First Nuremberg, then the world: How Orpheus evolved from a regional startup into an international player
by Julia Neumann
In spring 2020, the Nuremberg-based procurement software startup Orpheus was acquired by McKinsey & Company. Founded by foundingpartners Michael Lauer, Dr. Jörg Dittrich, Matthias Schuhmann und Jörg Mengeler in 2005, Orpheus is a pioneer of procurement software development, focusing on an analytical and data-driven approach. Initially, Orpheus offered project-related analytical support for purchasing departments. From 2015 onwards, the team invested more of its efforts in software development, working towards an objective of helping companies build more efficient purchasing teams.
We enjoyed a virtual chat with the founders covering subjects including the hurdles of starting a company from scratch, growing a business with investors, and how the acquisition changed the company overnight.
Starting a business often seems to get romanticized. What were the major hurdles you faced when founding Orpheus?
The biggest challenge for us was to become a limited liability company (GmbH). This step brought excitement when we finally kicked off the business idea, but also brought some of the less fun tasks with it, such as business transactions, bookkeeping, travel expense accounting, taxes, and the time-consuming search for the best employees. When your company is constantly growing, the tasks to support it keep growing too.
All these tasks seem overwhelming when they need to be managed all at once. What should people ask themselves when thinking about starting a company?
Even if it sounds trivial, many fail to clarify the basics in the rush of motivation. What added value do I want to provide? Who is my target group? What strategy do I want to pursue? These questions should be followed by budgeting questions such as, “Can I afford the required technology or assets for my project?” And finally, “What is my definition of readiness? When will I consider my product ready to go-to-market?”
You started Orpheus in 2005. Since then, you have gathered extensive experience. What are your go-to tips for future founders, especially in terms of dedication and personal growth?
A well-functioning founding team requires an immense amount of trust, or the lack of transparency will eventually take its revenge. That’s why we always play with open cards. Communication is key — it’s vital that you talk and keep each other up to date!
You should also exploit your trial and error phase and take advantage of learning by doing. Try things out as long as the opportunity is there. And last but not least, always keep in mind that your employees are the most valuable resource of your company. Emphasize quality within HR from day one and value your employees by creating an appreciative, non-hierarchical working environment.
You already mentioned the critical role of money in business. When you first started working with investors, what changed?
Investors not only provide liquidity but also ask uncomfortable yet significant questions. The investment allowed us to grow our knowledge base by hiring experts in the areas of procurement (analytical support) and software (product development). Furthermore, we were able to invest in necessary tools and expertise, and the development of our existing software solutions.
Investors also demand scalability: too much technical depth tends to be a hurdle at this early stage, which raises the question, “How do we respond to individual customer requests?” For us, it is a continuous trade-off between standard and tailored solutions. Added to that, additional liquidity leads to other challenges too. The priorities of the different dimensions such as Marketing, Sales, and Product Development are always a consideration.
How do you decide which responsibilities stay within the company and which should be outsourced?
We all know how challenging the process of carving up tasks can be, especially if it’s something you enjoy. That is why we initially followed a simple rule of thumb: the less the founders have to give up their initial creative responsibilities, the better. But in the long run, you have to balance what you can do yourself, with what would be better to outsource, and what your budget will allow you to do. We outsourced quite a few functions from the start: HR and Payroll, Accounting and Taxes, and initially also Marketing. In retrospect, we should instead have focused more on a managed office with a reception, a post office, etc. to improve the structure of our daily processes.
With the steadily growing interest of customers in your products and services, international markets became progressively attractive. What challenges did you face when tackling new markets abroad?
Orpheus was mainly known and represented in the DACH region. In 2018, we had grown to 50 employees and already served 50 existing customers. That was around the time we decided to focus on expanding internationally. We started introducing Orpheus through publications in the Netherlands and the UK, as well as attending different international trade fairs and digital events.
We quickly learned that markets abroad work totally differently, and we had to adjust and adapt our own strategies quickly to succeed. In the US, for example, you can’t just make business on the side. We would have needed to send a founder to North America to set up an international location there — with everything that goes with it. However, with the first international projects and initiatives, global players such as McKinsey became aware of our products and services, which created the first opportunities to work with them.
Congratulations again for teaming up with McKinsey! Merging with such a big company brings a lot of changes. How did the acquisition affect Orpheus? Any drastic changes?
One of the most noticeable adaptations when merging with an international team was adjusting our primary language from German to English! Other than that, the heftiest changes happened within the structure of our processes. Many Orpheus-specific processes or things that might have been done on an ad hoc basis have been elevated to McKinsey company-wide professional standards.
Project-wise, the variety of client-serving opportunities became much more diverse both in terms of markets and customers. We are very much looking forward to further merging our existing product-set with the McKinsey platforms to offer one consistent platform to our customers. We are excited to see what the future holds for us!
Julia works in Marketing Communication at ZOLLHOF and is studying Digital Business at TH Nuremberg. Being a creative mind she loves to write and is passionate about photography.