Q&A With Inspectorio On Their $10m Series A Financing

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The Inspectorio brothers (L-R) Carlos, Fernando and Luis Moncayo Castillo moved their company – and their lives – to Minneapolis following the Techstars + Target Retail Accelerator class of 2016.

Since that integration, the quality and compliance software startup has been booming every sense, attracting an initial $3.7m seed round in early 2017 with a follow-on $10m series A announced this past week.

We talk with Cofounder and CMO Fernando Moncayo Castillo about what’s going on with Inspectorio right now:

You just might be the only tech company in Minnesota that’s founded and operated by three brothers — how did Inspectorio begin in the first place?

As brothers, we’ve been together our whole lives and doing business together for 20 years now, with 15 of those in this industry.

We started a responsible sourcing agency in Shanghai around 2003 and as we increased our size to hundreds of inspectors across other countries like Bangladesh, Vietnam, Pakistan and Indonesia — were dealing with a multitude of challenges around the inspection and quality control process that ranged from communications to human errors and even corruption.

So about three years ago, we made our own internal software tool and had the idea to test it with some clients across their different inspection sites and realized that we were on to something. From there, we continued developing the technology for factories and vendors within broader the supply chain ecosystem, bringing everyone together on one networked cloud platform.

So now I am managing the marketing and sales (CMO), Luis is the COO and Carlos is the CEO of Inspectorio.

How do customers benefit by using Inspectorio?

They benefit by increasing the speed and accuracy surrounding their inspection processes, from sourcing to communications to the transport and understanding of information. Before, they had to hire more and more people as inspectors or work with a 3rd party inspection company if they wanted to scale.  These inspectors and their teams would use pen and paper and digital camera to do their work which was tedious and unstructured.

Now, when a customer decides to use our software, they are bringing their inspection process online which enables a much faster process than ever experienced before in this industry, from hours and days for tasks to merely minutes in some cases.

So there’s greater efficiency captured by doing more with less time using our artificial intelligence-enabled workflow system, and as you also can imagine, the accuracy rates increase along the way. Going beyond that, the data we are able to uncover and combine helps our customers see things like never before to power better business decisions, such as sustainability practices, around their supply chain.  The cost time savings realized are of a huge magnitude in a huge industry.

Who are some brand-name clients that use Inspectorio?

That I can publicly name: Target, Kohl’s, and American Eagle.  We have over 2,000 unique customers who are using Inspectorio representing about 11 different countries.

As a global business, how do you break down your operations? 

We are a US-based corporation headquartered in Minneapolis with major software development centers in Vietnam and Belarus focused on the technology side.

We have customer success and implementation teams in Vietnam, China, and Minneapolis.    We have executive operations based here in Minneapolis with some in Vietnam. In sales, we have a team here in Minneapolis, one person in Hong Kong, and the UK now.

Myelf and Luis are based here in Minneapolis while Carlos moves all around the world, but officially will be living in Belarus very soon.  We talk daily, have meetings weekly, and see each other just about monthly. We call our approach a functional distribution and have more than fifteen years of working together like this.

Overall, there are almost 100 people on the technology side of things and about 30 people including us on the operations side.

What can you tell us about the $10m Series A round of late?

We defined the size of just our main vertical, retail, and realized that there’s a lot of room for growth there over the next two to three years, so we calculated it as needing about $10m to achieve that penetration.

We are growing our development team in India, opening a business office in the UK and Spain now.  We are also planning to enter a new vertical outside of retail that I cannot yet speak to, along with the introduction of some new sustainability features.

Our Series A included all the original investors – Target, Matchstick, and Techstars – plus new strategic partner Ecolab.

We took calls from over 45 different VCs over the past year!  But Mark Solon at Techstars has been there with us for a while now and understands the business very well so it was easy for us to deepen the relationship there, while both Target and Matchstick also wanted to ante up, and we welcomed Ecolab is a new a strategic partner.

What is the significance of Ecolab as a new investor?

Doug Baker is a visionary and Ecolab understands the food safety and hygiene space very well. I believe they have a presence in something like 120 countries with 26,000 inspectors.  I think what Ecolab sees in us is of interest to them in that way and we can learn from eachother, but there’s no requirements for them to use our technology.

Who is on the board of directors now?

The Moncayo Brothers, one of our first angel investors, and Mark Solon from Techstars.

How’s the balance sheet and what’s your capitalization strategy?

We are tracking for a cash-flow break even in 2020 on retail alone, so it depends on whether or not we decide to enter other verticals?

We have learned a lot in business over the years, made money, lost money, gone bankrupt, etc. It’s not the first time for us but the consequence of 20 year working together. We are focused on a healthy balance of business and life, we do not come from the school of ‘raise and spend, spend and raise’

We are going to stay lean, measure every dollar spent, stay focused on execution and base decisions on supported facts. Our vision is to become the number one platform for inspection and verification in the world. The degree to which we expand our scope, competition occurs, etc. may dictate our needs for additional capital.

Business to us is about endurance, this is not a race!

What’s the biggest friction or barrier to growth?

Ourselves…as entrepreneurs with our own human weaknesses.  Growth is good but it’s a constant challenge to manage the pace. And we have team members from 11 different countries in 4-5 offices right now, which presents an interesting cultural challenge.

How’s the move to Minneapolis treating you?

Fantastic. I believe that we are doing things here with our partners that just wouldn’t be possible on the coasts.  My three kids and the wife are happy, and so life is good!

Is there anything else you would like to add?

The levels of visibility and data we are going to deliver with our new sustainability features will revolutionize social and environmental compliance around the world.

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