How Retraced Hit 50 Customers at €800 Monthly ARPU Building a Fashion Supply Chain Sustainability Platform (Interview with Co-Founder Peter Merkert)

Introduction and Company Overview

Nathan Latka

00:00Hey folks, my guest it is Peter Merkert. He's a tech wizard with strong business knowledge on how to run a company successfully. He started to realize early on that the true challenge in our society will be bridging the tech and non tech world, especially with topics like blockchain. More confusion is created than problem solved. Besides all that, he's a fast learner to adopt today's challenge running a company. He's including a semi remote setup, agility and development,

00:21quick learner iteration loops to fail fast. He's now building retraced.co, a sustainability management platform. Peter, you ready

00:28to take us to the top?

Peter Merkert

00:29>> Yes, of course. Lovely introduction, Nathan. Happy to be here. So yes, indeed. That's pretty

Who Uses Retraced and How

Nathan Latka

00:36No. I'm excited to have you on. So tell us who's paying for retraced? Who's using you and how are they using you?

Peter Merkert

00:42>> Actually, every fashion company you can imagine might be a client of retraced because we are building a sustainability management platform for the fashion industry, meaning brands, manufacturers, suppliers, suppliers, suppliers, down to the raw material producer, actually. It depends how they use the platform if they actually have to pay for it. Because obviously, most of them are not willing to pay, you know, especially if you're a small company because typically what you do, you contribute information into

01:11>> the platform This is what we are all about for the last ones in the tier, like a retailer. These are the ones who actually want to process and report information, whereas in the lower tiers in the supply chain, this is less necessary, so you want to just have something to easily collect information and process them on for the next party in line.

Average Revenue Per Customer

Nathan Latka

01:33Yep. Okay. So fashion brands are your customers today. What are they paying on average per month to use your technology?

Peter Merkert

01:39>> It's not only fashion brands. It could also the same be suppliers and manufacturers. Every fashion company, actually, you can imagine. We are Understood. So in average, it's approximately, €800.

Nathan Latka

01:52Okay. So about $1,000 per month, whether it's a supplier or a brand, etcetera.

Peter Merkert

01:58>> Yes. It heavily depends. Actually, it's quite unique because it's very It heavily depends on the size of clients since there are a lot of small ones who do not need a lot of functionality of the platform.

Nathan Latka

02:10The average you would say of all you're paying is about $1,000 a month. Yeah. Okay. Very cool. And imagine it's, you know, you're building a tool for the fashion brand is very different than if you're gonna build a tool for the supplier or somebody else. So who are you building this tool for specifically?

Building for the Entire Supply Chain

Peter Merkert

02:26>> It's very tricky and challenging to build this tool actually because you can't just build it for one party, you have to build it for all to make a benefit out of it. The problem in the fashion industry is it's non digitalized and very low connectivity here. And we've early on, my co founders actually have founded their own shoe brand and footwear brand, and this is where we all started. They wanted to

Nathan Latka

02:48How many of you guys are there?

Peter Merkert

02:51>> We have three. Three co founders in total. It's me and Did you

Nathan Latka

02:53just split equity evenly at the beginning or no?

Peter Merkert

02:57>> Yeah.

Nathan Latka

02:58Oh, nice. Okay.

Origin Story: A Co-Founder's Footwear Brand

Peter Merkert

02:59>> So so how we started actually out is their their footwear brand, they wanted to showcase the sustainability because they really were into the manufacturer. They knew everyone on the spot, but they had no means to communicate it. And this is when they came to me and said, Hey, can we not build a system? And I said, Yeah, fine, great. So we started communicating, you know, QR codes on fashion items, soon realizing the demand is massive in

03:24>> this area of sustainability because you have to prove actually the sustainability. You know, a lot of people claim it was badges, but it's just not enough. And this is how we started. The traction was massive. And then we started to say, okay, let's build it up for everyone. So we built a platform for actually the brands, the retailers, mainly for communication purposes, soon realizing that's not enough because you need the suppliers and manufacturers on board because

03:47>> they have the information. They understood. Something got produced.

First Customer and Launch Year

Nathan Latka

03:51And so walk me through your first customer. Who who was it?

Peter Merkert

03:56>> I mean, the footwear brand of my fellows, it's actually a piece of them because, you know, the industry was still very small when we got started for years

Nathan Latka

04:06And that was 2019?

