Interview with Sean OMalley, CEO & Co-Founder, BlueX

Welcome to ChainTech, the show and podcast focusing on the latest trends in supply chain, procurement, and logistics technology. My name is Max Henry from the Global Supply Chain Council, and together with my co-host and special guest, we explore the personalities, startups, innovators, and industry players driving disruption in supply chain. From early stage to unicorns, And from cutting-edge technology to the people using it to help drive more innovative, agile, and resilient supply chains around the world. This is ChainTech. Hello everyone and welcome to another episode of ChainTech. I'm your host, Max Henry, from the Global Supply Chain Council. And today we're going to continue exploration of different chain tech, log tech, and procure tech companies. And I want to, again, before I introduce you to our founder, which is our guest speaker today, I want to remind you of some of our website properties that we have around chain tech. The first one is our chaintech.net, which is, as you know, a curated marketplace of, you know, the different startup companies across Asia. And of course, if you are interested to hear and listen to the previous episode of the show, you can go to gentech.show. So today I'm joined by Sean O'Malley, who's the co-founder and CEO of BlueX. Hi, Sean, how are you? Hi, Max, how you doing? Okay, so as we get started in our interview, I wanna maybe start with you, your background a little bit, understand where you come from. So maybe tell us, you know, who you are and where did you grow and Maybe what did you study earlier?

Yeah, no, thank you. Well, my story is really, really early on growing up in Silicon Valley. I grew up in a family of entrepreneurs who were technologists, and eventually, that led me to attend Stanford, their business school. And this was back in the late '90s where, you know, the tech startup scene was super vibrant. I ended up taking a number of different entrepreneurial classes at Stanford and really fell in love with it there. But that really led me on to think about, you know, how you apply technology to the finance world and led me to really starting up one of the largest small business SBA technology companies and marketplaces in the US. But really, I was really in love with entrepreneurialism and certainly kind of that led me to Bluex eventually.

So how many years have you worked with other companies before you actually started Bluex?

So, I think I'd been about 15 years sort of a serial entrepreneur. The last company I started was a company called SmartBiz, which is now the largest marketplace for small business SBA loans. And really, in the fintech space, I got very interested in, you know, after SmartBiz, in more global applications of finance. And that led me to really looking at trade finance and serendipitously running into my co-founder during that period of time who had been very deep in the logistics space. And, you know, the combination of his logistics background and my finance background really led to us germinating BluAx, which is sort of a culmination of his experiences and my experiences where just the difficulty of the space in terms of not only just moving goods, but also moving capital and obtaining capital in the space, especially for small and medium-sized enterprises.

Have you worked with a large corporate company before you— when you left Stanford, did you join actually a larger company?

I did. I spent a time at Yahoo where I worked in a whole host of different kind of services while I was there. I worked in— early on when I first got there, interestingly enough, I'd worked on— they had a small business solution and group there where I worked on one of the earlier small business applications, which was their version of Yahoo Messenger but for business. And that led me though to work on a whole host of other services on the consumer side. And really gave me a lot of the experiences on the product side that led me to kind of grow my own business eventually.

So the idea of Bluex came or kind of, you know, grew as, you know, you met your co-founder, right?

That's right. And, you know, as I was saying, we serendipitously meet through mutual friends. Because I was looking at more global applications of finance and specifically trade financing at the time. And we met through mutual friends and ultimately he was looking at the digitalization of the logistics space and how it sort of 20 years behind where it should have been at the time. And I was looking at really the application of finance to small to medium-sized enterprises globally and how the— there was a huge gap in sort of the amount of financing that was provided to small businesses really around the world because of— a lot of it had to do with just banks underserving these enterprises. And that's a typical story in the United States, but it's a global one as well. And that's what really interested me about the trade finance space overall.

So tell us briefly what Bluex does and what type of problem that you are solving.

Right. So Bluex came about where what we do is we connect and amplify global trade by providing cash flow management to importers, specifically in the United States right now in the global supply chain. So we serve these importers that have been underserved by by banks and providing them with both payment terms-like services for freight and cargo, as well as payments, expedited payments for a number of their vendors, specifically around the logistics movement of their goods.

