Chemical supply chain digitization draws investment

The chemical industry has been slow to go digital compared with the consumer goods sector, and one big reason is the complexity of the transactions. Selling a tanker of p-xylene requires a lot more analytical data and regulatory compliance information than, for example, a pair of sneakers. In the first week of October, a pair of start-ups raised funds for their ideas to make e-commerce easier for chemical firms.

Mstack Chemicals secured $40 million in a series A funding round led by the private equity firms Lightspeed and Alpha Wave Incubation. Mstack’s platform connects small chemical manufacturers in low-cost regions such as Asia and the Middle East with buyers primarily in North America. Customers interact only with Mstack, through an Amazon-like web portal, while the start-up handles testing, compliance, and logistics.

The company currently operates in four market segments: oil and gas, coatings, water treatment, and home and personal care. Mstack says it will use the investment to expand into agriculture and pharmaceuticals, boost its custom formulation services, hire additional US-based staff, and “double down on its mission to disrupt a historically flawed supply chain for specialty chemicals,” according to the press release.

Separately, the chemical sourcing start-up Valdera raised $15 million in a series A led by Index Ventures. Valdera uses artificial intelligence and a database of raw material suppliers to help chemical producers and buyers make stocking and purchasing decisions informed by market trends and supply chain risks.

Valdera is attracting interest from major customers in cleaning and personal care, including Procter & Gamble, Estée Lauder, Unilever, Nestlé, Bayer, and Henkel, which all participated in the funding round.

Digitization start-ups are likely to disrupt the chemical distribution business, but it’s a change the industry has been expecting, says Robert Khachatryan, CEO of the shipping company Freight Right Global Logistics. “Valdera and Mstack are essentially software platforms looking to serve chemical distributors as clients, similar to how Adobe provides tools for publishers,” he says. Their strategy is probably to sell suppliers on a way to become efficient and responsive rather than try to replace them, Khachatryan says.

Supporting that notion, the chemical distributor Univar Solutions says it is partnering with Valdera. “The old ways of working are gone,” the firm says in the Valdera press release. “Supply chains are tight, managing inventory is difficult, regulations are changing. . . . The innovation [Valdera brings] to the table is exactly what the industry needs right now.”

Perhaps the leading player in the field, Knowde, raised $60 million in series C funds in August. “The chemical and ingredient industry has the potential to immensely benefit from digitization,” Dan Gwak, a managing partner at one of Knowde’s investors, Point72 Private Investments, says in a press release.