A logistical blockchain: Yojee
Alan Kohler December 15, 2017
CEO Interviews
- Yojee (ASX: YOJ) is a logistics software business
- It was started at the end of 2015 and listed in the middle of last year
- The company recently did a big deal with Scharff – the big global Fed-Ex supplier in Peru
Ed Clarke is the Managing Director and co-founder of Yojee which listed in the middle of last year. The company started up at the end of 2015, so it’s really just two years old.
Yojee is a logistics software business, software as a service mostly, selling its artificial intelligence and blockchain systems to large and medium and even small logistics businesses trying to deliver stuff. It recently did a big deal with Scharff, the big global Fed-Ex supplier in Peru. The company is based in Singapore and is a very interesting business; it’s now growing quite quickly. Growing at, in fact, 100% per quarter they’re saying, or at least that was last quarter and he expects to grow another 100% this quarter obviously from a low base. But the share price has gone up a fair bit also from a low base, from 4 cents a year ago to 24 cents today. In fact, I think a year ago more or less it was 3 cents.
So, it’s on a rapid rise now and starting to kick some goals. Still burning cash though, it’s burning cash at about a million dollars per quarter and it’s got five million in the bank. So, the way they’re going they’re going to run out of money some time at the end of next year but he says they should get cash break-even before then. As to whether they need to raise any more money he doesn’t really know but they’re on a pretty sharp trajectory right now.
Here’s Ed Clarke, the Manging Director and co-founder of Yojee.
Ed, when and why did you start Yojee?
I was working with an e-commerce optimising company out of Singapore called Ematic, it was a big data play for optimising sales. We had hundreds of leading e-commerce companies on the platform and we kept having discussions with founders and CEOs about the big problems with both fulfilment in country and also that across the region there was no cross-border logistics capability for these types of companies to expand their customer base. What we looked at was that the nature of logistics and the lack of technology meant that it was both inefficient and there was no visibility so you couldn’t really scale your business. We just felt that with the rise of things like artificial intelligence and blockchain we could create a solution that solves a huge number of problems for a lot of people.
Your intention was to put AI and blockchain together to begin with was it?
Correct. What we saw was that everyone knows that there’s a truck going everywhere in the world every day, the only people that don’t know it is someone that has to identify and connect the supply chain together to new places and to find companies willing to work with them that are not multinational. What we wanted to build is a software as a service product that was affordable to everyone that helped them improve their business but at the same time used AI and machine learning to identify both where and how they operate, and also the real time capacity availability of the vehicle so that we could actually power their companies and then give them opportunities to make additional revenue as part of a wider supply chain. Obviously the blockchain piece comes in for payments and transactions, proof of existence, proof of origin and also cross-border things like customs clearance and bills of lading.
When was this, when did you start the business?
So, the company is probably two years old today actually. We probably did six months research before we started the company and then we got some investors on and really went hell bent at building what now is one of the most powerful route optimisers for logistics in the world and also to build the software as a service platform, and begin implementing blockchain.
I thought you backdoor listed the company two years ago, is that right? Did you do it the same time as you started?
June 12 we completed, I think it was June last year. So, I mean the company essentially was just two volunteers, did a bit of sweat work and then we put it together and once we got everything organised and then had the blueprint together and put in our CTO, Andras Kristof, who’s probably the most successful tech entrepreneur out of Singapore into the company. Then we began to approach investors and take our NVP to market.
How much money have you raised in total?
I think it’s somewhere around $8 million at the moment, so we’ve still got – I think we’ve got $5 million in the bank now as of last quarter so we’ve been fairly frugal. We’ve got a good number of development teams across Southeast Asia and also Eastern Europe. We’ve done a lot of work and now we’re in the process of taking the product to market and getting really good results already.
Yeah, just tell us how much cash you’re burning at the moment.
