Karthik Sridharan ENG07 W07 has been riding a wave of good news basically since he launched his online marketplace for small businesses in 2012. The latest swell came in October, when his startup, Kinnek, announced the closing of $20 million in Series B funding. Thrive Capital led the round. Kinnek’s Series A closed about a year ago, led by Matrix Partners, and in total the startup has banked $33 million.
Sridharan’s story is the classic entrepreneur tale of spotting an ancient business problem—in this case, how smaller businesses procure goods and equipment—and solving it with modern technology and why-didn’t-I-think-of-that ingenuity.
It’s particularly head scratching for all of us who didn’t see and solve the problem given that small and midsize businesses (SMBs) represent $2.2 trillion in annual aggregate spending on supplies and equipment, according to Kinnek’s figures. CEO Sridharan’s platform is already handling $1 billion in quotes per year. As many as 20,000 businesses use Kinnek on the buy side (up from 10,000 a year ago), and about 2,000 suppliers. And according to a recent TechCrunch article, Kinnek is the only one of four similar platforms that hasn’t limited itself to one industry vertical.
Essentially, Kinnek is a marketplace. Business owners and purchasers approach the marketplace with a need, and vendors respond with a quote—usually multiple vendors with multiple quotes. Kinnek charges the sellers, in a hybrid model, part subscription fee and part commission on sales. The service is free for buyers.
Good for them. They need it.
“It’s not like running a small business is easy,” Sridharan says.
SMBs are looking for customized goods and equipment—malt and hops for craft brewers, an oven for a bakery and other things they cannot find at a big-box retailer—but they don’t have dedicated procurement teams like a big business, says Sridharan. From what he’s seen, SMBs then resort to buying millions of dollars in material “like they were still in the ’70s”—writing quotes on Post-it notes, waiting for suppliers to call them, going through print directories.
Sridharan and his partner, chief operating officer and Cornell engineering grad Rui Ma, who met while interns at JP Morgan, discovered this “latent demand” for specialty goods through dozens of interviews they conducted with business owners.
Sellers have needs met too, says Sridharan. The platform notifies vendors in real time when quote requests come in that match what the vendor sells. Once buyers and sellers do connect, buyers can get quotes after a few minutes and negotiate over the platform’s messaging feature. The challenge is connecting with the right buyers across a wildly fragmented SMB market, and Kinnek solves this problem for them. Sellers can focus on selling, not chasing down the names of small business decision-makers and cold-calling.
The company plans to apply the $20 million in funds toward two areas: expanding into new industries (their current strengths are in food and beverage, craft brewing and distilling, and small manufacturing); and building up features on the platform, like invoicing and shipping and receiving. Ultimately, the goal is to make Kinnek the social graph of businesses, à la LinkedIn or Facebook.
Based in New York, Sridharan enjoys more than just the early success of his enterprise. He enjoys the Silicon Alley startup ecosystem and the alumni influence in it.
“Penn and Wharton alums just dominate the tech scene out here,” says the alumnus of Penn’s Jerome Fisher Program in Management & Technology (M&T).
Almost half of his 30 staff members are Penn grads. He credits Penn’s interdisciplinary education—something he especially experienced as an M&T student—for its graduates’ ability to dive in and succeed in entrepreneurship.
“Being able to speak a lot of different languages is super important,” he says of the startup founder’s skill set.
In his case, he needs to know how to say the word “growth.”