Target invests in Mpls. start-up that helps retailers monitor supply chains

Target Corp. has invested in one of the start-ups that took part in its Techstars retail accelerator last summer and that has since moved its headquarters to Minneapolis.

Inspectorio, a firm that focuses on helping retailers keep closer tabs on factories through inspections and data analysis, has raised $3.7 million. The seed round of funding, which closed in recent weeks, was led by Target with smaller contributions from Matchstick Ventures, a Minneapolis-based venture capital firm, and Techstars Ventures.

"They have a lofty purpose and ambition about bringing transparency to the supply chain and sourcing world," said Casey Carl, Target's chief strategy and innovation officer. "That aligns very well to our approach and philosophy around where we want to take our sourcing practices and making sure we are doing everything within our power to build up trust and credibility and to pass that on to consumers."

Quality control in the supply chain has always been a concern for retailers who work with factories around the world. The potential for deception was highlighted last summer when Target cut ties with India-based Welspun Global Brands, one of the world's biggest textile manufacturers, after an internal investigation found that the company was passing off sheets as being made from Egyptian cotton when they were not.

At the same time, retailers are also more motivated to monitor factories for compliance with safety and environmental standards as consumers become increasingly concerned about the conditions in which products they buy are made. The issue has received renewed attention since the collapse of the Rana Plaza factory in Bangladesh in 2013.

Inspectorio, founded a year ago by three brothers, helps retailers by digitizing what has often been pen-and-pencil inspection reports as well as by using a platform to help retailers bring more data science to monitoring supply chains.

The firm was part of the first class of 10 start-ups in a retail-focused boot camp that Target hosted last summer in partnership with Boulder, Colo.-based Techstars, which runs similar accelerators around the world.

After the program, Inspectorio decided to move its headquarters from Hong Kong to Minneapolis. It has also been running two pilot programs with Target — one focused on Target's private-label apparel made in China and another on its footwear made in Vietnam. It also works with other small and large retailers.

Carlos Moncayo Castillo, co-founder and CEO of Inspectorio, said his company will use the seed money to continue developing its platform and growing its team. He plans to hire about 10 more people to work at its engineering office in Vietnam where about 16 people now work.

Inspectorio is also recruiting for a handful of marketing, sales and customer service positions in Minneapolis, where it has three people with plans to grow to 10. It also has a four-person operations team in China.

Inspectorio has continued to work out of Target's Techstars offices in City Center but is getting ready to move out shortly into its own digs.

"We are finalizing the move to our own space," said Castillo. "It's going to be in downtown Minneapolis very near to where we are right now."

While Inspectorio is the only start-up from the inaugural Techstars program that Target invested in, the retailer is still actively in touch with others and is in the middle of tests with some of them. Branch Messenger, which has an app that enables hourly workers to swap and keep track of shifts, has relocated to Minneapolis from Los Angeles. It has recently expanded a pilot program of its app with Target to 130 stores.

Another early-stage company in the program, Nexosis, an Ohio-based retail forecasting and data analytics firm, has secured $5 million in funding from sources. Nexosis' technology has been adopted by a number of retailers.

Applications for the 10 spots in the second year of Target's Techstars accelerator opened Monday.

"We're excited to kick off year two," said Carl. "I think it's only going to be bigger and brighter. Hopefully there are more Inspectorios in the mix."

Kavita Kumar • 612-673-4113