Teardown | Zetwerk – B2B marketplace for manufacturing

In just 3 years, Zetwerk has scaled its global B2B procurement marketplace to a $2.7B valuation.

Mar 15

Hi Everyone!
Welcome to our first Teardown under the new CommerceTech umbrella.
As we shared in our post yesterday, you’ll now be receiving Teardowns ~3 times per week through this newsletter instead of our old format.
As always, you can just reply to this email with any feedback!

These briefs are produced by leveraging publicly available data sources and information. If you notice a mistake or see an area for improvement, please let us know through this typeform or via email (team@sandhill.io).

Snapshot

Founded in 2018, Zetwerk is a B2B online marketplace for manufacturing that connects businesses and companies with OEMs (original equipment manufacturers) and EPC (engineering procurement construction) companies.
The company operates across 15+ countries, however, 85% of its business is concentrated in India. Zetwerk operates in more than 25 industry segments including Apparel and Luxury Goods, Renewables, Oil & Gas, Medical Devices, and more.
The company’s latest funding round was in December 2021 where it raised $210M in a Series F funding round led by US-based Greenoaks Capital bringing its total valuation to $2.7B.

On the Web: Website, Linkedin

Business Overview & Products

Zetwerk caters to both suppliers and customers by connecting both parties through its platform. It offers a wide range of manufacturing services to its customers like custom-made components, mass production, quality certification, inventory, and supply chain management.

Suppliers on the platform benefit from the partnership in terms of visibility and the opportunity to obtain international orders resulting in increased inbound orders and revenue. Moreover, suppliers are offered financial support like working capital loans and invoice discounting services by the company.

To date, Zetwerk has developed partnerships in 3 key segments: Precision Parts, Capital Goods and Consumer Goods. The product categories include but are not limited to assembly lines for consumer durables, precision parts for aerospace, prefabricated structure for infrastructure projects, and sheet metal for electric vehicles.

The company operates in 15 countries with the majority of its orders coming from established markets like the Middle East, Asia Pacific, and North America.

How It Works

Zetwerk works with OEMs and EPCs to fulfill their manufacturing requirement for customized components and assemblies by procuring relevant materials from high-quality suppliers. The platform connects both parties by offering a precise match between customer requirements and supplier capacity.

The platform executes these projects courtesy of its large network of high-quality partner suppliers and world-class plants. It sells custom-made products like parts of a crane, doors, chassis of different machines, and more. Since it focuses on products that nobody has in stock, orders need to be placed beforehand to manufacturers and workshops.

The company operates across 25 industry segments and mostly serves customers in forging, casting, fabrication, and machining businesses. These customers approach Zetwerk with digital designs that they want to be translated into physical products.

Zetwerk lists down potential workshops and evaluates their products and offerings to help companies work with them. Once a company places an order, Zetwerk allows it to track the progress of its order, from manufacturing to shipping. Customers have access to information on shipment, tracking, photos of projects, tax compliance, shipping documentation, and inspection reports.

Since the shipping of products in this industry takes more than 2-3 months, this tracking feature is particularly helpful for customers. Quality checks are also conducted to ensure that each part meets customer requirements so there are no rejections at their end. As a middleman, Zetwerk is able to provide high-quality production, on-time delivery, and project management to its customers and consistent orders and business growth to its supplier.

Business Model & Pricing

Zetwerk’s business model has evolved immensely since its inception. The company now positions itself as a supplier to their customers so they can delegate orders to the suppliers directly thus increasing efficiency and speed. It has transitioned from a supplier database for large manufacturing companies to a B2B platform for custom manufacturing.

The company mainly earns money by sharing margins with suppliers on their platform. In order to increase their margin, it ensures suppliers experience consistent growth in their businesses. Zetwerk also applies a take-rate on each transaction that takes place between suppliers and customers on the platform. This means industrial segments account for 85% of the enterprise’s revenue. Recently Zetwerk expanded to consumer goods which include items like TVs, mixers, grinders, etc. This category now makes up for 15% of the company’s revenue.

Traction

According to an Inc42 article, Zetwerk reported $180M in revenue in 2021 which was roughly a 2.5x increase from its $42M revenue in 2020. Ever since its inception, the company has witnessed incredible growth with a 300% yearly growth rate. This growth is evident by their order book which has crossed over $655M and showcases predictability in business for the rest of the year. Due to this consistent upward trajectory, over 1,800 organizations trust Zetwerk with their contract manufacturing needs. It also claims to be profitable on an Earning Before Interest, Taxes, Depreciation and Amortization (EBIDTA) basis.

According to their website, as of March 2022, Zetwerk has:

9 million+ manufactured parts
1,800 active customers
8,000 active suppliers
25+ industries
2000+ projects

Founder(s) & Team

Amrit Acharya: Co-Founder and CEO at Zetwerk, prior to which Amrit was an associate at McKinsey and Company where he built a dynamic pricing engine and also helped design an M&A strategy for the F500 company.

Srinath Ramakkrushnan: Co-Founder at Zetwerk, prior to which Srinath co-founded OfBusiness, a raw material aggregator and procurement finance provider.

Vishal Chaudhary: Co-Founder at Zetwerk, prior to which Vishal was the Supply Chain Manager at ITC Limited, where he led a 30 member strong supply chain function of India's largest Leaf Tobacco Business.

Rahul Sharma: Co-Founder at Zetwerk, prior to which Rahul co-founded Prepnut, a job interview preparation site for college graduates.

History & Evolution

Zetwerk was founded in 2018 as a database of suppliers for companies struggling to manage their supply chains. The founders created software to help large manufacturing companies organize their supply chain databases.
Within 30 days in June 2018, the company decided to pivot from a SaaS venture to a B2B marketplace where customers could discover niche suppliers. This sudden change was due to customer feedback and it did wonders for the company.
However, soon after the company started receiving complaints from customers about late orders. To deal with this issue, they decided to pivot again by positioning themselves as a supplier to their customers. This final transition helped them delegate orders to multiple suppliers and as a result ensure timely delivery. This model not just increased their orders but also translated into revenue.
In September 2018, the company received its first international order from Singapore and then another from Bangladesh, officially marking its entrance into the global market.
In December 2019, Zetwerk decided to capture the international market by setting up a small sales presence in North America and some channel partners in Europe. This step helped elevate its international position and as a result, it started receiving multiple international orders.
In 2021, Zetwerk expanded to apparel and consumer durable sectors due to an increased demand and supply chain disruptions post the coronavirus outbreak. The company worked closely with apparel brands and retail chains to produce products of various knits and weaves. The aim was to help suppliers modernize their strategies and make their manufacturing processes more strong.
That year the company forayed into the aerospace and defense sector by setting up a fully owned subsidiary to manufacture satellites, composite products, and rocket casings. It also decided to build components for aircraft only for international OEMs.

From archive.org

Market Snapshot

India is expected to become the 3rd largest construction market in the world with its contribution to the country’s GDP increasing to 13% by 2025.
Foreign Direct Investments in the construction sector were estimated to be $26.16B and activities of the sector stood at $25.95B.
The construction industry in India is expected to reach $1.4 Tn by 2025.
In the past 5 years, the construction sector in India contributed an average of 8% to the overall Gross Value Added (GVA).

Additional Learnings

Zetwerk stands out from its competitors because it not only focuses on infrastructure and construction sectors but also works for industries like aerospace and defense. The company also thrives on building custom-made niche parts for its customers which is a competitive advantage for the enterprise.