So, importers for you, what are they? Are they wholesalers, trading companies, brand owners? And, you know, what are the challenges that they face when they start maybe buying or sourcing from Asia? Yeah.

Well, the story of the US importer is one that has become front page news over the last couple of years with COVID You know, the difficulties that they faced have been, you know, the movement of goods was one that has gotten all the headlines, but it's not just the movement of goods that these importers faced. They also faced a number of different finance and payments issues as well. You know, as freight prices increased 10x and the time in which their goods sat on the ocean, it just stretched the balance sheets of these importers significantly. And, you know, typically where these importers would go is to banks to help them and provide them with, you know, financing services and payment services to support their business. And typically they're very much underserved by banks. They're just not the number one priority. I think if you're a very large importer, you'll get white glove experience from banks. But outside of that, this, you know, the small to medium-sized businesses, you know, have to find their their solutions elsewhere.

Are you targeting certain industries or certain destinations for those importers? I guess many of them are buying from China, for example. And do you target specific sectors or industry or maybe some type of product categories?

Yeah, this is a massive industry overall. So we've had to certainly target our services appropriately. We have boots on the ground really in Asia and the United States. And so as a result of that, we focused in initially right now on the Trans-Pacific Trade Lane. So Asia to the United States and helping importers move goods between Asia and the US. And so that's where my co-founder had his experiences. And then His experiences were in Asia, my experiences were in the United States. And so, it really led us naturally to focus in, and it's one of the largest trade lanes in the world. And so, that naturally led us to really focus in on that trade lane to start as a business. And it really, the type of business we're in does require their cross-border type transactions. And so, having Having people and experiences in those different regions certainly helps as we've grown the company overall.

Do you help those importers just on the logistics part of it, or you also help them with their PO financing?

We help them on the cargo side as well. It's both on the logistics side, so we provide logistics payment terms. And then on the cargo side, we also provide, you know, a post-shipment-like cargo solution as well.

Okay. So, you're trying— so, you're currently basically competing with some of the banks in the US, as you say, which are not supporting well enough the SMEs on what they call their supply chain financing solutions, right?

Correct. I think, you know, you look at the larger banks out there that provide these types of services, you've got the HSBCs of the world and the Standard Chartered, and they provide services to large importers, and they've done a fantastic job of that. And they're very good at it. I think it's the small to medium-sized enterprises and importers that, you know, that have been underserved. And I think that, you know, I The last business that I started, we, you know, and I was one of the earlier fintech entrepreneurs in the US, we really focused in on the small to medium-sized business because of the very same reason in the US that they were underserved by banks. And as a result, you know, if you applied technology and data, you were able to, you know, assess the credit situations of these businesses much, you know, with much less cost and a higher degree of efficiency and potentially understanding the risks even better. And so, you know, we took those same types of, you know, thinking and, you know, really applied them more on a global scale. And that's, you know, really the germination of Bluex is really thinking through, you know, the digitalization of this, is taking form and taking shape. The data pools on both sides of the ocean are taking shape, and we're really leading the charge in terms of assessing those businesses from a risk perspective and a transactional-based perspective, and then being able to apply these technologies to better serve these companies overall.

Are you saying that those banks, which are again not really supporting those small businesses, have a very lengthy and tedious process where they, you know, look at those companies and probably the application takes too long and those importers don't get the amount that they expect to have? What are the issues? Where are those banks failing exactly?

Yeah, the banks— well, firstly, these businesses, they, you know, if these businesses do come to banks, they, you know, sort of the extensions of, you know, working capital or whatever types of financing that those banks are applying for, they get declined on a mass scale, right? So the percentages is, you know, over half of those types of businesses you know, immediately will sort of get declined on these types of financings. So I think that first and foremost is that. There's also the length of those applications, and which actually takes significant amount of time and effort on the company's part. And both of those, you know, are— you know, can be more— much more efficient, and the risks can be evaluated much better when you apply not just, you know, information that's available from a credit perspective, but also from an industry perspective. And so I think that— and those are things that we're able to do because of the experience that, you know, we've had in the industry and the institutional knowledge that we've gained by being in the logistics industry since we started this business.

