How a Simple Mistake Led to a $20 Million Ponzi Scheme

Sean Weisbrot: Welcome back to another episode of the We Live To Build podcast. This is episode 132 with Anders is the founder and CEO of Focal Point, which helps modern enterprises manage their procurement processes. They recently raised a five and a half million dollars seed round in August, 2022.

Sean Weisbrot: We're gonna be talking about procurement because I don't honestly understand anything about it. And so this is a really interesting thing. I always love to learn about new things. So, uh, I assume this episode will be a little bit more on the informational, educational, uh, realm and possibly some of his journey.

Sean Weisbrot: So, uh, thank you, Andrew. Why don't you introduce Focal Point a little bit more and how you got the idea to get involved in it, and we'll go from there.

Anders Lillevik: Focal Point was founded in March of 2020, so right before the pandemic started. Uh, I have been working in procurement as a practitioner for 25 years before starting the company.

Anders Lillevik: And the challenge that we're looking to solve is the fact that the existing infrastructure providers are dealing really well with the tactical aspects of procurement, meaning the transactional part. So storing a contract, uh, sending out a purchase order. Receiving an invoice, paying suppliers, and so on, and most of the work, if not all of the important work, it's done.

Anders Lillevik: Before stuff turns into a contract. So gathering your requirements, deciding which suppliers to invite, deciding which internal stickers to stakeholders to involve in a process that all gets done manually, probably in a spreadsheet and email and pretty poorly. And having managed large global procurement organizations, I know firsthand how difficult it is to manage a couple hundred people, uh, using an Excel spreadsheet.

Anders Lillevik: And sort of the, the, the, the starting point of my journey was Excel is not a management tool. And that was kinda the slogan that I used. Like, it, it was never meant to manage a complex process and that that's really what we're trying to solve.

Sean Weisbrot: Alright, so what is procurement?

Anders Lillevik: I. Procurement in a nutshell is, is buying stuff, right? So any organization that you have, any company that you have, are critically reliant on third parties, right? So for example, we're a software company, we could not exist without a cloud provider. So we have to select a cloud provider to be able to host our software. And then we have other providers that underlies that.

Anders Lillevik: So the folks that do penetration testing, the people that manage our, uh, you know, software distribution, uh, people that do ar, HR systems and so on. And if you think of a company like a hotel, for example, they're critically dependent on soap being inside. The hotel rooms as, uh, as new guests come, right? So that soap has to be acquired by somebody.

Anders Lillevik: It has to be distributed to the hotels. Then it has to be delivered by a third party cleaning service, probably, uh, before it shows up in, in that, um. Hotel room and all these things are done by procurement and supply chain, where they look at the need of the organization long term, they find the best suppliers at the best price and then, you know, enter into long term contracts and procurement has evolved significantly.

Anders Lillevik: So when I started in procurement in 25, 25 years ago, it was all about saving money on long-term contracts. But now it has evolved significantly to where. We think about things like supply chain disruptions. We think about supplier risk. We think about diversity and inclusion. We think about environmental and sustainability goals that organizations have.

Anders Lillevik: And all of these things are, are things that procurement manages. So not only do you have to pick the best provider, but the, but the best cost, but also the one that's gonna take care of your data the best, the one that's gonna manage your processes the best. The folks that are, uh, going to be, um. Managing your environmental and sustainability goals, and it becomes much more complicated.

Anders Lillevik: So obviously organizations wanna get things done as quickly as possible, but at the same time, they layer on all these levels of complexity. And that's really what procurement is today. And it continues to evolve. And I think we all kind of understand the whole idea of. Uh, now the safety equipment that people needed for, uh, COVID and who would've thought that you can actually shut down an assembly line because you can't get, uh, masks and hand sanitizer.

Anders Lillevik: So, if you think about all these things that have to come into to play, for example, to assemble a car, you need to make sure the steel shows up on time. The paint shows up on time, the glass rolls up on time, the plastics and all the parts and pieces all at the same time. Who would've thunk that you actually need, you know. PPE equipment to actually run an assembly line, and that can literally shut you down. So that's a lot about procurement in sort of like a packed in way. But as you can imagine, right, managing all these things in Excel and in disparate processes becomes a challenge.

Sean Weisbrot: So beyond Excel, what are some some of their basic mistakes that companies make when setting up procurement process?

