users negotiate their pricing with Foodstuffs under the status quo.
Best Ugly Bagels uses Upstock in all its restaurants, plus all its bakeries that supply Foodstuffs supermarkets.
Brand manager Mike Lawrence says, "It's a much more streamlined process for both us and for the customer.
"It's given us much better visibility of what's been ordered and far less paperwork for our teams. Our accounts people love that the whole team enjoys using it because it means all the information they need is right there. For some of the out-of-town places that we supply bagels to directly – because Upstock is so simple to use – they've been able to build up their usage of bagels. Which is great for growth."
Fierlinger knew his way around a startup, and the US.
In 1994, the American co-founded Turntable Media, one of the first companies that helped artists, and the corporations that signed them, grapple with the internet's impact on the music industry. The Beastie Boys, Eric Clapton and Warner Bros were on its client list.
While Upstock has paying customers in the US, after its raise it will make its first real push into North America, including hiring staff and putting boots on the ground.
Is the co-founder daunted by incumbents?
"There's a wide range of different US competitors, both direct and indirect competitors, which also demonstrates the need. By far, the dominant competitor is still pen and paper, email and spreadsheets," he says.
"Most US competitors are focused on a narrow, specialised customer segment like: just wholesale alcohol, or just wholesale fruit and veg. Being from NZ, because we're a small market we have to provide a general, all-purpose solution – it's not a big enough market to be so specialised like the US," he continues.
"And that gives us an advantage as we enter the US, because wholesale buyers strongly prefer using one all-purpose solution to order everything they need, rather than having to manage and track their orders across different systems."
Hiring activity is declining at the slowest rate in over two years.