Take us through a typical process of application. If, you know, I'm an SME, I'm buying sourcing product from China, I need help. And so what do I do and how does that work on BlueX?

Yeah, on BlueX, it's, you know, what we do is, you know, we typically will— a customer will come to us, you know, post-shipment or, you know, as they've gone and, you know, and have an invoice for freight. from their, you know, from the carrier. And we'll act as sort of that intermediary where we'll take in those invoices, we'll actually evaluate the customer from a risk perspective, and then we'll service those invoices, providing those customers with sort of more time to pay on a net 30 to 60-day basis. So effectively what we provide those customers as a payment terms product and provide them with effectively more time to pay. It's a— on the freight side, it looks very similar on the freight side as it does on the cargo side. But effectively, like you said, we take those invoices and then we actually pay the vendor 100% of the value of that, and then the customer pays us net. 30 to 60 days later.

Okay. And how much are you charging for that service?

So the rates that we're charging today end up generally being— it ends up being somewhere about 1%. Our handling fee is about 1% of— vary from 1% to 3% of the invoice amount depending on the size and the And depending on the invoice amount overall.

Okay. And are you cheaper than the traditional banks in the US?

Well, I guess the question with cheaper is more a question of whether or not it's even available to the businesses, right?

Yeah, I guess so.

You can't compare apples to oranges if the banks don't actually provide the service So I think that when we look at our service and the value that we provide to our customers, you know, it's— we're valuing sort of our service based off of, you know, the value that we provide to our customers overall.

Okay. But you're not a shackle-on vendor, right? You're not charging outrageous rates. No.

So these are— I think that if you look at the rates that are in the industry today, we're very much a very competitive solution in the marketplace today, for sure.

Okay. If you look at other technology vendors, do you have any competitors? Who would be your main competitor in the market right now?

Yeah, I think that our competitors are going to be Like I said, are the banks that we'd be competing against. I think those are the main competitors that we have today. And—

Because those banks are also building solutions, right? They also try to digitize their operation and the way they process clients, right? That's right.

I think there's enormous— there's very large initiatives going on sponsored by banks on things like letters of credit and blockchain letters of credit and and those types of services that are emerging. They're being really positioned around not just larger enterprises, but also small to medium-sized enterprises as well. Those would be the technologies that we would be competing against overall.

Is this a threat for you or potentially an opportunity for you to be bought out by one of those banks?

I think that the time will tell in terms of how well they're able to apply their services to this problem. I think that, you know, the problem is a tricky one and it's difficult. And so, because it takes not only fantastic product, but fantastic people and operations. And so you need to have all 3 and a huge knowledge of of the industry. And I think that what's great about working on a startup is that you can be super nimble about approaching the problem and addressing the problems of those customers. And certainly, the problem set really hasn't— it's been around for a very long time. It's just, it hasn't been tackled Certainly by, you know, more small to medium-sized or startup enterprises because, you know, it is a difficult problem. It takes enormous amount of financial know-how as well as knowledge of the industry and the logistics industry itself, which lends itself to, you know, you kind of— you need to know, you know, you need to have a lot of knowledge in several different areas. Now, I think from a bank perspective, certainly the solutions that they're building, they're trying to tackle the problem in a large-scale way. But like I say, I think that time will tell in terms of how they're able to address the needs of the small to medium-sized enterprises more who have needs that are smaller in nature but more timely as well. And so I think that You know, where our business is really focused on is being able to be very nimble with our customers, service them in a rich way, and then being able to pull together a solution from a product, process, and operation perspective that, you know, really provides a really fantastic and aha moment for the customer.