Anders Lillevik: I think procurement people try to solve for world hunger and world peace all at the same time. And they tend to over-engineer the process so that make it overly complex and, and kind of grind things to a halt. And I think that's why sometimes procurement is, is not the most popular organization within, uh, companies.

Anders Lillevik: Um, so I think over-engineering the process and making it like the most intellectually, uh, challenging process to sort of manage becomes a problem. I. But also not involving the right stakeholders upfront. So a lot of times these large global contracts that involves multiple stakeholders in multiple countries, for example, can come to a grinding halt if you haven't involved the right stakeholders to say, wait a minute, this person in this division needs to opine on this particular requirement, and then you have to start over again.

Anders Lillevik: So it's a, it's a. Buying stuff sounds easy, but as you're making decisions for the entire enterprise, you have to make sure that everybody's bought in, they're all singing from the same hymn notes, and they're working in unison to make

Sean Weisbrot: good results. How can you identify who are the right stakeholders and how can you communicate with them? And, and manage all of this.

Anders Lillevik: That's part of what we're solving here at Focal Point. So making sure you have a structured process that is repeatable, but adaptable to the what you're buying. So, you know, we talked a little bit about risk. We talked about criticality, we talked about ESG, we talked about diversity and inclusion. So you need to make sure that all of those factors are. Flexible in your process to make sure that if you're buying something that is a commodity that is, uh, non-critical to the organization, then you take, you know, this path and you involve these stakeholders and you get these sign-offs along the way.

Anders Lillevik: That way in a structured process, there are no, uh, what I will call surprises along the way. And as you then sort of think about the more complex buys, let, let's say you are outsourcing human resources, processing or onboarding, whatever the case may be, right? Highly sensitive, highly critical to defunct, to the organization.

Anders Lillevik: And if data goes, uh, wayward, it's a lot of risk, right? Then you can say, all right, you make need to make sure all of these things are done buttoned up properly. And, and, and that that process is followed. And the mistake people sometimes do. Is take that commodity low criticality scenario and apply the, the, the more complex, uh, type or, uh, acqui acquisition method to it.

Anders Lillevik: And that makes it challenging, right? Because, you know, procurement people are risk averse. Just because of how we grew up sort of thing, right? So we try to sort of overcorrect and, and make it, uh, overly difficult to, to do business with us. And you know, you need to have a process that is flexible both up and down depending on the situation you are in. And having that structured process, having, uh, a communication process that is off email and trackable globally. So you can actually say, yes, I did involve these people. Um. Here are the signups, here's the evidence behind it that helps you be more nimble.

Anders Lillevik: It also helps you, an audit comes around to say, all right, something went wrong. How, how did it go wrong? And, and, and did you follow your actual, your own process?

Sean Weisbrot: So in the case that something goes wrong, what do those audits look like?

Anders Lillevik: Depends what goes wrong, right? So I, I worked for a bank once upon a time, and we, you know, before I, before I joined the organization, the um. The, the bank had decided that they were gonna have ATMs, you know, cash machines.

Anders Lillevik: Uh, you know, they get serviced by equipment manufacturers, but they also need to get cash delivered. And this bank had the idea of we're gonna have our, uh, equipment manufacturer, our equipment providers also manage our cash delivery. And at some point in time, four years into the agreement, uh, basically it turns out that there was a Ponzi scheme going on and. We were out 20 point some, some $20 million, right? The music stopped. The Ponzi scheme couldn't, it, couldn't ho, couldn't keep up anymore. And basically we were out $20 million. Uh, at that point in time, you can imagine audit and internal affairs ascended onto the procurement organization. Like, what went wrong here guys?

Anders Lillevik: And really it involves procurement about how the organization. Got into this, uh, quagmire to begin with, uh, what internal processes were done on the cash management side to make sure that, you know, you have to clear, you have to basically balance your books every, every day. Clearly that that wasn't being done properly. Right? Because how do you, how do you, how do you short 20 million bucks? Um. So there's a lot of processes that need to be sort of sorted out, not just on the procurement side, but also on the day-to-day side and how things are managed. Um, and I can go on and on and on about, about these types of things, right?

Anders Lillevik: 'cause, 'cause everybody thinks that they can buy stuff. Clearly this is an example of that. It's like, oh, it makes sense. This equipment manufacturer goes to the, goes to the ATM, they can handle cash as well. Right. Makes sense intuitively. Right? But there's a reason why there's armored cars and why they have like pla, you know, uh, bulletproof glass on it.

