How a Flextronics Spin-Off Raised $65M and is Revolutionizing the Global Supply Chain

Nader Mikhail, CEO and Founder of Elementum, speaks with GrowthCap about reinventing how companies think about supply chain management and the dynamics of founding an internal venture within a Fortune 500 company.

RJ: Could you please give us a quick overview on Elementum and the genesis of the business?

Nader: Elementum is a cross-functional supply chain platform that makes supply chain management simple. We help people in procurement, logistics, and manufacturing stay on top of risks, opportunities, and other issues, and collaborate across teams–and across companies–to resolve those issues or take advantage of those opportunities.

How Elementum came to be was that back in 2011, Mike McNamara, the CEO of Flex, asked me to help him solve their SCM (supply chain management) problem. I spent the better part of that year interviewing every SCM software vendor on the planet, drilling down into their technology, architecture, and UI, and after several months of this due diligence, I concluded that none of these vendors could solve the problem. And the reason wasn’t that they weren’t smart, or that their technology wasn’t sound. The reason was that they were going about trying to solve the problem in the wrong way. They all took an “inside-out” approach: build an internal solution for one big customer, then only afterward, try to figure out how to connect them to their partners and suppliers through a series of clunky integration projects. What they didn’t get is that to solve the supply chain problem for anyone, you’ve got to solve it for everyone.

That’s why our approach is different. We’re building the first product graph, which maps the entire world’s supply chain and allows real-time information and insights to flow to all of its participants. This allows even very large companies to respond to disruptions or act on new opportunities with the speed of a startup, and removes the uncertainty that leads to billions of dollars in wasted inventory every year.

RJ: Are there any interesting cultural or business dynamics of running an internal venture within a Fortune 500 vs. having to set up Elementum as its own business?

Nader: Actually, from day 1, when I went to Mike with the initial proposal to build Elementum, it was always as a separate business with its own team, its own office, and its own culture. While we took advantage of some of Flex’s finance and HR systems in the early days until we could set our own up, we were very clear that we were building a different business, one that would serve all the world’s supply chains, not just one company’s. That’s how we were able to attract some of the best engineering and design talent in the industry–the promise of building a graph bigger than all the social networks combined, and a product that would impact trillions of dollars of the global economy.

RJ: Could you talk briefly about your previous experiences that led up to Elementum?

Nader: Well, I’m an entrepreneur at heart. I started my first startup when I was still in high school, and had worked on four different startups by the time I graduated from college. I got a crash course in real-world macroeconomics working at an investment management company for a year before joining McKinsey. When I was at  McKinsey, I spent about four years on their cloud computing team, helping some huge brands define their cloud strategies–this was back in the day when people didn’t even know how to spell “SaaS”. It was actually my former boss at McKinsey who introduced me to Mike McNamara, and the rest is history.

RJ: The wider enterprise software space is known for having some very large players such as Oracle, SAP, and others. What advice would you give to other CEOs about how to think about differentiation within industries with very large incumbents? And how do you think about it at Elementum?

Nader: One of the key differentiators for startups is the rapid iteration of your product, the speed of getting to market with new features and innovations. As Jim Rowan, COO of Dyson has said, “it’s not the big that eat the small, it’s the fast that eat the slow.”

At Elementum, we release every 2 weeks, which is quite unusual in enterprise software. We also monitor the usage and activity in our products constantly to make improvements and learn as we go. We’re innovating at the speed of a consumer app while selling enterprise software to Fortune 1000 companies.

The other advice I would give is, at the end of the day, don’t forget you are a product company. There are about 700 distractions per day, but you can’t lose your focus in making a great product. Don’t let all the activities required to build a company take away your focus from making sure your product is the hands-down best experience in your industry.

RJ: You closed a significant $50M Series B last year. Was there anything interesting that you learned or that stuck out during the capital raising process?

Nader: The supply chain space was a very unknown commodity to the VC community. We thought being new and different would be a major advantage. On one hand, we were correct in that everyone acknowledged it was a huge, underserved market. On the other, however, most VCs wanted a blueprint for success, and that just didn’t exist in supply chain. Or even worse, they’d want us to play it safe and transition to more traditional paths, such as order management or planning. Today, we have many more customers to validate the product and vision, but it was surprising back then how reluctant most investors were to make a big bet in a new space.

RJ: And if you were lucky enough to have multiple suitors, What were you looking for in an ideal investor?

Nader: We were fortunate because Lightspeed Venture Partners (LSVP) found us. LSVP had a pre-existing thesis that supply chain was ripe for disruption. Chris Schaepe at LSVP had connected the dots that the changes in CRM (Salesforce) and HCM (Workday) were inevitable in supply chain. Chris embraced our bold vision and encouraged us to do it our way instead of the safe way.

RJ: Can you give us a sense for the scale you’re at now and your vision for the near term?  How quickly are you going to be expanding, and are there certain areas in particular you’re focused on for your expansion plan?

Nader: Since we launched the company in late 2012, we’ve seen remarkable year over year growth, with over 130 employees and the addition of several Fortune 1000 customers, which span the automotive, healthcare, technology, agrochemical, and food and beverage sectors. The impact this has had on the growth of our product graph has been enormous, but we still have a ways to go. But ultimately, this is the measure of our success–how quickly our graph grows to encompass all the products, sites, and interconnections in the global product economy.

RJ: Is there anything else that you’d like to share with our readers

Nader: An important thing to note about our success, or any company’s success, is the role that good advisors play. We’ve been fortunate to have Dave Duffield, Chairman of Workday; David Henke, Former SVP of Engineering at LinkedIn; and David Dibble, Former EVP of Engineering at Yahoo! on our Board of Advisors, plus folks like Jim Davidson, Co-founder of Silver Lake Partners, and Ray Bingham, Director for Oracle and Trinet, on our Board of Directors with Mike McNamara, Chris Schaepe and myself.

We have a unique advantage with such a seasoned team of industry veterans joining our passionate and talented employees to help transform the supply chain industry.

RJ: Nader, thanks so much for your time and best of luck as you continue to transform the supply chain for companies worldwide.

Nader: It was my pleasure, and thank you.


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