Steel usually isn’t associated with sexiness, but “Make Steel Sexy” is the slogan for Felux Inc. The online business-to-business marketplace aims to banish paper from procurements for steel and other metals.
Founded in 2019, Cleveland-based Felux announced this month it had raised $19.5 million in a Series A funding round. Felux says it has raised a total of $24.5 million in less than a year.
For Felux, metals represent a wide-open opportunity for B2B ecommerce. The company claims the U.S. steel and aluminum market is worth $385 billion annually, but 95% of transactions are offline and paper-based. Many producers and metal-buying manufacturers still cling to outdated quoting and negotiation processes.
Chipping away at paper processes
CEO Dallas Hogensen says Felux is chipping away at these encrusted practices. The company handled $64.9 million on its platform in 2020, with volume booming to $454 million last year. Growth in 2022 is projected at about 120%.
“We’ll be north of a billion dollars this year,” he says.
Some 4,000 to 7,000 products are listed on the Felux platform on any given day, according to Hogensen.
“We expect that to grow significantly,” he says. Depending on the product line, the average order is about $70,000, but values range widely. They’re typically $40,000 to $80,000.
More than 1,000 customers use the Felux platform. Some 40% of users are steel companies. Hogensen wouldn’t name them but says “we work with some of the largest mills.” Buyers on the platform include Fortune 500 companies, and steel companies themselves use Felux for both selling and buying.
“The majority of our buyers are also steel suppliers,” he says.
Felux has competition in online metals procurement, but Hogensen says industry brokers who take a cut of the seller’s proceeds run most such operations. In contrast, Felux generates revenues primarily through subscriptions.
“We’re kind of like the system for both sides,” says Hogensen, who declined to disclose his company’s revenue.
Negotiate prices and track shipments
Buyers on Felux can source inventory, contact sellers, negotiate prices, bid, and track shipments from order to delivery. The platform offers various payment options, including credit lines through a third party. Sellers can opt-in for next-day invoice payment for a fee. He says a new payment-related initiative could be announced soon.
Building the digital marketplace, and challenging entrenched paper-based procurement systems, was a heavy lift in part because of the steel industry’s lack of standardized terms, Hogensen says. Terms and descriptions for essentially the same product can vary depending on country or region.
“No one’s built a global taxonomy of systems,” he says.
Some 95% of Felux’s transactions involve steel, but the firm plans to branch out into other metals, including copper, Hogensen says. Also in the works is international expansion. The company’s primary markets are the United States, Canada and Mexico, but Hogensen expects to set up shop in Europe in about 18 months.
Funding for product development
Proceeds from the new funding round will mostly go toward product development, Hogensen says, without revealing details.
“We will strategically hire in spaces where we see acceleration,” he adds. The funding was led by EquipmentShare, a supplier to the construction industry, and joined by investment firm Signia Venture Partners, Suffolk Technologies, Expa, Lightbank, 8VC, and JumpStart Ventures, among others.
Felux has 38 employees, with a mix of steel and technology backgrounds. Hogensen hails from the tech side with a résumé that includes stints at Signal HQ, a sales-tracking and data firm where he was co-founder and president. He was also at ride-share firm Lyft, where he was vice president of commercial and corporate sales.
The top executive at Felux with a steel background is chief operating officer Chris Day. While an executive vice president at Majestic Steel USA in Cleveland, he oversaw various digital initiatives, including Majestic’s first customer portal and development of software for customers to replenish inventory. Majestic’s president and CEO, Todd Leebow, is a member of Felux’s board of directors.
“For us, it was the perfect match of technology and steel from the beginning,” says Hogensen.
Jim Daly is a Mount Prospect, Illinois-based freelance journalist covering business and technology.
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