Anders Lillevik: 'cause it's worth a lot of money. Right. And, um. So sometimes a good idea is not really a good idea once you think it through. Um, so the audits can sometimes be fairly thorough, depending on the risk, right? Uh, and, and so on and so forth. And then there were other things that go wrong. So for example, we have a, again, same bank. We had, um, statements being printed, uh, and uh, you, you print on one side and then you pass it through for another side. You print on one side and then you turn it over and print the other side. Uh. They had a problem where, uh, something came outta order. So on the one on the front side of the statement, it was, uh, one person information on the backside, it was another person's information.

Anders Lillevik: When those things go out, they, you know, sort of say, well, what were the internal processes of the printer, uh, to that just should have caught this right. And clearly the operator screwed up. When the, when the thing jammed, they should have started the batch over, but they didn't 'cause they were in a hurry. So like all these kinds of things become discoverable in an audit and you have to make sure you get your things right. Uh, and I, you know, it may not sound like it's a procurement's problem, but it kind of is. Right.

Sean Weisbrot: Yeah. It's always your problem to, to deal with. I'll, I'll give an example. 'cause it, it sounds like some of the things I'm used to doing in the past, I was involved in international trade. And so I would have customers come to me and say, and I'm, you'll laugh here, but I'm serious. I want a hundred containers of chicken feet, frozen chicken feet from Brazil. And so I would have to go and do due diligence on the manufacturers or the importers or the, you know, companies, whoever it was, so that I could make sure that I was coming to them with an absolute certainty that like, these guys are legit.

Sean Weisbrot: Right. I, I'm working on this right now. Um, I had a client running a high risk, um, business and he wanted an additional payment processor to make sure that, you know, in case he had issues with the other ones, it wouldn't take down his business. And so I went and I started to look for people and I came across someone and I asked them a million questions and then I knew, you know, if I was gonna sign on as an affiliate for that other business and then bring this client to them that this client was not gonna have any problems because that's my reputation.

Sean Weisbrot: If this, if this company either steals their money, doesn't provide the service, or you know, whatever happens, it's me, that's my name. It's, you know, that he's not, he can't do anything to that business, but he can make sure that I don't get a new business. So, with that said, um, how should someone go about doing due diligence on these third party providers to make sure they are legit? What are some specifics that. They should think about and, and questions they should be asking or, or documents, things that they should be looking for and, and not, you know, demanding before making any decisions.

Anders Lillevik: Kind of depends on what you're acquiring and, and who's acquiring it, right? So there are a lot of processes that organizations have built now to make sure the company is stable, legit, and has an appropriate business process. So. For example, make sure their financial stability is sound. How do you do that? Well, if they're publicly traded, you can just put, pull that data down and find out yourself.

Anders Lillevik: Right? Number two, if they're private, get audited financials to make sure that they're liquid. Make sure they have the capital positions that you want 'em to do. And when we were, when, when I worked for banking, they kind of said, look. If the, if the company's critical, pretend the pretend as though you're lending them a bunch of money. Right. And that kind of puts a whole different lens on it to say, well, would we underwrite this company to lend them money? And that, that, that kind of how we treated it. And then you can sort of get into. What are their customer base? Do they have customers that look like us? Do they have customers that are, you know, dominating their business?

Anders Lillevik: Meaning, you know, the worst thing and the best thing for some companies is to get Walmart as a customer because the volumes are so big, right? So it can really make you or break you. And other customers can say, well, am I really gonna compete with Walmart to get your attention? Right? So again, like that's something you need to think about. Um. If they are dealing with DA data, make sure that they have a secure environment, that they're encrypting their data both in rest and at transit. Uh, make sure they have a control environment. So you can request things like a SOC two or an ISIS certification. Uh, but you know, really make sure that they have the qualifications and the certifications that's relevant to the industry that they're doing.

Anders Lillevik: And again, being a startup, selling to large enterprises, we have to. Get our SOC two. We have to get our ISIS certification. We have to go through a variety of, uh, you know, information security assessment and all these things are relevant to, uh, making sure that your companies, that you are, that you're doing business with, really, uh. Have the best, uh, intentions and the environments that you would have at the end of the day, the worst thing that you can think about is, I've outsourced this now, so this is no longer my problem. And I've seen that so many times, is companies outsource things and then they don't have the proper governance in place to manage that relationship.

