The supply chain was transitioning from being vertically integrated, all under one roof to a real-time, virtual network. The demand patterns that drive the supply chains have become very unstable and, hence, no longer as predictable as it used to be. There were problems in how to gain control over that kind of an unstable, highly virtual type of supply chain. This fundamental shift led to the emergence of a new breed of companies, all of which wanted to grab a share of the $2 billion market.
The expected size of the market has enticed some of the biggest names in venture capital. Vinod Khosla and Ray Lane, partners at the VC firm Kleiner Perkins Caufield & Byers (KPCB), made real-time computing their main area of investment. “When companies become real-time, they improve service performance while reducing costs dramatically,” Khosla says with enthusiasm. He continues, “You will not be competitive five years from now as a corporation unless you have near real-time information architectures inside the company.”
A consultant at KPMG International was conscious of the market need. In October 2000, Mecker, along with three others, founded Valdero to build software he describes as “next generation supply chain software.” “During the next four years,” says Mecker, “U.S. corporations are likely to spend a sizable chunk of their IT budget on real-time technologies.”
Playing the cards right
Within two months of starting the company, Mecker raised the first round of funding of $7.5 million from KPCB and Mohr, Davidow Ventures. Again in January 2002, Valdero closed a $15.5 million second round. Along with the old investors, Trinity Ventures and Integral Capital participated in the round, which indicates that they believe in Valdero's vision and that there are good prospects for this young firm.
Valdero's vision was to deliver software that helps provide real-time visibility and gain control over the daily execution in a supply chain. They aimed at building a product that facilitates the continuous monitoring of key activities across the distributed supply chain and, whenever imbalances occurred, guides the customer to take corrective action. “The bulk of the companies that have existed have focused on planning. The game has shifted from trying to do better planning to execution. Faster and smarter execution would ultimately drive away the latency, high inventory, and poor reaction time. That is the underlying premise and the mission for building Valdero's solution,” says Mecker. Before Valdero even began to write software, the founders spent time validating the vision of the company. “We met executives of 25 companies. We said: ‘This is what we are building and why we think it is important. You tell us your business uniqueness.’ We weren't selling anything. It was refreshing for people to hear what a startup company wanted to build from day one.” During the course of the validation process, Mecker had met the then-Vice President of Operations at Juniper Networks, Michael Dodd. “Once the product came to a certain stage, I knew that we had an intellectual connection with the VP of operations based on our initial discussions. There was a sync between the supply chain he had in mind and what we were building,” explains Mecker on how he landed his first customer. “Michael Dodd was a great asset for us. He even helped us land our next customer.” Today, Valdero has three customers: Juniper, AFC, and Extreme Networks.
The Pedigree
Unlike many other supply-chain software vendors, Valdero initially did not make offerings across industry verticals. It focused on developing supply-chain software for technology companies, especially the networking sector. “We wanted to understand the needs and deliver solutions to one particular segment of the market before we tried to address the needs of ten other segments. This is very important from a startup perspective because offerings for a networking company are different from those of a semiconductor company,” explains Mecker.
He understands that the adoption of newer technologies is more prevalent in one subset of the market than another. Based on this fact, he had decided to focus on the networking sector which, in fact, paid dividends. “We stuck to that market. We delivered to that market. We happened to validate our vision with that market,” says Mecker. “To be a successful enterprise software company, you better understand the domain you are addressing. As you go across verticals, you need to understand the problems of each vertical and tweak the product with the right amount of careful balance so that you can conquer.”
A New Kind of Sales Force
The expectation, buying patterns, and market and budgeting of each vertical are different. Therefore, as he moves across verticals, Mecker has made it a point to spend time on hiring the right sales persons. “Sales people need to be seen as much more than people making a transaction,” he says. “They have to develop relationships that are based on understanding the customer's problems as opposed to the logic that “since 500 other customers use the product, why don't you have it, too?”. That definition has helped me narrow down the profile of people we need to look for and what methodology we need to develop in order to maximize the productivity of the organization. The amount of energy put into the sales force is very different from what it was three years ago. We have a focused consultative sales selling model wherein every member of the sales force adds content at every meeting.”
The Landscape
Today, there are more than 500 supply-chain software vendors in the market. A month after Valdero was founded, AMR Research identified 24 young companies making software for monitoring supply chains in real-time, which included Valdero. However, a Forrester Research report states that though Valdero has robust agent and what-if-analysis features, it lacks monitoring networks—like competitor Descartes does—and industry diversity, limiting its ability to expand its product. “Overall, we feel Valdero has some catch-up to do to match the capabilities of competitors like Exemplary, WorldChain, and Viewlocity,” says Navi Radjou, Senior Analyst at Forrester Research.
Mecker does not rule out the possibility of another startup in this space. “I can't claim that a new company cannot take birth. Entrepreneurship will hopefully not die. But the next grand idea should be market-focused and better rooted in reality. The key to survive is to develop a technology product that leverages the existing investments of the customer and deliver incremental value relatively easily,” says Mecker. His bowling dictum and focus are driving Valdero’s real-time platform into reality.
