Welcoming Stedi — an elegant platform for brands and retailers to manage oft inelegant EDI

We are not often “first money in” investors nor do we frequently lead angel rounds. VTF Capital is a seed firm meaning we generally invest in a company after it builds an MVP and establishes its business.

The rare exceptions are when we meet an entrepreneur who inspires us and in whom we develop an uncharacteristically high level of conviction. Zack Kanter is that entrepreneur.

We’re excited to share that we led the pre-launch round in Stedi, a simple, elegant platform for businesses to implement and manage EDI. This was VTF Capital’s 7th new company investment in 2016 and our 16th overall investment of the year.

We’re humbled to be leading a round that includes our close friends at UK-based Pentland Ventures (parent company of Speedo, JD Sports and more), Ryan Petersen (founder of Flexport), SV Angel, Susa Ventures and others.

Zack and Stedi are based in Boulder, CO.

Why EDI?

We focus on the commerce technology, digital brand and pre-consumer logistics spaces. Most of the companies that get us excited are the ones tackling the messy underbelly of how goods are made, moved and sold.

EDI is very much a part of the underbelly. EDI? What’s that you say? Behind the simple act of buying a product on Amazon or at a store there are dozens of systems communicating (mostly) seamlessly to make, move and sell them. Among those systems are a stack of protocols and platforms that are commonly known in retail as Electronic Data Interchange or EDI.

EDI handles the purchase, movement, payment and product data exchange between manufacturers and brands and their wholesale partners. An EDI system is responsible for telling a company like Whole Foods that the tea you want to buy comes 24 in a box and retails at $9.99. When it goes on sale, an EDI system processes the discount. An EDI system handles the purchase order, the invoicing and in some cases the payment.

EDI is the only way to integrate with 90% of Fortune 1000 companies including Amazon, Walmart and their many suppliers. As an illustration Fitbit uses EDI to receive orders and send invoices to Amazon.

The easiest way to think of EDI is as an API. EDI systems speak a common language and allow companies that speak different languages to speak to each other.

Except that EDI is not an API. In fact no standards exist in the way we’ve become used to seeing thanks to API-centric companies like Stripe. It’s a disaster.

For brands selling to everyone from a regional grocery store to Amazon, EDI integrations are helpful and often required. I know this because in my past life at The Republic of Tea I worked on integrations into national retailers like Whole Foods and many smaller regional retailers. The process was, to be polite, a mess filled with integrators, consultants and hidden costs.

So when Zack Kanter shared his vision for fixing that industry I thought several things must be true:

  1. My experience must be outdated. Surely the industry has evolved in ten years.
  2. The rise of Amazon and the fall of many old school retailers must mean this isn’t a problem worth solving. Surely Amazon must be rendering this need moot.
  3. There must be a company like Stripe that’s fixing this already.

I was wrong on all counts. It turns out that my EDI experience from ten years ago is actually still relevant. The industry has not evolved. Realizing this made me sad in the way that knowing 2.1M people still use AOL dial-up does. It also means there’s an opportunity.

During our diligence process we talked with smart people from the largest and smallest retailers. They had two messages in common: this problem sucks and when can we signup.

Born from Twitter

I’ve followed and admired Zack’s view of the world for some time. He’s among the few people whose Tweets I actually read versus consuming the links they share via Nuzzel. Zack and I had never spoken in real life until a few months ago after he sent me a direct message on Twitter about a startup he was thinking of launching to tackle the dark and messy world of EDI.

This is probably the only time in my history with Twitter that I have a) seen a DM and b) set up a meeting as a result of one. But like I said, I’ve admired Zack for a while. And maybe I’m a bit hopeful this will become one of those Twitter moments like that of my friend Ryan Graves.

The Power of Conviction

When we first met, the vision for the company was in its infancy. He didn’t yet have a deck and it had a different name that reminded me of Lord of the Rings. But as a guy who had built a company that relied on EDI he knew there was a problem to be solved. My initial response was yes, Stedi should exist and we’ll be happy to invest in it later when it’s a functional platform.

In subsequent discussions with Zack and friends who work closely with this problem in large scale manufacturers and retailers, my view changed, my conviction deepened and we decided to invest in bringing the MVP to life. I’ve since had the opportunity to work with Zack as an investor and I leave each conversation more convinced we made the right call than when I enter.

Zack is one of those rare entrepreneurs who can convince you to get behind him not because he’s a slick salesman but because it becomes clear he knows his shit more than anyone on Earth. If there is a horse to back in the race to fix EDI, Zack is that horse.

Cheers,

Zach (spelled correctly), VTF Capital