Tradeshift gets $240 million in funding to restructure, seek profitability

Tradeshift, a solution provider known for its network, supply chain payment offerings and marketplaces, announced today that it has a funding round of $240 million in equity and debt that sets “the company on a direct path to profitability in the near future,” the announcement said.

CEO Christian Lanng spoke with Spend Matters and said this marks a time for refocusing on high-value efforts and restructuring the company, which was founded in 2010.

“It’s been a very long journey to get critical mass. It actually doesn’t feel this long today. Ten years is quick in our space,” Lanng said, reflecting on the company’s style but also how it’s evolving. “We are very loud, sometimes rowdy, not afraid of big battles. I think that Tradeshift, just in the last few years, we did a lot more to focus on our own execution, our own products.”

Lanng said the investors include the same ones from a Series E round a couple of years ago and a new one.

“It’s clear that the investor community has a strong focus on growth combined with profitability, and they like our plan,” Lanng said in the press release. “As a network business, growth is always going to be a key part of our story. But it’s also important that we manage that growth responsibly.”

Tradeshift Update: Numbers and Names

Prior to the announcement, Lanng shared with Spend Matters a number of insights on the technology and marketplace provider.

He notes that Tradeshift is welcoming one major new investor with the debt and equity funding round (which will soon be announced) alongside previous investors, including Gray Swan, a venture company established by Tradeshift’s founders, according to a previous press release.

According to Lanng, Tradeshift:

Currently has 1,200 global employees
Will become cash-flow profitable in 2020
Realized “well north” of $100 million in revenue for 2019, representing 60% growth
Has above “half a trillion in GMV” (volume) and “will cross a trillion in 2022”
Is realizing high growth in Latin America (LATAM), which has become the “fastest-growing market for new enterprise customers” with China coming in second
Major customer additions (from direct sales) include: Corning Glass, Smuckers, Mondelez, Innogy, CBC, Jacobs Douwe Egberts, Ikea and Danone
Added new strategic partners in 2019, including Genpact and Accenture
Has deployed its AI/machine learning capability (Ada) across all customers
Welcomed 300 new customers for “Tradeshift Go” — it’s mobile-enabled procurement and payment solution
Added two major executives with SAP experience: Tony Alvarez, who is serving as SVP of the Tradeshift network business, and Janet Heppner-Jones, who is Tradeshift’s VP of sales, Americas

Lanng also noted Tradeshift is not planning a 2020 IPO given the election year cycle, but that becoming cash-flow positive this calendar year will provide the maximum number of options, including the potential for a future IPO.

He also told Spend Matters that supplier revenue is becoming an increasing growth area for Tradeshift, and that the restructuring is in line with this change (and that by 2025, supplier revenue will outstrip buyer and partner revenue).

Finally, Lanng shared details around current and planned restructuring activities within Tradeshift.

Margin Improvement and Restructuring

Lanng told Spend Matters that Tradeshift is restructuring its operations to drive profitability and margin improvement and to emphasize specific product lines from an internal development perspective over others.

According to Lanng, components of Tradeshift’s restructuring will include:

Moving select roles in North America and the Nordics from high-cost to low-cost regions
Adding net new headcount (overall)
Emphasizing development of app and marketplace capability (and partners) focused on the payments area
De-emphasizing enterprise procurement (e.g., not going “head-to-head” against Coupa and SAP Ariba) for “straight-up” deals within its own product portfolio. Tradeshift will still compete in procurement with its own apps, but only in support of differentiated use cases.
Continuing to focus on marketplace partners (including BuyerQuest, Jaggaer and Corcentric/Determine) for procurement more broadly. Tradeshift also recently added Wax Digital as a procurement app partner.

Emphasizing Payments

Lanng noted that payments will be the highest priority product development, sales and channel effort going forward.

The payment emphasis will include “building brand-new products from scratch that solve buyer/seller problems much better.” Product development efforts will include targeting previously decoupled processes (e.g., supplier/customer onboarding, KYC, broader compliance, financing, moving money, etc.)

Conversely, Tradeshift will focus less on developing custom apps for financial services customers that are not leverageable on the platform/marketplace level.

Partners will also play a role in the broader payments ecosystem for Tradeshift. Lanng suggests that areas such as tax compliance will receive “increasing emphasis on the app/platform side.”