In our Making Markets series, learn from exceptional entrepreneurs about their magic moments in company building and important lessons for shaping the industries that matter today. 

Material Bank is a marketplace for design professionals and brands, providing the fastest and most powerful way for architects and designers to discover and sample materials such as textiles, wallcovering, flooring and paint.

Material Bank Founder, CEO and Chairman Adam Sandow purposely created a digital-physical company from the get-go. Utilized by more than 65,000 design professionals, Material Bank is both a trusted online marketplace and complex physical logistics business, operating a 380,000 square foot facility stocked with millions of material samples from hundreds of brands.

We sat down with Adam, a serial founder, to hear his insights on how to design a “fail-proof” business model.

How did you convince the old-fashioned building materials industry to pivot to a digital sampling model?

The building materials industry is very insular and slow to change. Brands and manufacturers have been sending out samples the same way for decades. Designers and architects would browse through multiple catalogs – one for each type of material, such as tile or paint – and then order various samples from each individual brand. They visited local showrooms, which was time-consuming and often only had a small selection of samples.

Some of this search moved online in the last decade, but it was still highly fragmented and incredibly inefficient. A single resource for design professionals didn’t exist, and I saw the opportunity to dramatically improve the specification process. Over the last fifteen years, I built a very successful design and architecture media company, so we knew the architects, interior designers, brands, and manufacturers intimately and had gained their trust.

Our media foundation and deep relationships within the industry were critical in gaining early adoption from leading material brands and design firms. To successfully build a marketplace, you need trust from both buyers and sellers.

The old way of ordering building material samples seems so ripe for disruption. Why didn’t someone think of this sooner?

They may have thought of it, but implementing it would have been extremely difficult and complex.

Actually disrupting an entire industry isn’t as easy as some entrepreneurs think — it’s not just about building the right technology, and then customers come. For a marketplace like ours, there were three main challenges.

One, gaining trust from the industry to get enough brands and designers to the marketplace. Two, building, organizing, and stocking a massive warehouse of millions of samples and equipped with state-of-the-art robots and AI. And three, creating a sophisticated, free overnight shipping-and-returns logistics system.

Building the technology wasn’t what was most difficult. The hardest part was figuring out the physical logistics side of the business. A single brand can have 8,000 to 10,000 SKUs, so we had to build a marketplace that could process hundreds of thousands of SKUs.

We built our logistics facility just minutes from the FedEx World Hub in Memphis, TN, to be able to have the latest order cut off time and fastest delivery in the industry.

Did COVID accelerate the use of Material Bank and other online marketplaces?

COVID sped up digital disruption in so many industries; it forced people to quickly adapt to working from home and to an entirely online world. Material Bank allowed design professionals to continue to work from anywhere and for brands to remain connected and get samples into their client’s hands without disruption. We tripled revenue during 2020 and the pandemic only helped to accelerate our growth. But COVID also laid bare that the physical world isn’t retreating.

The design industry relies on seeing and touching the physical samples when specifying materials. A designer would never order $20 million worth of marble for a new airport just by seeing a photo, nor would a virtual reality headset suffice in showing you exactly how that marble looks and feels. Even if you’re just painting a room, you’ll always need to see the actual paint before making a final decision.

We built our business around the digital-physical relationship, creating the world’s largest online marketplace of design materials combined with ultra-fast and ultra-efficient logistics.

Prior to starting Material Bank, you founded SANDOW, which became a very large and successful B2B media business. Now Material Bank is also growing like crazy. What’s your advice for entrepreneurs building B2B companies?

Let me just say that winning is hard. There are three things you absolutely must do to build a successful B2B business. First, you need an unfair advantage; without that, the playing field is just too level and wide open. With Material Bank, I had fifteen years of relationships in the design industry, which was my unfair advantage.

Second, you need a truly innovative business model. Every entrepreneur thinks they have that, but do they really? An idea may be innovative, but an idea is not a business model; you need a clear plan to generate recurring revenue, reduce burn, and get to profitability.

Lastly, you need a moat. Don’t go to market until you have a really defensible product that no one else could build quickly enough to catch up with you. In Material Bank’s case, we spent years building our digital marketplace, onboarding Brand Partners, and building our proprietary warehouse and logistics system. Only then did we launch, because we had a strong moat against any competition.

More than 65,000 design professionals use Material Bank to source materials for architecture and design projects such as hotels, airports, and residences. BCV led a $28 million round for the company in April 2020 and recently doubled down with a super pro rata investment in its $100 million Series C financing. Read our take here.