Right now we’re around a million dollars a quarter which will go up slightly as we do custom projects for customers, like the Scharff Fed-Ex project out of Peru and Bolivia, we’re building them a core operating system that they’re replacing their old system. Bringing in some more technology people to do the implementation but overall we’ve been averaging about a million dollars a quarter.
Do you expect to get to cash break-even before you need to raise more money?
Well, there’s all sorts of possibilities we’ve modelled and we do see some strong growth happening next year as now our products have begun to mature and we’re starting to move to more and more customers and we’ve got big opportunities. But we also look at big growth opportunities in markets like across Southeast Asia, Australia, North America, Europe. We’ve got a number of different models of how we can move forward but certainly we do get into a lot of our burn with our software as a service product because the nature of that. It’s a high margin product with monthly recurring revenue so it helps reduce the overheads of the business.
Yes, well in fact you’ve got two businesses, haven’t you, you’ve got the software as a service business offer to big logistics operators but you’re also running your own network of couriers in effect, aren’t you?
A little bit. In terms of how we run the network that’s done by essentially our AI algorithm. In Singapore we do sometimes 500 plus deliveries in a day, maybe have one or two customer service people but the system essentially runs itself and speaks with the carrier. So, we’re just making use of their empty capacity and people that want to make a bit of extra money and the system’s assigning the jobs and working out who the best drivers are.
Are these professional drivers that you’re using in that business and how do you make money out of it?
Yeah, so they’re sole traders and individuals. Some companies are doing work with us as well. We just essentially but the ticket on transactions that we introduce to the network in Singapore. We have a marketing capability and essentially people come and book in our website and we book a job the same way you’ll do with DHL or someone else. You book the job and then our system works out who the best driver is, assigns the job and then we keep a commission for the introduction and pay the driver for the work.
What’s the commission?
It can change. We’ve got anywhere from our next day and same day service which our same day service is eight hours, so that’s 20% or a bit more. We have another product which is a three-hour delivery which we get a higher commission on. Three-hour deliveries are an area where we’re quite unique in Singapore providing that for businesses and e-commerce companies to be able to get product to their clients. That kind of Amazon-type model of gratification, so we’re an alternative for them to provide an additional service to customers.
Yeah, it’s funny you should mention Amazon, the reason I ask about what your clip is, is because I interviewed Joel McDonald of GetSwift the other day and he was saying they were charging 29 cents. I was just wondering if this is per delivery and I was just wondering whether – I mean you’re a disruptor of course, you’re disrupting the existing logistics business but I’m wondering if you’re arguably being potentially disrupted yourself by someone coming in at a lower price.
No, look I mean GetSwift is a great business and they’re focussed on last mile deliveries for restaurants and from single warehouses and these types of things. We’re more of a supply chain company so we have $1.20 a container, 40 cents a pallet, around 22 cents US a parcel and we’re looking at large scale logistics, multiple warehouses. The company we’re working with in Peru is doing a million deliveries a month. They’ve got all sorts of warehouses and subcontractors they’re working with and bringing into the system. We’re not so much a delivery function or a delivery app but we’re actually a logistics core operating system so that we’re very different in that way and so we do the waybills, we do the finance piece, we can do invoicing. All of the different pieces that means that you can run most of your business off our platform if you’re a logistics company as opposed to digitising a delivery function of your company.
I presume the company in Peru that you’re talking about is Scharff which is a Fed-Ex provider in those companies.
Correct.
Is Scharff your first big customer?
No, so we have Lion Parcel which is part of Lion Air Group, the biggest airline in Asia. They’ve got thousands of agents across Indonesia, they’ve got a lot of work they’re doing across Jakarta and onto planes and across the rest of the country. That was one of our early signings. The reason we get these types of companies is because of our application of the AI and also the way that we’ve built our software so that in the case of Scharff in Peru they only own fleet and do deliveries across Lima whereas they work with subcontractors across the rest of the country and essentially we were the only system that offered them the capability to pass on the software to their subcontractors in a different instance so they’re not sharing their confidential information. But, they can keep tracking across their entire network off the same platform. They can make sure that they’re meeting their contractual requirements with Fed-Ex and they get full visibility of what’s happening. Then the subcontractors can manage their own fleets out of the same software.