Anders Lillevik: Um, and you know, just because it's outsourced doesn't mean you don't have to manage it, right? So I think as a, as an industry and as a discipline, we're getting better and better. I. It's sort of saying, okay, now that we've outsourced this thing, what are the KPIs and kros and, and the metrics that we need to monitor on a regular basis to make sure that, you know, the level of service is being kept up.

Sean Weisbrot: You said the term SOC two and ISO certifications. Please explain what those are.

Anders Lillevik: A SOC two is a, is an overview of your control environment, so anything from how you onboard and manage your employees. How you secure your data centers, how you are, how, how you're pushing code into production, how you're testing code, how you're monitoring, uh, vulnerabilities, how you're dealing with day zero vulnerabilities is basically a very long checklist of, of requirements that you need to maintain.

Anders Lillevik: And then you hire an auditing firm to come in and say, you know, focal Point says they have these, uh, um. These controls in place, we have validated these 200 controls, and we have seen evidence that they have done this for the past six months or a year. And then here are some findings where they can make improvements and so on and so forth. So that's basically, uh, SOC two. So they come back and they, they, they, they, they monitor you for a period of time to make sure that the controls that you have stated are actually in place. And ISO certification is, is more like a point in time sort of thing. So here are the standards to which, um. Uh, to which we have, we are setting up for SOC two is are very similar.

Anders Lillevik: Um, but the, so the iso basically you get an auditing firm to come in and say, yeah, they've done it. Then they do a control assessment on top of that. And so the SOC two is sort of like an ongoing audit. The ISO is more of a point in time and you gotta make sure you maintain it. ISO is more common in in Europe and Asia. SOC two is more common in the United States.

Sean Weisbrot: What does it cost to get these certifications?

Anders Lillevik: There's a lot of startups have come up now, uh, to mitigate some of those costs. So basically a long time ago you had to pay a consulting firm to say, come in and help us get so to compliant. And that would normally be like, uh, multiple. Maybe even a couple year engagement to say, all right, here are all the controls you need and here's how you document them, and here's how you put 'em in place, yada, yada. So now you have, um, companies, and I can put a plug in here for a company called Rada that basically says, here are all the controls you need to put in place.

Anders Lillevik: We're gonna integrate your AWS to your Google environment and your, you know. All, all your control points that you have that are systematic into rada and document what you have and what you don't have help you put the policies in place, help you get, uh, background checks in place for your employees, and kind of provide that as a turnkey service.

Anders Lillevik: And then on top of that, you have to pay an auditor to come in and validate those things. So for us, it took us about a year. Uh, the service for ADA is, it's in. The low 10 thousands. And the audit basically depends on who you pick, right? So you could pick a tier one consulting firm and you're gonna pay tier one prices, or you could pick a, uh, less well-known, uh, consulting firm and you'll pay those kind of prices.

Anders Lillevik: But, you know, a company should expect to pay $25,000 to get a so to type two. Um, that's, you know, again, like for a startup that's. Quite a bit of money for large companies, not so much. Right, but it's the table stakes in this case.

Sean Weisbrot: I was just looking up the website, uh, as you were talking about them, and it seems like they just raised $200 million.

Anders Lillevik: It's a big business, right? 'cause. Everybody who wants to do business with enterprises need those certifications, right? So Draw can do A-G-D-P-R certification for Europe. They can do ISO 27 0 0 1, uh, for your controlled environments. They can do type two soc twos, like they can do, uh, whatever sort of standards that are put in place by companies. They can, they can do. And again, like I, I'm not pointing out Draw in particular, like there's, there's quite a few out there that do it. Um. But it's, it's big business and this is the type of stuff procurement looks for to say, right, do you have one of these, these audits? Can we see it? What are your outstanding items? And like, and, and who did it. Right? So all these things are, are, are part of the things that companies do to make sure there's, they're a, suppliers are legit

Sean Weisbrot: try to, looks like an interesting business. It seems like auditors. I, I think being an auditor seems like a really good, profitable business.

Anders Lillevik: Well, it's interesting now, right? 'cause audit has changed so much. So back, you know, 10, 15 years ago, you know, let's say you were auditing procurement, you would pull out, you know, procurement does, let's say a million transactions a year. You would pull out. A hundred, maybe 200 transactions and make sure those were done according to plan by paper documentation.

Anders Lillevik: Today, everything is online, so you can say, all right, here's the 2 million transactions audit away. Right? And you can then put a lot of these things in systematic ways like Tableau or Power bi, and you can look for the outliers and say, alright, here are the things I need to audit, not just pick a random number.