Peter Merkert

04:08>> Just one and a half years before. Approximately, that's when we started. And the great thing is we started with

Nathan Latka

04:13a Peter Peter, so what what year did you launch?

Peter Merkert

04:16>> 2018, I think.

Nathan Latka

04:18Okay. 2018. Okay.

Peter Merkert

04:21>> Yeah. I think so. 2018, mid twenty eighteen, isn't it?

Nathan Latka

04:23Okay. So 2018 like you kind of lost the year.

04:26Oh, yeah. Yeah. But 2018, you launched. You're scratching your own itch. Right? You build this for your own footwear brand, then you bring in Pure as your first customer. How many customers are you now serving today?

Current Customer Count

Peter Merkert

04:35>> I think we are about 50 brands already. I'm not

Nathan Latka

04:39counting Five zero or one five?

Peter Merkert

04:40>> Yeah. Five zero.

Nathan Latka

04:42Five zero. Okay. Very cool. And 50 brands paying at that average price you told me earlier, a thousand bucks a month, that would mean you guys are doing about $50,000 a month in revenue right now. Is that about right?

Peter Merkert

04:53>> Yeah.

Nathan Latka

04:54And if that's where you're at today, where are you exactly a year ago? Do you remember?

Early Days and COVID Impact on Revenue

Peter Merkert

04:59>> Basically nothing, I would say. We started very small, especially in COVID times, no one wanted to invest because back then we had COVID and fashion brands often said, Hey, we stay clients because we still want to utilize the platform. What's a benefit for us? We still get known, but we stopped most of the subscription revenue actually, and it was hard times.

Nathan Latka

05:16Interesting. Okay. So maybe go from 2,000, $3,000 a month a year ago to now $50,000 a month. You've grown really nicely. Have you bootstrapped or raised capital?

Peter Merkert

05:26>> We raised capital actually a year ago. That was in the end of that year. Actually, we were very happy. I was with venture capital, so my partner.

Nathan Latka

05:35So sorry. When was the first capital raised? What year?

Peter Merkert

05:38>> I mean, when you count count angels or do you wanna adjust that to be seen?

Nathan Latka

05:42Because angels are only can first round, I think you raised 278,000 in in early on. Right?

Peter Merkert

05:47>> Yeah. Yeah. Yeah. It was an earlier round with angels. I think that was in the beginning of that year of corona or end of the previous year. Yeah. Was wrong that because it got split kind of over multiple times.

Nathan Latka

05:59Yep. So But this it looked like based off based off my team's research, you guys closed that in January 2020. It's about a $280,000 seed round. Yeah. And I think that was at a $2,300,000 valuation, something like that.

Peter Merkert

06:12>> Yeah. It could be around something like that. Yeah.

Funding History and Seed Round

Nathan Latka

06:14Okay. And then you raised a little bit more this year. How much did you choose to raise?

Peter Merkert

06:19>> So in the end of last year, it was 1,000,000 to raise, actually.

Nathan Latka

06:24You didn't just close a round in November for 1,200,000?

Peter Merkert

06:28>> Not this year. It was last year, '20.

Nathan Latka

06:31Interesting. Okay. Cool. Did you just did you just formally close that based off your government filings? They say it was closed literally last month.

Peter Merkert

06:40>> Oh, okay. Interesting that you picked up on that. So the thing is, it was with the performance condition because we set ourselves a strict target to founders. We said, you know, we wanna set ourselves a performance condition that product market fit us there.

Nathan Latka

06:51We were proud of our product, but we were not sure if

Peter Merkert

06:55>> we are there and we didn't want to risk too much. We said in the end of last year, hey, we are going to close this, this is the amount we agree on, but we want to meet a performance condition that we have product market fit actually. And we wanted to prove it for ourselves. And this is why we came in a bit later.

Performance Condition and Round Structure

Nathan Latka

07:10When did the money actually get wired then?

Peter Merkert

07:12>> It was split up in full conscious, you know. You have first something sent over, so pretty much fifty-fifty. Okay?

Nathan Latka

07:18I see.

Peter Merkert

07:19>> And then based on the performance condition, you got the rest of it. But the filing happened later because I'm not really sure. I think some people were on summer holidays. So effectively, we reached it earlier. So we had a performance condition, I think, set to the end of April, and we met it already in beginning of March.

Nathan Latka

07:33Yeah. So what was the performance condition? Was it number of customers or revenue target or what?

