How MODIFI worked with Maersk Growth to build Competitive Advantage 🤝🥇
By: Taiyo Jønsson
Tags: Supply Chain, Venture Capital, Startup, Corporate Venture Capital, Logistics

On a cold and windy March day in 2019, Nelson Holzner, Sven Brauer and Jan Wehrs arrived in Copenhagen. Their new startup, MODIFI, was striving to fill the huge gap in global trade finance, a problem estimated by the World Economic Forum to be worth $1.5 trillion. Now they wanted to work with Maersk Growth in pursuit of this ambitious goal.

The three men had a hugely impressive background, having sold their previous business, BillPay (dubbed ‘The PayPal of Germany’) to Klarna a few years earlier. Since then, they had reconvened to build and launch a new business, a digital finance solution focusing on the trade lane between European buyers and Asian sellers. Less than a year before travelling to Copenhagen, the founders had raised a seed round to start forming a team and validating their solution for European buyers; now they were looking to expand their suite of services to offer seller finance in India and China, and create a truly international footprint.

Their vision was clear: the MODIFI team would provide specialist insight and technology, while Maersk would bring the global reach and proprietary data.

Nelson, MODIFI’s CEO, recalls the deeper motivations behind the partnership. “Working with Maersk provided a great opportunity for us. Maersk is the market leader in shipping and logistics and runs probably the largest B2B trading network on the planet. They are true experts in the field of international trade.”

“Secondly, Maersk is a huge and trusted brand and so being able to leverage being part of the Maersk family could help us overcome the challenge of being relatively unknown when entering new markets and talking to customers and partners.”

Thus, for MODIFI it was not just about getting funding, it was about building competitive advantage.

“It made perfect sense for us to choose a strategic partner who would not only provide us with capital but also the in-depth market knowledge and insight that we couldn’t get anywhere else. In a competitive market, these are the most valuable assets.”

MODIFI’s approach to trade finance 💡🤖📄

As the global boom in Fintech startups illustrates, the financial sector is currently ripe for disruption.

Around 50% of all SME financing requests are rejected, and this is acknowledged to be one of the greatest barriers to trading globally. The traditional process of getting trade finance is primarily paper-based with manual processing of physical documents, which makes smaller transactions slow and unattractive to offer from a unit economic perspective. At the same time, loan providers typically demand high rates to cover their risk because the SMEs lack an international track record.

MODIFI have developed a solution that can sweep all these problems away with a paperless, digital-first approach, delivering a seamless customer experience on top of an automated back-end. Using technologies such as optical character recognition and machine learning to automatically capture and analyze various data points, the solution can assemble the necessary components for underwriting.

This means that a process which previously took weeks can now be done in minutes, reducing the cost of serving each customer, and creating an opportunity to scale and build a large, diversified portfolio of small loans, lowering the risk and consequences of defaults.

When they arrived in Denmark, MODIFI were looking for a means to supercharge their growth and get ahead of their competitors.

Applying Rocket Fuel to support MODIFI’s objectives 🚀

As outlined in a previous blog post, Maersk Growth offers a range of value creation services to its portfolio of startups, called the ‘ABCDE’ model, as it includes assets, brand, customers, data and expertise.

With the clear vision and objectives of MODIFI, it proved relatively easy for them to find common ground with relevant Maersk stakeholders. This early validation in meetings, before the deal was done, helped to align expectations at both ends and also mitigated the risk of unfortunate surprises post-investment.

Maersk Growth Value Creation, ABCDE model

“Pre-investment, the team at Maersk Growth ran a very well-structured and fairly smooth process,” Nelson recalls. “After only a few calls and a presentation in Copenhagen, and two calls with the Maersk stakeholders whom we were going to collaborate with later, we received a term sheet.”

The initial work with the Value Creation team at Maersk Growth identified a range of opportunities where the collaboration could help MODIFI further build and scale their business. By focusing on their core objectives for the round and the challenges they provided, a short list of projects was compiled and prioritized with clear deliverables. These included:

Assets : Access to lower cost of capital to re-finance the loan portfolio.

: Access to lower cost of capital to re-finance the loan portfolio. Brand : Public brand association with Maersk in the media to increase MODIFI’s credibility with partners and customers.

: Public brand association with Maersk in the media to increase MODIFI’s credibility with partners and customers. Customers : Distribution to new customers through Maersk platforms and sales team.

: Distribution to new customers through Maersk platforms and sales team. Data : Proprietary Maersk trade data sets to run experiments for market insights and credit assessment.

: Proprietary Maersk trade data sets to run experiments for market insights and credit assessment. Expertise: Support to understand local regulatory requirements and markets.

“Once the investment was made, we started partnering with Maersk right away,” Nelson says. “And it has been an energizing experience. We have had lots of opportunities to work with various teams across Maersk and its portfolio companies, on a range of topics from product development to data to risk.”

To kick off the collaboration, MODIFI took the opportunity to fly in the entire team to meet their new colleagues.

“One highlight was that we arranged an offsite for our entire team, which Maersk Growth hosted in their previous Copenhagen office. Those days working alongside the Maersk team were really great fun and connected the wider teams beyond the typical founder/partner relationship“, Nelson remembers.

He also appreciates the opportunity to meet their Maersk counterparts in person prior to starting the collaboration and has been impressed by the ease of working with them.

“There has been a lot of communication both at the C-level and below, with focus on actionable cooperation and identifying where we could provide each other the most value.

“We were slightly concerned that working with a large corporate might slow us down — startups like MODIFI rely on agility and fast decision-making to succeed, so any excessive processes or red tape can undermine our competitive advantage. But I have been positively surprised how fast decisions are being made and how professional the follow-through has been.”

Making measurable impact 💥↗️💰

MODIFI worked determinedly the next year to improve profit margins through Maersk’s access to lower capital costs, and benefitted from Maersk’s local market expertise and data to help build product-market fit for seller finance in India. With the foundation in place, it was now time to accelerate the business by onboarding more customers, leveraging Maersk’s sales channels and global network for rollout.

Over previous years, Maersk had seen an almost complete switch to online bookings (98% by 2019). Maersk.com had become one of the world’s biggest online platforms in terms of revenue, and now represented a great sales channel for digital value-added services.

After only a few weeks of engagement with the Maersk.com team in the spring of 2020, MODIFI was cleared and ready to commence the first pilot. One of the great advantages of the purely digital collaboration was that it allowed the two parties to run small experiments and test customer viability with different segments.

This first pilot showed promising results and was quickly followed by a second one on the platform Twill. Where Maersk.com is more focused on the traditional large to enterprise-sized Maersk customers, Twill is the Maersk offering for SMEs, something that intuitively would provide a more natural fit for customer segments across targeted markets in India and China. This was highlighted by some very impressive numbers, emphasizing the strong synergies that could be further developed and leveraged.

YTD results of pilots with Maersk.com and Twill (Nov 27th).

The successful partnership pilot meant that today MODIFI is still offering trade finance to the 1000s of Twill customers in certain corridors, which in turn enables both trade and partnerships on a global level. This naturally excites the MODIFI team.

“As we enter more markets, Maersk can help us improve our services and avoid pitfalls”, Nelson states. “We are working in unison on some exciting projects and would look to integrate on an even deeper level in some key areas.”

For the MODIFI CEO, there is no doubt: a partnership with Maersk Growth can help them meet their objectives.

“We want to become the world leader in trade finance for SMEs and as the leader in container shipping and logistics, Maersk is well-placed to support us on our journey”.