Anders Lillevik: And all these things are becoming a lot easier and more automated. Right? And I'm not trying to. You know, denigrate the audit function. I think now they can provide a lot more value by the virtue of having these systems in place. And again, this is why Excel is kind of a pain in the, took us, because it's, it doesn't actually keep the records, it doesn't actually maintain the records as, as well as, as systematic process would say, alright, show me how something came into procurement.

Anders Lillevik: Show me who touched it along the way and when and how. And show me what happened at the end of it. Right? And this is why. Some of these systems exist, right?

Sean Weisbrot: What part in a company's lifecycle would procurement be, become something that's like important to think about?

Anders Lillevik: Typically, what I've seen are procurement organizations can be relevant in some many shape, form, or fashion. As you start managing expenses for suppliers in the 50 to $100 million range, right? It becomes. Kind of substantial. It also depends on the business that you're in. So for example, if you're in financial services, you know these things are mandatory. You, you, you know, at a certain point in time. So if you're dealing with customer data, if you're dealing with, uh, financial transactions, like managing your third parties become that much more important.

Anders Lillevik: Um, I would be surprised, although it happens from time to time to see companies with, you know, that are billion dollar companies and they have no procurement organization. Right. So it's a wild, wild west, you know, everybody goes out and picks their own. Uh, and then at some point in time they have to come to a reckoning of, of trying to get cost out or they have a fraud or they have some sort of incident.

Sean Weisbrot: And like Twitter. Correct. Exactly. Right. When you're developing code. Right. You'll have like a staging environment, then you'll have a production environment. It seems like Twitter didn't have a staging environment, so all of the code they were pushing out was automatically live. So procurement code, I mean, it doesn't matter the size of the company, you're gonna have fuckups anywhere in any company. I think.

Anders Lillevik: So basically how we develop software focal point is we have, uh, user stories, we have a design, and then we have, um. You know, basically front end and backend tasks, right? The front end and backend task is developed. They get pushed into a QA environment. They get tested, they get tested, they get tested, uh, and then we progress it into a staging, uh, to a test environment where we sort of do a demo.

Anders Lillevik: We make sure that we do scripts and so on and so forth. Then we push it into the staging environment to see how we do regression testing end to end, and then we push it into production, assuming all the tests are happening, right? This is what these, these types of certifications make you do. Um, and you document it along the way so that no one can push code without it having been approved, without having gone through the proper rigor.

Anders Lillevik: Make sure that you haven't inserted any vulnerabilities in the code. It's kind of like belt and suspenders, right? But it's, it's kind of important.

Sean Weisbrot: I'm glad you know how your company manages code because, and, uh, I'm serious. I've talked to some people and they're like, I don't know how this stuff works. Like you are the CEO. Of your company. You don't need to be technical, you don't need to. You don't need to know how to write code, but if you don't understand how your company operates, sorry, but I think you should like go and spend some time doing that.

Anders Lillevik: Ultimately, for me, having been in procurement for so long, understanding how companies. Acquire software. Like they will look for business continuity. They will look for disaster recovery. They will look for redundancy, they will look for virus scan, they'll look for all these things. So I think as a company that's less than three years old, um, you know. We have a lot of these things in place already that large companies are expecting.

Anders Lillevik: So for example, if AWS goes down, we have a backup cloud that we we re revert back to. Right? And it's just one of those things like, it, it's, it's, it's a waste of money 'cause we've never had to use it, but. Sure. Like it's kinda like insurance. You hope we never have to use it, but holy smokes, if it's not there when you do, then you regret it.

Sean Weisbrot: That's why you charge your customers the big bucks to, to make sure that it's there hopefully someday. Yeah. I guess what you're, you're burning some of the seed money to, to keep the, that backup cloud alive.

Anders Lillevik: You know, the seed money that, that we, that we raised has gone into developing these mature processes, developing a proper sales channel, developing a marketing channel. So we were. Heads down building product for the first two years. Right? So we have a few large enterprise customers who are early adopters and, and they helped us shape the product direction and helped us shape some of the features and functionalities that we have now rolled out. And then the seed money came in on the back of that.

Anders Lillevik: And really, and now we have matured the processes. We have gotten our SOC two, we have, um, uh, proper marketing function with proper sales function, and now we're starting to scale, right? So I have zero, uh, reservations about going up to a multi-billion dollar company and say, we can take on your process.

