Last week, Atlanta-based fintech company BAM Worldwide, a logistics industry financing platform, announced a raise of $10 million to fuel team expansion and product development. This funding makes a total of $55 million that BAM founder and CEO Todd Ehrlich raised just in 2017 to finance the growth of a product that serves a $400 billion industry — and the capital is being put to work: in the past year, BAM ranked as top 25 fastest growing companies in Atlanta. Revenue increased by 300 percent.
Ehrlich is no stranger to explosive growth — the former Navy SEAL also saw 300 percent revenue increases at his former company, exercise recovery drink Kill Cliff. He’s also not one to shy away from unique challenges in untapped industries or be creative with funding strategies. Hype dug in a little more with this special forces entrepreneur to find out what other spaces BAM’s financing platform could be applied to, his solution to a gap in capital, and the lessons he’s learned from his former ventures.
How have you seen the logistics financing industry change since launching BAM in 2014? Have you changed your model or products at all since then?
The financing industry, especially in logistics, has been relatively calm — there hasn’t been the level of disruption and upheaval in the space like you have seen in other industries. Transportation is relatively slow to change. However, we have seen new entrants and new forms of financing and technology grow on the margins. There have only been a couple of other players who have followed our lead on cash flow management. We’re far ahead of the industry and our solutions create average growth of 60 percent in our brokerage customers. This ability to help our clients grow will enable us to continue to extend our lead.
The one pivot we made involved the structure of the industry and the structure of our clients. We had a pretty tightly-focused plan to work with transportation brokers and 3PLs. We quickly learned that some brokers own trucking companies and some trucking companies own brokers. Truckers required a more traditional form of financing, and we needed to provide it, so we pivoted on that.
What are some of your biggest successes from the past year?
In order to accomplish working with trucking companies, we acquired a company for their talent. This was the smoothest acquisition I have been involved in and it was a great move for us. The team we acquired is outstanding.
Also, we’ve raised $55 million in new debt and equity in 2017 to date. Our second half of 2016 was a big challenge from a capital perspective, but the business was running the best it ever had. So we had this internal dichotomy where the business was running well, but our capital structure was lagging behind, and since the capital structure was so complex, it really narrowed the group of people who could really help us. We had to get creative and our team crushed everything we put in front of them. Their commitment to never give up is the reason we’ve been successful.
What is your funding history thus far?
It’s relatively complex — we use a mixture of equity, senior and junior debt to run our business. We raised about $5.7 million in what I would consider sophisticated friends, friends of friends and management (no family) equity over a couple of years. When we hit a transitional period, and by transitional I mean binary, we raised about $3 million in convertibles over the course of a year. Some of that capital gets used for our lending business, so we weren’t sucking it all down operationally, but growth puts certain strains on capital in our business model. Then in January we raised $10 million of mezzanine capital and in April we closed $35 million in senior and $10 million of preferred.
What divisions of the company will you be expanding with this funding?
This most recent round will help us scale sales and development. We will expand our sales team as now we have the room to grow, and we are strategically entering some new markets so we need to open the aperture on our development bandwidth.
What do you plan to add to the product/platform?
Simplifying what we do, it is cash flow management with a specialization. Up to this point that specialization has been transportation. The real horsepower is in the cash flow management. We’ve “legerized” all the collateral and accompanying documentation that is part of cash flow management by building a sophisticated platform that helps our customers be more efficient. The application layer is where we really have a lot of opportunities, both for our own efficiency and for our customers. We focus on making decisions and features that create equity value first and foremost for ourselves and for our customers.
We think about it like this: If we make our customers more valuable they will be growing, and the faster they grow, the faster we grow. We are focused on improving value-added functionality that takes the data we already have and repurposes it for our clients in a way that makes them more profitable, efficient, and valuable. For example, if receiving and making payments for our clients is something we do, and that is 80 percent of what keeping the financial books of one of these businesses is, then we can add the financial reporting on top of that and give our customers something they have never had — accurate financial reporting.
What was it like to pivot from a consumer packaged goods company (KillCliff) to FinTech? What entrepreneurial lessons can be applied to both?
Making the move was really good. I got lucky and was able to lead annual growth in both companies of over 300 percent at different times. Both Kill Cilff and BAM have had unique challenges.
I’ve learned that the first thousand days of a startup is critical to getting it going in the right direction. There are patterns and obstacles that are generally the same and transcend industries. Most of the challenges are derived from three areas, people, markets, and capital. I think that team building is one of the most fundamentally challenging endeavors for a CEO. If he or she can build the right team they can do anything. The way that team gets managed, mentored, and groomed is critical to success. The way they communicate is crucial, and the way you communicate with them is über important. There are qualitative aspects to teams that took me a while to figure out. I’ve learned that it is the people who will determine what your success is going to look like long term.