In 2020, KingsCrowd rated Tradefox’s Wefunder raise a Deal to Watch and gave it a five-star rating. In its new raise on Wefunder, Tradefox (formerly known as Scrap Connection) has broadened its mission from protecting buyers of recyclables to protecting the planet. Tradefox’s new emphasis on the environment is less of a pivot and more of an attempt to place the company’s services in a broader global perspective that puts the planet’s health front and center.
But why? And why now?
Tradefox founder and CEO Chris Yerbey first pivoted the business during the COVID-19 pandemic. The startup developed a series of free online conferences and earned respect from the industry by giving it a space to do business. Chris is now adapting to new market demand. “Transitioning to green fintech I think will trigger interest from impact venture capital (VC) funds,” he said. Tradefox’s extensive data collection will help surface sustainable funding opportunities in the recycling industry.
Tradefox gets its data from the companies doing scrap metal trades and from the companies they’re trading with. The latter — called counterparties — provide a crucial informational feedback loop. They rate their trade partners on metrics such as integrity, material quality, payment, and the shipping and handling of quality claims, just to name a few. Then Tradefox’s scoring algorithm combs through the data and provides assessments on each company’s reliability and trustworthiness.
The company’s environmental impact was always implicit in these services. By making the global scrap business more transparent and honest, Tradefox hopes to increase the industry’s access to financial products — especially green capital-seeking, sustainable opportunities.
Chris is simply highlighting this aspect of the company’s mission. In doing so, he’s brought the company squarely into today’s dominant zeitgeist. Not many people (or VC funds) give a fig about the scrap business. But who doesn’t want to save the planet?
It’s a smart move. And it should encourage more capital to flow Tradefox’s way. That’s a good thing because the company has real innovative solutions for the dysfunctional world of recyclable trading.
Tradefox has made great progress in collecting data and turning that data into useful products. It has been at the core of the company’s efforts to date, as it should be. Now, with the help of several large companies adding thousands of their historical transactions (along with post-transaction notes) to the database, that phase of the company’s efforts is finally coming to an end — at least as a core activity.
But what’s also notable about Tradefox’s progress to date is the conspicuous absence of customers and partners. Tradefox will be addressing both these things in its next phase. While it has 5,300 members, they’re non-paying. Tradefox gave its members “credits” to use the platform for free in exchange for data. It collected around $9 million worth of data, according to Chris. But when those credits run out, it will begin charging for its reports. I’m happy that Tradefox is finally going after revenue.
From Scrap to Fintech
Tradefox is targeting new membership growth in Central Asia and the Middle East, where recyclable buyers far outnumber sellers. And it wants to maintain its strong presence among exporters from North America and Europe. They use their Tradefox profiles to create a competitive edge in attracting buyers.
The company’s monetization plans don’t end there. It’s about to ink a partnership with Amsterdam-based Atradius, one of the biggest commercial insurance agencies in the world. Tradefox will use its extensive data library to vet companies Atradius has targeted for debt collection. This would make the company become a fintech startup and realize Chris’ vision. Tradefox could diversify its offering and differentiate itself by insuring uninsurable risks like fraud or canceled contracts.
Chris has also struck up a relationship with Sealink International, a major freight forwarder based in Texas. Through Sealink, Chris hopes to forge a commercial partnership with Maersk, a huge Danish shipping company.
These various initiatives are projected to generate around $12 million to $15 million in revenue in three years — with accelerated growth expected after that. By that time, Tradefox should be in a position to enable Atradius and other insurance companies to underwrite trading behavior that is now uninsurable, including certain fraud practices, canceled contracts, etc.
Tradefox will be hiring six to seven more people with the money from this raise — including a chief commercial officer, which will add to the company’s chief technology officer and newly minted co-founder Will Cavendish.
If all goes according to plan, this will be the last crowdfunding round for Tradefox. Chris plans to raise again next year in a Series A round with a hoped-for valuation of $50 million to $100 million. That’s a nice little jump from its current $30 million valuation cap. But it’s a projection, not a guarantee.
Wall Street has Morningstar, S&P, and Bloomberg
The equity crowdfunding market has KingsCrowd.
About: Léa Bouhelier-Gautreau
Léa is passionate about impact investing and sustainability. Prior to KingsCrowd, she worked for Stanford’s accelerator, StartX, helping to select the most promising entrepreneurs. She also led the first award-winning study on the Malawian startup ecosystem. In her free-time, she volunteers to help entrepreneurs in Cameroon, Brazil and Colombia. Léa holds a degree in Anthropology from France and is currently enrolled in the UC Davis MBA program.