Anders Lillevik: And we have the scalability and the infrastructure to do that. You know, because again, I'm, I'm a bit of a propeller head in, in, in disguise, right? So I go, I go in, I monitor logs, I go in, I look at the CPU count to make sure that we never go over 25% CPU utilization. Like I know this matters to people, right?

Anders Lillevik: Because no one wants to click a button and wait three seconds for something to happen, right? It's kind of stupid, but it, you know, we've dealing with literally millions of lines of data that we're tr that we're tracking. But no one wants to wait three seconds. And I'm on, like, my CTO says a few times, like, no one will, no one cares. I'm like, yes, they do. Right? And we don't want, we don't want that, that one, uh, new client to break the camel's back, so to speak. So we're all over that. And you know, that's why seed money comes in real handy.

Sean Weisbrot: I know we were thinking about server utilization and how we could tweak our own code to make things go as fast as possible, and it was always a struggle.

Anders Lillevik: You can't hardware, uh, bad code out, right? So you need to optimize your code, um, at some point in time, uh, you know, and, and make sure that it, it runs the way it should. Um. But you know, you can bandaid it with, with adding server power to some extent for a period of time.

Sean Weisbrot: And the investor's opinion is always throw more money at it and you'll fix the problem. Uh, surprisingly,

Anders Lillevik: they, they, they, they, they do like that, but at the same time, they expect the revenue to come in the door as well. Right.

Sean Weisbrot: Of course. I've, I've seen a big change in investor sentiment in the last 12 months where it used to be, yeah, have more money than you need and just throw money at it. And now it's like, can we not give you money? And you just find a way to use the money you already have to like become profitable things.

Anders Lillevik: So we raised our seed round. We started in January of last year, and by March we had term sheets, uh, from our investors and we closed a $3 million round in May, and then the market went, uh, pear shaped.

Anders Lillevik: And um, basically our lead investors came in and said, Hey, do you need some more money? Um, we think your business is, is, is, you know, really something we want to double down on. So if you need more capital, happy to give you some. And we basically, we negotiated new terms. 'cause I said we don't really need the capital, but on the back of that, we ended up raising another two and a half million dollars.

Anders Lillevik: Uh, and the valuation went up significantly also. So, I mean, I, I think, well, I don't think I know, uh, our investors are, are very bullish. They've been really a pleasure to deal with. And I, I can't say enough good things about 'em. So I, I, I get asked all the time if I need more capital, which is kind of a blessing in this environment.

Sean Weisbrot: I know a lot of investors have been, uh, closing up their, their purse strings, uh, recently, at least in, in the industries I'm familiar with.

Anders Lillevik: I've seen some investors who are continuing to double down. I think ultimately, you know, they, they put bets on founders now, right? To make sure that. Founders that can, can deliver and execute rather than just a hairy idea. That could potentially just be something, I think, like you said, due diligence, right? It has to, you know, people do more due diligence now for lower check sizes.

Sean Weisbrot: I've heard that B2B sales cycles can take up to 18 months. What do you find is a typical length of time for you?

Anders Lillevik: So our B2B sales cycles are fluctuating. It really depends on who you're selling to. Um. So we sold through a very large hotel chain that basically dominates the Las Vegas strip and our sales cycle. There was 14 months. It wasn't because of this process, it's just the turnover in the, in the organization was tremendous. So, uh, we had to sell to three different heads of procurement. So we sold to one. They said, yeah, let's go do this. And then that person quit. And then we had to sell the second person and they were like, yeah, let's do this. And then that person quit and the third person finally stayed and is still there today. And that was 14 months. On the flip side of that, we, we made a sale in three months.

Anders Lillevik: They were like, this is fantastic. This is exactly what we need. Let's go do it. Right. And a lot of that comes down to the size of the company, the industry they're in. Um, but. As we're scaling now we're budgeting for a, an average of six months, but you know, we can probably see that increasing significantly. We're trying to figure that out

Sean Weisbrot: as we speak. With that also comes this idea that you have to communicate with them, right? So it's not like you can get a single call, obviously, and then they say yes. That usually doesn't happen. So how do you. Build that relationship where they're constantly saying, well, yeah, let me think about it, or I need to talk to this person. Like what does that actually look like?

Anders Lillevik: We qualify people in, so we say, Hey, is there a need? Is there an urgency? Is there a timeline? Is there a budget? Right? Typical band, uh, qualification. And once we have qualified them in to say like, there's a real opportunity here, then we map out the stakeholders to say, all right, we're selling software to procurement.

