Santiago “Santi” Nestares boarded a flight, opened his laptop, and finished a project for a customer during his flight. Fairly typical behavior for a startup founder, except the project was an end-to-end enterprise resource planning (ERP) migration. Using Starlink, Santi completed the whole thing before wheels touched down: bank connections, integrations, and books reconciled to the penny.
Companies have long depended on ERP solutions to understand how the business is doing and, ultimately, help them make better decisions to help the company grow. But implementation can cost hundreds of thousands of dollars and countless resource hours, only to deliver a solution that often requires compromises and workarounds.
Gartner backs this up: 70% of recently implemented ERP initiatives fail to meet their original business use case goals, and as many as 25% will “fail catastrophically.”
A “next-gen ERP” is not a new concept in venture. Over the past decade at Lightspeed, we have heard every version of the pitch from many players in the space: better interfaces and faster reporting. But when we looked more closely, there was always an obvious problem in addressing the underlying challenge in ERP implementation.
While flaws in ERP implementation are well-known, it also seems to be universally acknowledged that the problem cannot be solved. Then we met Santi, co-founder of DualEntry, an AI-native ERP. We asked the same question we always ask: what makes your solution different? The response, specifically addressing ERP implementation, caught our attention.
Tackling the hard problem: ERP migration risk
For a long time, new ERP systems couldn’t promise enough benefit to make a CFO switch. Legacy ERPs like NetSuite are among the most taxing implementations a large enterprise can take on. The headcount you have to dedicate to a migration comes at a real cost.
CFOs know this. They actively delay ERP implementation, unhappy with their current solution, because a six-to-nine-month migration was usually such a painful process. It also came with real risks of not being able to accurately close the books during the migration period, a significant impact on the company and its ability to report to investors.
On top of that, many CFOs were jaded. The appeal was there with next-gen ERPs. It’s not the difference between not going from an old tool to a slightly better tool. It’s migrating from a 1990s legacy ERP system built on Windows to AI. Yet no startup had ever successfully solved the ERP migration issues, and it was safer to select a well-established provider like IBM.
Instead, what sprang up were different products, or “wedges”, adjacent to and dependent on the ERP, but not a replacement. If they competed directly, they would lose connection to the ERP. They became profitable businesses on their own, but never solved the underlying problems with legacy ERPs.
Next-day migrations and streamlined operations through AI had always been appealing, but seemed like an impossible technical challenge. Then it stopped being impossible a few years ago. We could see companies porting over their data and running their books via AI, removing the barriers they previously faced.
DualEntry solved this with what Santi describes as a “reverse wedge.” “You have to go at the hard thing first and get rid of the dinosaur before you can tackle some of the other adjacent problems,” he says. “That was the biggest insight we had. It’s very obvious from the inside, but it can look counterintuitive from the outside.”
The shift wasn’t just AI making a better user interface: it was making AI do the migration work for you.
How AI upended the ERP category
Legacy ERP demo culture has also been a symptom of the broader issues with ERP implementation. Sales-led demos are rigid, with salespeople unable to go “off script.” No company can get a true picture of what a successful implementation would look like with their data.
DualEntry shows its potential customers proof of successful implementation. They can migrate data within 24 hours and hand a company a sandbox of their own data, letting the product speak for itself. One customer spent 36 hours evaluating the software on their own, then came back a month later and signed a five-figure contract. One discovery call, no follow-up, and the product had sold itself.
After the first meeting, we brought six people from Lightspeed into a room with Santi the next day to get into the weeds. This wasn’t a formal investment committee; just a room full of people saying, “Walk us through this.”
Then fourteen reference calls happened in a single day. Glowing reviews all around. We had deep experience in evaluating ERP solutions, and could recognize that a painless migration could be the way to win the market.
To go from months-long implementations to a migration that can happen overnight is a mindset shift. The thesis had always been that the ERP category was stuck because migration risk made the switching cost unbearable. DualEntry took out that risk and was able to achieve the reverse wedge.
Looking forward: AI as the biggest enabler
ERP used to be a product companies would take on at Series B or later, when they had the available resources. DualEntry is seeing much smaller companies, even seed companies, adopt its product to get better insights and the ability to segment their books.
“If you look at airplanes in the 1980s, they had so many knobs and that was a good thing,” says Santi. “But now, most modern planes try to abstract away almost everything so the pilots can focus on the things that actually matter.” DualEntry wants accountants to spend time on insights, saving the company money, and helping lower risk, instead of the logistics of closing the books.
AI allows companies to synthesize context that would otherwise be a daunting task. That’s true for the customers DualEntry serves, and also for how DualEntry approaches AI internally. AI has a role in everything from engineering to productivity.
“You can do powerful things a lot earlier,” says Santi. “It’s like 10x-ing what you can do with the same number of denominators.
The content here does not constitute an offer to sell or a solicitation of an offer to buy any securities or investment advisory services.
The views expressed are those of the authors and do not necessarily represent the views or opinions of Lightspeed. Other market participants could take different views. Unless otherwise indicated, the inclusion of any third-party firm and/or company names, brands and/or logos are for representational purposes and does not imply any affiliation with these firms or companies and also does not imply their endorsement of the views expressed by the authors.
Certain information contained herein is based on information from various sources prepared by third parties. While such sources are believed by Lightspeed to be reliable, neither Lightspeed nor its affiliates assume any responsibility for the accuracy or completeness of such information, and such information has not been independently verified by Lightspeed. For more details please see https://www.lsvp.com/legal.
Authors