Peter Merkert

07:39>> Yeah. It was MRR, actually. We had

Nathan Latka

07:41to What did you

07:42have to hit to get the second 600,000?

Peter Merkert

07:44>> Well, let me let me think about it again. Was it something above 20 or so?

Nathan Latka

07:48I see. Interesting. Okay. So you raised 1,200,000 on this sort of performance based seed round. And what was that? Like a 6 or 7,000,000 valuation, something like that? Yeah. Around about. Yeah. Okay. Okay. And so how do the three of you guys think about dilution?

Peter Merkert

08:03>> How do you mean for ourselves?

Nathan Latka

08:05Yeah. Mean, obviously, you don't want to get diluted. Right? So as you're thinking, you know, you're raising all this capital, how do make sure to minimize dilution?

Peter Merkert

08:11>> It's tricky. Depends on the situation. To be honest, in the end of last year, was very tough. With COVID, we were happy having someone who was still open to finance because we were just in the need of it in the end of the day. How we are not getting diluted? I mean, to some extent, you have to do it. We are now looking into alternative possibilities of cash. So for example, revenue based financing. Yep. That's a

08:37>> good alternative.

08:38>> Yep.

Team Size and Engineering Headcount

Nathan Latka

08:39How many How many folks are on your team today?

Peter Merkert

08:42>> We are 24.

Nathan Latka

08:4324. How many of those guys are engineers and gals?

Peter Merkert

08:47>> I think 14.

Nathan Latka

08:4814. Okay. So happy engineering. That's great. Now, when these fashion brands and suppliers sign up, they stick. What's your churn look like?

Churn and Customer Retention

Peter Merkert

08:58>> Think it's basically nothing. I think we have lost two two clients or so. Something like that. Okay. Two. So not 2%. It's, like, less than that. A tiny bit. Yeah. Mhmm. But one has yeah. But one has also to mention most contracts are twelve months, so I could also be biased in here. But, actually, they stick around for a longer period of time. Some even start to close for two years'contract time. As we are building

Pilot Conversion and Customer Success

Peter Merkert

09:19>> something in an era of compliance, they are sticking around to it in any case. And actually, I can be very proud of excellence, Head of Customer Excellence, because everyone who went through a trial period, you know, pilot project, they all converted over into paying clients actually, that could last from three to six months. And sometimes they even went over said six months pilot, but after four months, they converted over because they were just convinced that it

09:45>> works.

Famous Five Rapid Fire Questions

Nathan Latka

09:46Those are all healthy early indicators, Peter. That's exciting stuff. Let's wrap up here with the famous five. Number one, what's your favorite business book?

Peter Merkert

09:55>> I think it's Rich Dad Poor Dad.

Nathan Latka

09:57Number two, is there a CEO you're following or studying?

Peter Merkert

10:01>> I would say my CEO. I like what he's doing. He's quite he's very smart.

Nathan Latka

10:06Number three, what's your favorite online tool for building retraced?

Peter Merkert

10:11>> GitHub.

Nathan Latka

10:12Number four, how many hours of sleep do you get every night?

Peter Merkert

10:16>> Not so much. Part of two. Six.

Nathan Latka

10:19Six? Okay. And what's your situation? Married, single, kids?

Peter Merkert

10:22>> Married? Yeah. Two kids.

Nathan Latka

10:24Two kids. Wow. Okay. How old are you?

Peter Merkert

10:27>> I'm 30.

Nathan Latka

10:2930 years old.

Peter Merkert

10:30>> You had

10:30>> to think about it.

Nathan Latka

10:31Alright. Last question. Something you wish you knew when you were 20.

Peter Merkert

10:36>> Even going abroad earlier because I went to China when I was 22. I would have loved to explore the areas even earlier.

Nathan Latka

10:45Guys, travel more. They're building a tool to help fashion brands track supply chains and basically embodied energy. They were doing two, call it a thousand bucks a month a year ago, now doing $50,000 per month. Great run rate serving 50 customers. They've raised a total about $1,400,000 last round at a 6 or 7,000,000 valuation. Team of 24 heavy engineering 14 people as they look to continue to scale. Peter, thanks for taking us to the top.

Peter Merkert

11:07>> Thanks, Nathan. Have a lovely day.

Nathan Latka

11:12One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM

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12:21up for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. If you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We

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Peter Merkert

12:47>> See you.