Anders Lillevik: Procurement, while they might be the decision maker and the, and the holder of the purse strings, we also need information security. We need probably legal, we need probably, um, it, we need some integration with your existing infrastructure. It becomes a complex, complex acquisition. Right. And we need to, to sing and dance with the other systems in the organization.

Anders Lillevik: So. For us, it's all about making sure that we understand who the champion is, uh, what the road to close is, and how we can strategize about how to make that happen in the most expedient way. Uh, the other thing too is, is, you know, people always think that, uh, not always. People often think that organizations can do this, like I said, with Excel spreadsheets and so on, and we, we meet that challenge often to say, well, you know, we have ServiceNow.

Anders Lillevik: And ServiceNow is a workflow tool. Yeah, it is, but it's a it ticketing system. It's never meant to ingest, you know, billions of dollars of procurement spend and, you know, few hundred thousand suppliers and payment terms and all these kinds of things, right? So it's just, if all you, if all you have is a hammer, everything looks like a nail.

Anders Lillevik: So we run up against that all the time too. It's sort of saying like, it, it's not ServiceNow, it's not, uh. monday.com or something like that. Um, so it is an interesting sales cycle. I have to tell you that I'm learning a lot as a seller rather than a buyer,

Sean Weisbrot: even on the consulting side, right? My, my company is providing consulting services, and so for us it's like, okay, well, you know, tell us about what you're going through. What are your issues? What are your successes? Like, what are your customers like? So we, we get to know them and their business and then, you know, f find. If there is a need based on like, oh, actually we could see this is a problem. It's a

Anders Lillevik: journey for us too sometimes, because. And know, we sometimes run into organizations where they say, good, what do you guys do? Like we, we help procurement be more efficient. Well, we already spent a million dollars on Coupa or Ariba or whatever software. Great. You have the, you, you have the foundation, and now let's get you from, you know, 60% to a hundred percent. Um, but it, it is interesting, like most people might not have realized what best in class looks like today 'cause it's moving so fast.

Sean Weisbrot: So what does best in class look like right now?

Anders Lillevik: Predictability of the process. So people actually know how to get from point A, point A to point B. What's involved, um, the stages they need to go through, who they need to engage in, involve, um, and how long it's gonna take, right. I think having process transparency and then an easy way of actually doing it. It is what best in class looks like. So that process is really up to your organization to define, depending on the circumstances they're in. But having this one size fits all, like, you know, you can have any color of the car as long as it's black. It's kind of how procurement software has been built, right?

Anders Lillevik: Like it's best in class 'cause this is how we built it, rather than saying like, what would you like your process to look like? And I think that's gonna be the new, uh, new wave of procurement software. Probably software in general to be configurable to the needs of the organization rather than saying that we have developed one way of doing it, it's the right way 'cause we built it, uh, and, and, uh, take it from there. And, uh. It, it's, it's a very interesting space.

Sean Weisbrot: I love that you have that mindset of, it's not about what I built. You need to use it now. It's about, I've built something that you can use and you can use and you can use, and it'll work in different ways based on what you need. 'cause that's the mentality that I had with my startup. Which was for internal team collaboration, which was, you look at Slack, you look at teams, they built something that worked for them and everyone else has to use it that way. But it wasn't flexible and it was horribly, uh, it wasn't scalable. It was horrible at scale. Um, and that's why we were trying to build a competitor to that.

Sean Weisbrot: Where it was designed through frameworks where, you know, this set of features are designed as kind of like a framework, which is basically empty in that you can use it however you want, but it'll be different for company A from company B, from company C. And that's just how it's designed. And it's, and it has to be that way because otherwise you have companies like my, uh, former COO's, uh, wife's company that she works for a really large company in Malaysia.

Sean Weisbrot: And they had to spend a million dollars to adapt their operations to meet the needs of a software that they were paying for.

Anders Lillevik: Yeah. And you know, that this, one of my pet peeves, like when I was a chief procurement officer for very large companies, I would have, uh, you know, I would have requirements to say, all right, my regulators are telling me I need to do this, this, this, and this. How does your software do that? And they would say, well, that's not best practices. That's not best practices, because that's not how we built our system. Uh, that doesn't negate my requirements, right? So how, how will, how will I meet this requirement when my regulators are coming? Me, they're looking for this evidence.

