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B2B Marketplace Interview: Adam Sandow (Material Bank)

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Michael Brown

February 23, 2021
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The Bowery Capital team is embarking on a blog series covering B2B Marketplaces. We are doing deep dives on various companies, interviewing founders and investors, and learning what it takes to build success in the B2B Marketplace arena. This week, Adam Sandow, Founder & CEO of Material Bank, answers some of our questions. You can read all of the posts in our series by going here.

Could you give us a brief overview of how Material Bank works and the role of the sampling process in matching buyers with sellers of architectural and design inputs?

As an architect or designer, in order to make final decisions about what materials to use, you need physical samples of the options you are considering. Once you review the samples, you need to bring them to your client, and then your client needs to review them to make their own decision. This physical need to review a sample is a major pain point in the architecture and design industry, and one that is not going away.

With Material Bank, we created a platform that aggregates product data and by making it all searchable, we turned what was previously hours of work into minutes. In addition to developing this search technology, we also built a highly advanced robotic distribution facility in Memphis, Tennessee, right next door to FedEx’s main hub. My goal was to not only create a better search tool on the software side, but I also wanted to improve the expectations and service levels of sampling materials. Material Bank allows users to order any sample by midnight Eastern Time and have it on their desk by 10:30 AM the next morning, all in a single box.

Before Material Bank, this did not exist. If you were looking for carpet, you would have to spend hours browsing websites, calling sales reps or attending tradeshows and then request a physical sample. The process was incredibly time-consuming. Material Bank aggregates all the sampling options under one platform and delivers requested samples in one shipment. With a midnight order cutoff, overnight delivery by 10:30 AM and everything in a single box, this was not an incremental improvement, but night and day compared to existing alternatives.

What was your inspiration for launching Material Bank?

I spent 15 years building a large media company and one of our pillars is residential and commercial design. With producing 150 magazines per year across our brands and about 350 events annually, in addition to running a digital and consulting business, this meant that we really understood the ecosystem of architecture and design. My focus over the last few years has primarily been identifying ways to build tools and services for the industry on top of our media foundation.

Instead of only chasing print ads and digital ads like most media companies, I wanted to build disruptive tools that would serve the industry. The inspiration for Material Bank came from studying the market, seeing the large degree of fragmentation in this industry, and recognizing the huge opportunity to dramatically improve it.

Many of this generation’s B2B marketplaces have tried to incorporate a fulfillment feature; are there any key lessons you learned in building out Material Bank’s complex fulfillment process?

It was not easy, but we had the benefit of starting with a blank slate and did not have legacy issues and concerns. From day one, we worked with our robotics partner, Locus Robotics, to design our facility around their technology, which provided maximum efficiencies. Our first warehouse was about 80,000 sq. ft. and supported us through the first couple of years. In February, we are moving into a 380,000 sq. ft. facility with 10 times the number of robots in order to keep up with our growing demand.

We also thought through each step of the fulfillment process, inventing new ways to store and package materials. We spent years of R&D to develop custom cardboard storage systems and our proprietary Material Bank tray system. We did this all in-house, as opposed to buying an off-the-shelf product. Since we were a startup, we were able to take a large building, experiment, and figure out how to do things right, before we even had customers. It was risky, but it allowed us to become experts in logistics and what we do.

When you were launching Material Bank, did you try to onboard the supply side first or did you focus more on the demand side (e.g., builders, architects, designers)? What drove that decision-making process and was there a side of the market you found maybe a little easier or more receptive to the Material Bank concept?

We had years of research behind us. We knew that sampling was a huge problem and that if we built a tool to simplify that process, the industry would embrace it. Our biggest challenge was getting manufacturers to adopt the platform. What makes our platform unique is that it is not just “give us your data, we'll aggregate it, fulfill and ship your orders,” we solved for the physical delivery of the sample. This meant that when a manufacturer would sign up, they had to decide to not only give us their data, but to also send a truckload of their physical samples to store in our central logistics facility. This made it a big decision for manufacturers to come on board. We knew that if we got a critical mass of those manufacturers onto Material Bank, we would be able to get the design professionals, because of our strong relationships within the A&D community through our media companies.

What was the workflow for an architect who needed samples to present to a client prior to the Material Bank marketplace coming online?

Prior to our marketplace, architects and designers would spend hours searching for materials in numerous places—visiting various websites, calling multiple sales reps, and going to different showrooms or tradeshows—even before ordering a sample. It would take three, four, or five days, sometimes longer, for the samples to arrive. They would then receive a mound of boxes, with excessive packaging and often times damaged materials, and would have to gather everything together and bring them to a client for review.

Now, you can do hours of searching in minutes, order all your samples on Material Bank, and ship them directly to your client. Your client receives them the next morning for review. We also built an incredible collaborative tool, called Material Desk, where you are able to interact with your client and review all the materials that are in front of them digitally. By incorporating live video, we can help you and your clients make design decisions faster.

And, Material Bank is not just for architects and designers, our platform is used by all types of buyers including major corporations, hospitality companies, cruise lines, restaurant groups, colleges and universities, hospitals, and anyone specifying and purchasing materials.

How do you think about monetizing the Material Bank platform?

Our approach is simple, we charge manufacturers on the platform a monthly SaaS fee, as well as a transaction fee every time we handle the fulfillment of their material samples and provide them with the lead. This lets us run our marketplace with SaaS-like margins and it is a model that is allowing us to really scale the business.

We do not process the final purchase transaction between the manufacturer and specifier, however, we are currently building additional tools for communication and ways for sales reps to better manage customer leads. We are building a large ecosystem around our marketplace, and the services we are rolling out are so important to our manufacturer partners that it deepens our relationship with them.

Material Bank requires potential design buyers to undergo a registration and vetting process before they can get on the platform. How does qualifying your demand this way fit into the wider marketplace strategy?

We provide this as a free service to design professionals, so we need to make sure that the people using our platform are real specifiers. We do not want hobbyists who are going to waste time and resources for our manufacturers. Every registrant of the platform is reviewed through our vetting process to ensure they are a qualified specifier or buyer of material. As a result, we reject about 26% of the people who register, because they do not meet our requirements.

Sustainability is a recurring theme I have noticed in reading about Material Bank. Can you tell us a little bit about some of Material Bank’s sustainability-focused initiatives?

Sustainability is extremely important to us and to the industry, and we designed Material Bank to be the most sustainable way to sample. This is because we have one facility packing everything into a single box. Normally, if you are looking for carpet, tile, and paint samples, it would require three different boxes coming from three different vendors. Shipping everything in one box eliminates a massive amount of waste that had existed in sampling and we have already eliminated 1 million unnecessary packages. We also ship 100% carbon neutral to address any environmental concerns about overnighting sample orders, and we have continued to purchase carbon offsets to maintain our carbon neutrality.

Is there any advice you would share with a founder who is thinking about launching their own B2B marketplace?

I think that often times, the business model or the value proposition is not strong enough. You have to offer an amazing value proposition to the user, otherwise, marketing costs are going to become so expensive that it will be hard to gain traction. You also have to look more creatively at the underlying business models, because just taking a piece of a transaction does not work in every case. I believe these two things are absolutely critical for success.

If you liked “From The Front Lines: Adam Sandow (Material Bank)” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. Look out for more content on B2B Marketplaces from us in the coming weeks.