STAT Recovery-Cambridge Capital: Why we Invested
Benjamin Gordon (Managing Partner at Cambridge Capital), Matt Smalley (Principal at Cambridge Capital), and Rocco Scundi (Senior Associate at Cambridge Capital) share the Cambridge strategy and why they chose to invest in STAT Recovery.
In May 2024, Cambridge Capital made a majority investment in STAT Recovery, a leading machine learning-based invoice audit software platform helping retail suppliers optimize revenue by reducing improper deductions and compliance fines from large retailers.
We appointed Cambridge Operating Advisor Kamal Sundar as CEO and brought in Ken Frieze (Chairman of Gordon Brothers), Bill Mines (former SVP, Finance and Supply Chain at Walmart) and Chris O’Brien (former Chief Commercial Officer of C.H. Robinson) to join STAT’s Board, in partnership with STAT Co-Founder Casey Roberts and the existing management team.
As we reflect on this latest investment, we should start with the Cambridge strategy.
The Cambridge Strategy
Cambridge Capital’s strategy is to build a concentrated portfolio of high-conviction investments in supply chain-focused tech and services businesses with staying power and outsized growth potential.
We begin with a set of key themes that we believe drive success in the supply chain market.
We then look to find entrepreneurs who are the best leaders, building strong companies with significant growth potential.
Our team then conducts due diligence to validate our thesis. A new investment is the product of months of hard work from many sides: the founding and executive team, the Cambridge investment and operating teams, and various advisors and third parties that helped both sides finalize the investment.
For some firms, when a new investment is completed, it may feel like the finish line. However, at Cambridge, this is just the beginning of our journey with our new portfolio company partner. Once we close our investment, we then transition our focus to supporting our teams in achieving results for all stakeholders. Each situation is unique, so whether it’s assisting with key leadership hires, improving technology, finding customers and partners, or helping with cross-portfolio collaboration, the entire Cambridge team is there to be of service.
Why We Chose STAT
STAT Recovery, founded by Casey Roberts and Todd Reeves, is a leading machine learning-based invoice audit software platform helping retail suppliers optimize revenue by reducing improper deductions and compliance fines from large retailers. STAT has audited over $250 billion in retail transactions for the largest retail suppliers in the world and has the highest recovery rate in the industry, as well as the most comprehensive claims avoidance program.
Retail compliance fines for suppliers are significant and can represent up to 2% of suppliers’ retail sales, totaling tens of billions of dollars annually just in the US. In just over 5 years, STAT has helped retail suppliers recover over $500 million from improper deductions and fines, and avoid countless more, based on over 300 years of cumulative experience in retail compliance and technology.
At Cambridge, we know this problem all too well, even though we do not invest in retail suppliers. Cambridge portfolio companies like Everest Transportation Systems and Boa Logistics, which serve as trusted logistics partners for numerous retail suppliers, must deal with a portion of these retail compliance fines and deductions daily. It is a source of friction and frustration for all parties involved.
Retail suppliers and their logistics partners can feel like the goal posts of retail compliance policies are always moving, as there is no clear explanation of the rules and retailers can change them without notice. Additionally, as STAT’s success has shown, over 50% of retail compliance deductions actually relate to errors on the retailers’ part (vs. the supplier) and should not have resulted in deductions. STAT has helped numerous large retail suppliers recover this revenue and improve overall supply chain operations, leading to higher retailer and supplier satisfaction.
As an example of the scale of the problem, one large STAT customer recovered over $50 million in one payment from one retailer after leveraging STAT’s platform to uncover years of errors in just one area.
Our investment in STAT reflects what we seek in every new portfolio company and underscores why we continue to focus exclusively on supply chain companies led by outstanding teams that benefit from the additional resources we can bring to them.
To prioritize opportunities and ensure consistency, we came up with a framework to benchmark new potential opportunities, with six pillars: Cambridge thematic fit, market tailwinds, capital efficiency, strong tech-enabled moat, top team, and the ability to create a Cambridge-influenced edge.
We believe companies that score high on all these attributes have the largest potential to become winners, and we focus on companies that match all six attributes.
How STAT Compared
STAT stacks up extremely well on Cambridge’s key characteristics:
· Cambridge Thematic Fit — STAT fits three of Cambridge’s currently published investment themes: Predictive Supply Chain Decisioning, Niche Technology Leaders, and Supply Chain Visibility. STAT has established itself as a pure-play audit software platform helping retail suppliers optimize revenue by reducing improper deductions and compliance fines from large retailers. We believe this niche focus and combination of people-driven relationships and a top-tier technology platform will allow STAT to emerge as the definitive leader in retail supplier revenue optimization globally.
· Market Tailwinds — Based on our due diligence, STAT customer interviews, and numerous conversations with Cambridge Operating Advisors and Limited Partners that built companies that sell to or ship to retailers, we estimate that the amount of retail fines and deductions in the US market is more than $10 billion annually. As technology has proliferated in retail supply chains, and as operations became less manual, the quantum of retail fines and deductions has remained stable or even increased due to system changes or stressed supply chains. Unlike STAT’s competitors who tend to offer a variety of disjointed solutions for retail suppliers, STAT’s exclusive focus and obsession with optimizing customers’ retail revenue by reducing deductions and fines puts STAT in a leading position to take market share.
· Capital Efficiency — STAT has exhibited strong financial growth since being founded in 2017, and had a ~70% EBITDA CAGR since 2021, with current annual profits in the 8-figures, amidst no institutional investment before Cambridge. Most of the growth has been driven by existing customers asking STAT to expand contractual scopes, due to significant ROI and benefit to their own profitability.
· Strong Tech-Enabled Moat — STAT has a proprietary software platform, powered by machine learning, that automatically reviews every retailer-supplier transaction, and automatically uncovers errors, mistakes and opportunities. Post investment, we plan on investing aggressively in AI and retooling the existing ML model as STAT transitions to a multi-retailer focus and offers more capabilities to customers.
· Top Team — STAT’s founders and existing team have 300+ years of collective experience in retail compliance and technology and have previously worked at companies including Walmart, Sam’s Club, Kroger, PwC, Conagra, GE, Helen of Troy, and Alteryx. The existing team has highly complementary skills across strategy, execution, technology, sales and operations, and they are poised to lead STAT in the next growth stage. We are also excited about the addition of Cambridge Operating Advisor Kamal Sundar as CEO. STAT’s entrepreneurial and results-oriented culture is aligned with Cambridge’s values.
· Cambridge-Influenced Edge — STAT has developed a strong market niche with demonstrated success with key customers. Cambridge can build on STAT’s momentum by leveraging its established network of larger shippers and retailers to help source and win new business for STAT. Additionally, Cambridge can leverage its relationships with top retail supply chain leaders, including the three Board Members we brought on, and other attendees of our annual supply chain CEO conference, to generate outsized growth.
We are excited to invest in STAT, fortunate for the opportunity to partner with an exciting company and founding team, and eager to help them accelerate into their next stage of growth. For any consumer brands, retail suppliers or logistics companies interested in reducing revenue leakage from retail compliance fines and deductions, STAT can be an outstanding potential partner. Please feel free to reach out to us for a direct introduction.