Mm-hmm. Let's talk about, you know, your funding stage. And maybe before we talk about this, I wanted to understand how you actually started the business. Some of us are listening and always quite interested about this. Did you actually bootstrap? Did you raise capital right from the start? And what is your current funding stage right now?

Yeah, we're a venture-funded company. We're institutionally funded by 2 of the larger kind of top-tier venture firms. One's Greycroft in the US, another one's Headline in Asia. I, you know, I've started up a number of different venture-based businesses in my career. I feel, you know, they're— what I love about these businesses is, you know, the impacts that we can have on the overall, you know, category that we're building. And it's really I get— one of the things that I love is building large-scale solutions, tackling large problems, working with fantastic teams to do that. And those all are helped through venture-founded companies. I think we— you don't— at the very beginning, I certainly went out to build and tackle large problems. And these types of problems really, because they're so large in nature, do require venture-type funding to kind of get them off the ground because the problem sets are large and it takes a number of different disciplines pulled together to actually go execute against these problems.

Yeah.

And so, we started out right from the beginning looking at this as a venture-funded opportunity.

What is your current stage right now? Are you looking for a new round? Are you looking to raise an amount?

Yeah, no, we've— we'll be looking at raising a round at the beginning of next year. I think we've had some very good success over this past year growing our business and that You know, the timing of which will lead us to looking for additional financing will really kick that off at the beginning of next year.

Okay. Let's talk about your team. How many employees do you have? How many engineers? You know, so I understand you don't have co-founders, right? But is that something that you are interested in as well?

So, we have 34 full-time employees, 18 development, My co-founder, you know, as I mentioned, you know, we started this business back in the beginning of 2019, really prior to COVID. And, you know, we'd seen the problems that were going on in the logistics space and the finance area of the logistics space, you know, really early on and prior to COVID. COVID really just accelerated things, but I think we both got excited about the space because really the problems involved in what my co-founder is, you know, in the space overall, and then me from the trade financing area.

So you only have— you still only have one co-founder, right? That's correct.

That's correct.

Okay. All right. And in terms of development, you know, do you mainly develop your product, your solutions in Asia, or do you have a mix of engineers both in the US and here?

You know, we locate all our development is in Asia right now.

Okay.

Our sales and marketing right now is in the US because our main customer right now Are the US-based.

Yeah.

And so, you know, I spend a significant amount of my time in both places working directly with the team in Asia, but also directly with the team in the US. What we found for the business that we're building is that you do need presence in both areas because we work with— while our customers, like the importers, are in the US, their vendors, a significant portion of them are in Asia, the factories being in Asia, a number of the different logistics vendors are in Asia. And so it helps for us to be able to have— to be in both of these time zones and to be able to service both stakeholders on our platform.

How do you market your solutions, Bluex solutions, to your SMB customers in the US? How do you, you know, promote it and engage and get your customers here?

Yeah, the logistics space is really a sales-driven space. I think that what I found, you know, a lot of times in startups, you talk about, are you a product-driven company or a sales-driven company? And you know, in a product-driven company, you kind of can build a product and maybe do some online marketing and customers will come. And if you build a great product and they love it, you know, they'll keep coming back for more.

Yeah.

I think with the logistics space, especially the customers that we're dealing with and it being an enterprise B2B sale, it's really a sales-driven type of sale, right? So we have a sales team. In the US who directly engages with the customer, white gloves the transactions. Now the customers will come, you know, once we've been able to white glove them, then, you know, ultimately, and they see the value and gain that aha moment of the value that we provide to the customer, then I think, you know, from there that the customer can continually engage with our product with less and less touchpoints with our relationship team. But initially, it's really a sales-driven type of sale for us.

So, promotion is not enough. You need to follow up and basically continue talking to them. But I was interested because there are probably millions of SMEs in the US right now. So, how do you go around you know, profiling and identifying, you know, your best prospects among all those companies? Yeah.

