Strattam Capital has backed NETSTOCK, a provider of inventory planning and optimization software for small- and mid-sized enterprises, Hilary Fleischer, partner at the Austin, Texas-based firm told PE Hub Wednesday.
NETSTOCK, which operates remotely across the US, Australia, South Africa, and the UK, helps its global customers manage over $15 billion of inventory and plan 100 million items per month. Its software-as-a-service platform is used by customers in distribution, manufacturing, retail and warehousing to minimize stock-outs, reduce excess inventory and improve time to order.
The tech-focused private equity firm invested out of Strattam Capital Fund II, which closed on $230 million in February 2019.
Strattam has a history of backing enterprise resource planning (ERP) and point solutions businesses such as MHC Software, Blacksmith Application and Trax Technologies. This time around, NETSTOCK presented an opportunity to invest behind the company’s deep industry expertise in inventory management, Fleischer said.
“The CEO Tony Sinton has been in the inventory management space for quite a long time and is an expert in that space,” the investor said.
“So what him and the company have been able to do is to bring solutions that historically have been only available to large enterprises to small- and mid-size businesses; and help those businesses improve their inventory management, optimize their inventory, and improve profitability and bill rates.”
The company has also proven its resiliency during covid-19, creating additional value to its clients by helping navigate uncharted territory.
“Systems like this that are mission critical or systems of records – what we found is that they are incredibly sticky even in times of uncertainty like we are in right now,” Fleischer said.
“So in times of uncertainty the customers are keeping the software, and the software is actually providing additional value because when there is an uncertain demand – like there is right now – the ability to best forecast what inventory you should hold is quite valuable.”
With NETSTOCK onboard, Strattam plans to focus on growing the company organically through additional market penetration in the North American market, Fleischer said. NETSTOCK plans to expand its capabilities in the region by adding an enhanced functionality in order to sell more to existing customers, she said.
The deal reflects Strattam’s broader strategy of backing founder-led businesses and, ideally, becoming their first institutional partner, the investor said.
The firm attracts founders through its Five-Point Plan, which means that before closing on a deal, both the investor and the CEO come to agreement on five core business initiatives they will work on together, Fleischer explained.
“[The] real reason why the company got comfortable working with us is Strattam’s Five-Point Plan,” the investor said.
“We closed the deal last week and we already kicked off a number of those initiatives, so having that alignment with the founder is very critical for us and also gets the founder comfortable taking private equity capital for the first time,” she said.
Action Item: See Strattam’s latest form ADV here.