It’s a seamless operation for them once rolled out and they get much more control, visibility and efficiency than they ever have before and the customer sees real time tracking across the entire country. So, it’s a vastly improved customer experience.
What do you charge them?
As I mentioned before, our software as a service product – our base rate is $1.20 a container, 40 cents a pallet and 20 to 22 cents a parcel. Then we do different pricing based on the sophistication of the technology you want to take from us and also the volume that you want to commit to.
You don’t do kind of a holistic retainer type deal with them, you still charge per container, pallet and parcel?
No, so as I mentioned once we get an idea of their historical volumes we’ll offer a discount based off a minimum volume commitment, right, and that forms your retainer. That’s how we evaluate the size of the companies. So, if they want to commit to 600,000 deliveries a month then they’ll get a percentage discount because of the volume and the commitment that they put in place. We do obviously get as much of a commitment as we can to help us budget and to get them access to a discount.
Can I get a sense of what the total sort of revenue from a customer like Lion or Scharff might be?
Look, we haven’t announced those to market and they form part of a certain strategy, we have to get more global clients onboard. But in terms of where we see clients coming we see SMEs coming in anywhere from just starting out at $100-$200 a month through to $10,000 a month and then the enterprise clients going all the way into six and seven figure contracts as we get more and more of those onboard.
Tell us about how scalable the business is, when you put on clients is it all fixed cost? Most SaaS businesses are fixed cost, does that apply to you?
Yeah, correct. Right now we have over 30 modules now that are building like Lego blocks, different companies require slightly different things but over the scheme of 1,000 customers they’ll all require a different mix of the same 30-40 different modules. We do a presales meeting with them, they tell us about their operation and their requirements in terms of proof of delivery or what sort of routing or job assignment they want and what sort of invoicing they want. We plug all the different options together and give them their final product. As we mature as a company we’re getting faster and faster at that. Early on it was about six months to do the very large scale deployments, the more we mature it’s going to come down to a matter of weeks, that’s because we have to build all the individual modules. But, certainly we’re seeing a very rapid deployment to most of our customers.
And do your APIs mean that you can plug your system into whatever software they’ve got whether it’s Oracle or SAP?
Absolutely. We can plug into the warehousing and finance functions of Xero, SAP, Oracle, almost anywhere where you can push and pull jobs from we can push and pull jobs from we can plug into if there’s a way to access it. We see that as a great way for us to give very large legacy technology companies the first input into Yojee to start using us for routing optimisation and the customer side piece and then the more and more that we establish trust with them we can do more and more of their operation.
I mean how quickly do you think you can grow? I mean does your sales effort involve and what’s the potential customer base?
Yeah, since starting out I think Q1 or Q2 this year were our first full sales quarters we’ve been doubling quarter on quarter and we’re trying to sort of maintain that rate at the moment. We see huge growth.
Did you just say you’re doubling each quarter?
Correct, so starting from a small base obviously but we’re doubling quarter on quarter in terms of revenue growth and we’re hoping to achieve that again this quarter. We’re really working hard to scale up the business and meet all the demands of the customers that we’ve got coming in. Yeah, obviously you have to build a scalable business, so from an operational and people perspective as well as a technology perspective, so controlling that. We’re seeing good network growth in Singapore, we’re seeing good technology demands from around the world from multinationals as well as small and medium companies. There’s a lot of excitement in here and also obviously a lot of good stress for companies trying to meet the delivery schedules and demands of customers.
When you go into a company to sell them the product are you bidding against somebody else who’s doing the same thing as you or is your main competitor the idea of a custom build for the business?