Well, I think, you know, certainly narrowing the field by importers has helped us a lot. There's, you know, over, you know, 200,000 type of importers in the US, and then you can start narrowing that down to the size and then, you know, the amount of container movements that they have and certainly addressing specific customers within, you know, we can continually narrow that down as we, you know, as we see, you know, different types of customers engaging deeper within our product. And I think that we were super data-driven at our company. One of the things that, you know, is one of the sort of key tenets of when we built the company was to be data-driven about our customers and our decisions. And so we certainly watch which customers are engaging deeper with our product and how they are and how we can help improve the situation around them. But ultimately, yeah, the customers that— and how we identify them overall is going to be very data-driven and not only in how we identify them, but how we actually service them better over time.

Yeah, I guess there's a number of databases in the US, like the custom database, or there's also an SMB database that you can tap into, right, to profile. Yeah, sure.

Yeah. And I think that certainly helps. I think how you engage and address the customer's needs, I think there's a whole slew of different distribution techniques that you can employ to kind of get both introduced to the customer and then engage with the customer. I think that beyond just direct sales, there's partner engagements, there's integrations with specific types of partnerships that you can have that service customers through one mechanism where we can be just a payment option. That's one of the areas that we're exploring as well, which is providing our services more as a payment option on third-party platforms.

Okay. What has been the impact of the pandemic on your business?

Well, it really has continually accelerated the speed and the growth of our business. I think what happened as the pandemic grew over the course of the last several years Initially, freight costs jumped significantly. And then, you know, the travel times of the containers increased. And that all stressed the— and stretched the balance sheet needs of our customer sets, of our— of the importers in the US. And as a result of that, it increased their need to find the right partners to to help them as they navigated the logistics space overall. And that's where we come in and we work directly with our customers and we help them in terms of providing them with those payment terms and then being able to help navigate that and engage them in a way that provides them those types of terms over and over again as they you know, hit peak periods or, you know, need more time to pay specifically as they're growing. You know, the types of customers that work with us best are growing businesses that maybe, you know, have peak periods of volume where their balance sheet stress stretches in a certain way that requires them to kind of seek additional terms during those periods. And that's where we help out best.

Okay. So shipping prices are coming down a bit, but there are other potential risks around inflation, the ongoing zero-COVID policy in China. What kind of other issues or, you know, whatever issues that you think are still going to be, you know, major disruptors for those importers in the US moving forward and, you know, getting closer to 2023 now?

Yeah, what, what I have seen over the last several years is that within logistics, you can't necessarily pinpoint what's going to happen. But what I could tell you is that there's probably going to be a lot of volatility. And when there's volatility in the system, that really drives the need for our product with our customers, right? Increased volatility means increased uncertainty. It also means potentially changes in prices, changes in shipping times, and all of those actually, all that uncertainty drives the need for our customer sets to look for solutions to help them during that volatility. And so, I don't, if you look at a crystal ball and say, what will happen over the next year? I don't know if I can predict them all, but what I will tell you is most likely there's going to be volatility, and that volatility will lead to the need for our product. And because that's specifically where we help best is during those volatile periods.

As a CEO of BlueX, what would you say are your biggest challenges in managing the business right now?

Well, you know, in these, for us, we have a couple of different areas as a growth company. You know, I would say the number one issue for us is really gonna be people. It really is getting great people on board, helping to solve the problem for our customers is always gonna be one of our chief areas of, of really finding the right people to help us kind of execute against our vision.

But it got easier, right, with the pandemic? You are now able to pretty much work with remote teams and have great talents regardless of their location, right? So, the pandemic has been helping on this, right?

It's interesting. That's right. I feel like that the aperture of you know, how you look for your, you know, the people you work with is increased significantly because of that. It's also brought about new challenges for organizations as they grow as well, because, you know, trying to be remote first, I think we, you know, as an earlier stage company, you know, thinking about being a remote-first company was something that was already part of our experience because we, you know, right from the get-go, we had people both in the US and in Asia. And so, we had to grow as an organization as a remote-first company. And that's only led us to kind of really think about how we grow our organization. It, you know, I think that finding great people around the world It's still difficult, though. I think that no matter what, as you're growing, finding the right people for the right problem sets is— you need to take the time and the effort and really have a culture that people around the world gravitate towards.

