We have a thesis at Notion Capital that the pure SaaS market is moving more and more in the direction of both saturation, fragmentation and, more recently through the impact of AI, deflationary pressures. There are too many products chasing the same market space with not enough differentiation for why the customer should choose them and how they will establish a meaningful market share. There are also too many SaaS products being used within an organisation leading to a greater focus on optimisation and accountability. This has informed our thinking on investments for some time.

One way this thesis has developed is being more open towards hybrid models where SaaS is combined with hardware or the physical world in some way. 

Enter Ferovinum, a fintech company who have built a really innovative funding product for the wine and spirits industry. 

This is an industry with a pretty unique set of liquidity challenges. The product is not only expensive but takes a long time to produce and there is often a premium on ageing - the longer the maturation the more expensive the product. On top of that, the trade customer will often enjoy generous payment terms affording them the time they need to sell to the end consumer. 

The wine and spirits industry is worth around $800bn making it one of the largest markets out there. But despite being such a large market with clear and obvious liquidity challenges, there are very few funding options available. Some banks offer a one-size-fits-all all asset-based lending product. But this takes a very risk-averse approach, will only lend against a small percentage of the value and applies to a fixed term.

Mitchel Fowler and Daniel Gibney have a long track record in the world of finance and asset-based lending. They also both happen to be wine lovers. And it was this combination that sparked the idea for Ferovinum. The company can finance a product at any stage of its development, from casks to bottles to warehouses. In this way, they not only serve the producers themselves, but also the distributors and importers that face similar liquidity and working capital constraints, not to mention the burden of compliance and documentation that comes with cross-border sales. Working with Ferovinum removes all that complexity for their customers.  They use customer and publicly available data to calculate the value of the product. They will then provide funding against the full value of the product less a deposit and actually become the merchants of record. The producer or distributor then ‘buys back’ their product in any size batches plus accumulated fees once they have an end buyer.

It’s a beautifully simple solution. It gives customers a dynamic and flexible solution to their liquidity challenges. A solution that is immediate, fully flexible and designed specifically for the industry. A good example is that the company understands that the product goes through various stages in its production process and this has an impact on its value. And they use various customer-specific and broader market data to calculate both the value of the product and the risk profile of the loan, something that is reviewed on a regular basis.

But this is only the start for Ferovinum. The long term vision is to build an end-to-end finance and supply chain platform for the industry. Their first product addresses the liquidity challenge and puts them in the product flow. Their next product is a trade sale module managing payment and delivery of the on sale. Further modules either available or on the roadmap include procurement, warehousing, logistics, export (shipping and regulation), insurance, FX and invoice financing. 

This is an industry with a large amount of operational friction across the entire supply chain. And this friction disproportionately impacts the small and mid-size players. The large corporates are able to leverage economies of scale across their global operations making it hard for the independent players to compete.  The Ferovinum platform ‘democratises’ this capability and, in doing so, helps customers to turbo-charge growth in their business. 

This is what gets us so excited about the potential of Ferovinum. Through their end-to-end, SaaS enabled platform they can help customers punch above their weight and change the dynamics across the industry. And these operational challenges are not what teams want to spend their time on or where their skills are best suited for. 

Talented people in the wine and spirits industry generally want to spend their time on producing a great product. Beyond this I think they want to focus on marketing their product and finding the right customers and partners. Everything else is probably not why they got into this industry. It is not what they want to do and is holding back their growth. This is the unlock that Ferovinun can provide and why we are so excited to be leading an investment in the company. 

We are very much looking forward to working with Mitch, Daniel and the rest of the Ferovinum team to help them become a disruptive force and a global leader in the industry.

Why Notion? A note from the Founders…

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We were fortunate to have very strong interest in what turned out to be an oversubscribed Series A - so had the opportunity to dig in with some great investors. With Notion, from the very outset, what stood out to us was that Jos and Mel really understood our vision for Fero and took a very thoughtful approach, with genuine intellectual engagement around what it would take to realise that vision. 

It was also very impressive to see the way Jos’ instinct led him to the heart of why we are so excited about what we are building, but from his own unique perspective and experience.

This gave us enormous comfort (and excitement) in bringing Notion into our investor group.

As we met more of the investment and platform teams at Notion, we had the same recurring sense of strong chemistry; earnest curiosity, relevant operator experience and a burning desire to help build something truly awesome!