Yeah, I mean the Scharff win that we had was part of a global tender. Scharff found out about us through an IBM presentation in Peru and shortlisted us in their top three in the tender. We came in late in the tender against another two and blew the other two companies out of the water just because as I mentioned our multi-company single link seamless supply chain capability. That’s technology we brought to the market that helps people work with their partners and subcontractors and build supply chains very quickly that give full visibility. We do very unique technology and we’re winning a lot of deals because of that. We’re also helping people replace legacy sort of in-house built systems with something much more modern. There’s a mixture but certainly we beat off some global companies in different tenders.
Where to from here? You say you don’t need to raise anymore money or you think you’ll get to a cash break-even early enough?
Yeah, it’s not something right now we’re really focussed on, we’ve got a huge number of customers that we’re working with across our pipeline and we’ve got deliveries to do. As I said we’ve finished last quarter with $5 million in the bank, burning a million quarter on quarter, so it’s not a massive priority for us right now it’s more about focussing on sustaining our growth and building really good operational procedures to make best use of what we have and if we did in the future go out to do that we have a very strong in-house capability to really explode from there.
I get how you’re using artificial intelligence particularly to organise the dispatch and so on, but tell us how you’re using blockchain.
Sure. Blockchain is really interesting in logistics because you have a whole number of factors. Apart from with Bitcoin it’s all about a financial transaction but in logistics, in global supply chain, we have a huge number of assets and transactions that are happening. You have the assets as in the vehicles, you have the assets as in the parcels, you have the assets as in the finance and there’s not a lot of trust in that industry and people trying to work together. You see things like Penfolds Grange being sold counterfeit into China. With the application of blockchain in logistics you can build an indisputable record of that wine coming from South Australia into China into the store where people can then click on the barcode, see that it’s original, see where the supply chain links for it is and verify that item. Proof of origin and proof of existence is important. Then at an operational level for companies they look at things like for audit and proof of existence, proof of occurrence of what they’ve done being hack proof.
You see Mercer this year lost about $250 million because of a hack to their system and it puts you in a very precarious place if you don’t have an indisputable record of how your database and assets were at a certain point in time. Blockchain is a really great way to do that. Then you get to the things like doing payments and doing insurance transactions and doing cash on delivery to the banks across the world and all these other applications where out of a single environment you’ve got an extreme source of trust.
What would you think your main weakness is? I mean is it because you’re so small and you’re a start up effectively and you’re up against and you’re bidding to very large global businesses? Is that where you think your key weakness is?
Yeah, look I think it always is. You stay up at night wishing you could build everything 100 times faster because you know what you want to do but you’ve got a certain size team. But, at the same time it’s a strength being at our size right now because we’re much more agile with the way that we can do things. Some of the bigger companies around the world see us with an ability to provide very rapid innovation and opportunity because of our size. There is, obviously as someone that sees our roadmap, myself and the CTO there, we see where we want to go but you’ve got a certain amount of resources that you need to prioritise and then you wish you could do everything but you can’t and that’s always your weakness in a start up but it’s always also an opportunity knowing that you can day to day fine tune your direction and meet the low hanging fruit and revenue opportunities that come your way as part of your overall focus.
Do you regard Yojee as a Singapore company or an Australian company?
It’s a really good question. I think obviously I’m very Australian and I see a lot of our investors and a lot of the application technology we see as huge for Australia but we also see different use cases across Asia. I’ve actually never had to answer that one and never really thought about it but I do ourselves as a mixture because I think that obviously being on the Australian stock exchange we’re Australian in that essence.
But, you live in Singapore, don’t you?
I do, it’s a place where we can innovate and work across the region. We’re two hours from most of the different markets we want to sell into from here. It’s a much faster way to get out to market being based here at the moment.
Yeah, I think companies are mostly based where the CEO lives really.
Yeah, it could be true. We did look at Australia but from a sales perspective and where we wanted to focus it just made sense to stay in Singapore.
Yeah. Well, great to talk to you, Ed, thanks very much.
Thanks very much for your time.
That was Ed Clarke, the Manging Director and co-founder of Yojee.
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