Yeah.

And certainly spent time doing that. And we recently did did get an award for one of the best places to work in Asia last year. And I'm proud of that because we were able to not only get an award for— that's really driven from the experiences of our people, but it's— I think we're proud of that because we've been a remote-first company as well.

Yeah. Okay. How do you see your company in 3 to 5 years from now? Where do you want to be?

We want to be the category leader in thinking about, you know, cash flow management for the supply chain and specifically for, you know, importers. I think that where we're spending our time and thinking through and servicing customers is really on that problem. And I think that ultimately, if we achieve that goal, we'll be solving a massive problem today. I think if you look at the overall— if you think of the financing gap globally, for trade financing. There's a well-quoted number of, you know, $1.7 trillion. There's a trade financing gap that's out there in the marketplace today. That's what we're focused in on helping to navigate. The numbers are huge when you start thinking about them overall. You look at just the United States, the United States, you know, they import $2.3 trillion worth of goods annually. Those are some of the latest numbers. And, you know, a significant portion of that are small to medium-sized enterprise importers.

Yeah.

And they're the ones who have this trade financing gap that, you know, that persists year over year.

Yeah.

And traditionally, banks have underserved this because of The, you know, it takes a lot of effort. And the reward for that typically for banks is much less than if they dealt with a larger size customer. Think of it—

Yeah.

If you're doing the same amount of work to underwrite a $200,000 transaction as you are a $10 million transaction. And so, if you're a bank, you're going to do the $10 million transaction all day long. And so what we're, you know, the advantage that we're applying to the situation is we're taking technology and data that's able to allow us to streamline that in a significant way and address this trade financing gap. And really, and do that in a way that is able to adjust for risk as well.

Okay, pretty clear. Okay, all good. All right. Maybe let's take Yeah, maybe I'd like to ask you that question. And what would be your advice to a new founder who's starting a company in the field of supply chain, logistics, or procurement, you know, learning from your mistakes that you made previously?

Well, I look at— I've had a ton of experiences over my career, but I go back to a lot of my experiences when I was an athlete. I had a great coach in high school, and he used to tell me to anticipate and run to where the ball is going to be and not to where it is right now. And so I think, you know, as a startup, what you're always looking at doing is you're anticipating where the ball will be in a decade, and you're adjusting your company and your vision to that, but solving the problem right in front of you. And so I think that, you know, for any startup founder, it's, you know, it's really that, know where things are gonna go in 10 years, but, you know, look at the problems right in front of you and know how those problems set up to solve the larger problem overall.

Learn to anticipate and project yourself in the coming years, right? With the solution that you offer.

Okay.

All right, some quickfire questions for you, and you can just give me one answer for each. Cats or dogs?

Cats.

Window or aisle?

Aisle.

What's one of your favorite movies you've seen recently? The movie that comes to your mind right now.

Oh, Top Gun.

Okay. What is your favorite sandwich?

Oh, right now I don't have a favorite sandwich.

What's your most used app on your phone? The one that you use every day, all day long?

Google Maps.

Google Maps? Really? You're trying to find your way all the time?

Well, I'm moving so much, you know, traveling and, and, uh, Visiting different partners and— Yeah.

Okay. Google Maps. Yeah. When it works, because if you were in China, you have issues with that. What's your favorite tool to build your company? Software tool that you're using every day with your team?

I think I would put probably Slack up there very highly. It's really transformed a lot of the way we communicate.

Describe the rest of your life in 3 to 5 words. When you get old, what do you want to be? What do you want to do?

Well, I'd say a man for others.

Okay. All right. Thank you very much. It was great talking to you. Very interesting products with BlueX. And you guys are definitely Doing some great stuff around supply chain financing. So we wish you all the best.

Max, appreciate it. Thanks for your time.

Okay, thanks again for joining us. So that's it for our Chantech episode. Again, we'll see you next time. Thank you.

Thank you, Max.