Katana, an ERP for SMB manufacturers, raises $34M

Katana, an enterprise resource planning (ERP) platform for small- and medium-sized manufacturers, has raised €35 million ($34 million) in a Series B round of funding.

ERP is a form of business management software that can serve any number of functions inside a company, from marketing and risk management, to supply chain management and beyond. Integrations are pivotal to any ERP software, as it typically involves taking data from different systems such as HR, CRM, accounting, and order management to generate insights and analysis — at its core, ERP is all about identifying potential problems and improving efficiency.

Founded out of Tallinn, Estonia, in 2017, Katana is an ERP for the manufacturing sector, with prebuilt integrations for many of the most common tools that a manufacturer might use, including e-commerce platforms (e.g., Shopify and WooCommerce), accounting (e.g., QuickBooks and Xero), shipping, forecasting, CRM, and more. Collectively, these various integrations can help a manufacturer predict what their future inventory needs will be based on historical or real-time sales data, for example, to ensure that they don’t run out of stock or parts.

End of ‘made in China’ era

A big driving force behind demand for such software is direct-to-consumer (D2C) manufacturing, which has seen smaller, local manufacturers — or “micro-manufacturers” — remove many of the intermediaries that were traditionally necessary to get their products made.

“The rise in D2C manufacturing has driven a small manufacturing renaissance, giving consumers a wealth of options that reduce the hold of brands relying on mass production,” Katana co-founder and CEO Kristjan Vilosius explained o TechCrunch. “As manufacturing moves closer to the ever-increasingly conscious consumer, brands that rely on local production and inventory are gaining market share. In short, the ‘made in China’ era is ending.”

This has been aided by modern technologies such as 3D printing and computer-aided laser cutters, allowing companies to produce goods on a smaller scale away from centralized, mass-production factories. In tandem, the emergence of online marketplaces, e-commerce software, and the broader cloud computing movement has made it easier to assume greater control of the entire business process, from manufacturing through to sales.

“Manufacturers already have a tech stack of tools like e-commerce platforms, shipping tools, and accounting software,” Vilosius continued. “What’s missing is a central source-of-truth that streamlines the flow of information and minimizes manual data entry and, as a result, human error.”

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Legacy ERP software from the likes of Netsuite and SAP are typically geared toward larger businesses, which is why we’ve seen a slew of younger upstarts enter the fray to much VC fanfare in recent years, with Katana and its ilk trying to usher in a more modern toolset purpose-built for SMBs — and in Katana’s case specifically, SMB manufacturers.

“Supporting this new wave of manufacturers is critical — enterprise business suites like NetSuite and SAP come with hefty costs and a plethora of features and functionalities that exceed the needs of small- to medium-sized businesses,” Vilosius said. “The ERP space is also known for poor user experience and user interface, and low customer satisfaction. Many small businesses opt for spreadsheets despite being error-prone and difficult to scale as their businesses grow.”

Katana had previously raised around $16 million, the bulk of which arrived via its Series A round last year, and in the intervening months the company claims to have quadrupled its annual recurring revenue (ARR), grown its headcount from 30 to 140, and scaled its customer base from “hundreds of micro-businesses to thousands of customers in the SMB segment,” according to Vilosius. On top of that, the company launched an open API for customers to build their own integrations.

With another $34 million in the bank, the company said that it’s well-financed to “bring manufacturing software into the digital era,” which will include rolling out “more advanced accounting integrations.”