Anders Lillevik: If I don't do it, I'm gonna be in trouble. And, you know, I would, I would throw 'em outta my office and like, like, you know, I'm sorry you're behind the times. Like, why are you doing, why are you selling to my industry? Like, because anyone worth their salt should be asking these questions. And if you don't meet the requirements, you're out. Um, so I think this is gonna be a big change, uh, for a lot of these large organizations.

Sean Weisbrot: Yeah, I think it's gonna be really important going forward. I think COVID has taught us a lot about how the way things were broken and people didn't realize they were broken or they didn't care that they were broken, but now they're like, oh, actually they're broken, and we can see them very clearly and we need to not do that thing anymore. And, um, so yeah, I'm, I'm hopeful that, uh, the rest of the 2020s and beyond will be really exciting in that regard. Pushing out the old and, and letting the new come in, and I think AI will have a big place in all of that. Do you guys have any AI in, in your processes or,

Anders Lillevik: uh, not as of yet. And we are, you know, we're crowdsourcing a lot of data and, and what we're looking for are trends and patterns that, uh, we can sort of say all right, in, in it. Services or, you know, you pick, you picked on Slack, so I'm gonna pick on Slack too, right? You can say, all right, so the average Slack contract is going from X dollars to Y dollars. Like, so they're decreasing by X percent over time. Like those kinds of things, like we wanna be able to, to, to, to map out and so on and so forth.

Anders Lillevik: But we don't have the critical scale of the data yet, but we're definitely modeling it out. Um, morbid, premature for that. Um, but it, it's, it's kind of neat, right? 'cause once you get these large data sets, you can see like how much is the procurement organization pushing through in terms of per, per, uh, FTE, um, what is the risk they're taking on, uh, what is the per supplier performance on average? Like, you get all this data and it's pretty cool, right? Uh, where you can start mining it and really provide intelligence back to companies. And I look forward to that as well.

Sean Weisbrot: You might be able to ask chat GPT for that specific. Data point on Slack contracts?

Anders Lillevik: Possibly. Possibly. But then take that and, and you sort of say, what's the average price for chicken or beef or shrimp? You know, and, and sort of start mining that out 'cause Well, it's pretty cool, right?

Sean Weisbrot: Yeah, you could, I mean, I used to manually keep in touch with all of the different manufacturers of, um, chicken feet and chicken thighs and chicken wings and, and beef and pork and in, uh, Brazil and. There, there was in Australia, Argentina, and we, we had to like, um. Tell the different customers, like, well, if you want the best, that's like a hundred percent hands down the Brazilian beef, but like the Argentinian chicken. So, you know, if you wanna, you know, that's why it's $300 more per ton because like it's the best and everybody wants it. And if you want it, that's what you gotta pay. If not, you know,

Anders Lillevik: what you're describing right now is what in in procurement terms we call a category manager. So you know that category of. Proteins, let's call it. Right. And you, and you know, the inputs, the outputs, the prices, the lead times the process to, to, to slaughter and, and manufacture and package and ship. Right. So, um, but at scale, you know, we have a few hundred categories for each organization, probably. Right. And how do you, how do you maintain that knowledge base? So you can hire a bunch of people that can maintain that knowledge base, or you can, you know, get it through AI and machine learning and that's. Probably a scale where it's at.

Sean Weisbrot: I would much rather have a single AI that I don't have to pay a salary for that has infallible memory than humans that have to constantly communicate with each other. If only, you know, each manufacturer had an ai, I. That would just communicate with all of the other ais, which would then ingest the data into a central algorithm that then could spit out for your platforms to tell any of your clients that need that specific data. Hey, these are the updated numbers as of five seconds ago. Right. No humans in the loop

Anders Lillevik: maybe one day, but you know, that's uh, star Trek type stuff, right?

Sean Weisbrot: So how can people follow up?

Anders Lillevik: Yeah. So if you're interested about procurement, uh, or focal point in general, you can reach out to us@getfocalpoint.com. Or, uh, look me up on, uh, on LinkedIn. Anders Livic,

Sean Weisbrot: thank you very much. I appreciate your time and your energy. Anders, don't forget that entrepreneurship is a marathon, not a sprint. So take care of yourself every day. And if you have a need to buy a ton of stuff and it's really complicated, check out get focal point.com and. If you don't need it, hopefully you found this, uh, educational and inspirational for you.

Sean Weisbrot: I've, I definitely did learn a lot from it and, uh, yeah. Thank you Anders.