Canals Raises $35 Million In Funding Led By Base10 Partners

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Canals, a Miami-based AI platform for wholesale distribution and industrial supply chains, announced a $35 million Series A funding round, led by Base10 Partners.

Canals’ $35 million funding marks the company’s first major outside capital after years of bootstrapping. It positions Canals as a standout in applying AI to the “real economy”—a massive, traditionally under-digitized sector plagued by manual processes, fragmented data, and legacy systems.

What is Canals’ main focus?

Founded in 2022 (some sources note operations starting around then) by Michael Delgado (CEO) and Erez Arnon (CTO), Canals builds an “Operating AI” platform tailored for distributors, manufacturers, and contractors in verticals like electrical, plumbing, HVAC, mechanical, and industrial/MRO.

The platform automates end to end workflows across sales, customer service, accounting, purchasing, and receiving. Key capabilities include:

• Sales Order Entry and Quoting: Converts messy customer inputs (emails, PDFs, spreadsheets, handwritten notes, takeoffs, voicemails) into quotes or orders ready for ERP integration. It handles part number mismatches and learns from usage without templates.
• Accounts Payable and Invoicing: Achieves high rates of touchless processing (reported at 96% for some customers) by validating invoices against business rules and pushing them into ERPs.
• Purchasing and Receiving: Tracks POs, receipts, acknowledgments, and discrepancies; auto updates ERPs for ship dates and flags issues early.
• Part Number Conversions and Large List Processing: Rapidly maps products across manufacturers or acquired businesses.

The AI is trained on industry specific complexities and integrates with existing ERPs with minimal IT overhead. It emphasizes reliability in “messy real world data” over hype, capturing institutional knowledge as teams use it.

Metrics and Traction (pre funding): Over 100 distributor customers (including notable ones like DSG, The Kendall Group, Locke Supply, United Electric, R.S. Hughes, Puget Sound Pipe & Supply). Processed over 8 million sales orders and $5 billion in payables. Bootstrapped and profitable, with 90% employee ownership. Customers report results like doubled quote conversion rates, minutes to clear stock orders, and significant productivity gains.

The $35M Series A was led solely by Base10 Partners, a San Francisco VC firm focused on automation in the real economy (portfolio includes companies like Notion, Figma, Nubank, Stripe). Jason Kong, General Partner at Base10, highlighted Canals’ customer obsession, superior ROI, and outperformance versus competitors.

How will Canals use the funds?

Proceeds will accelerate product development, expand end to end automated workflows, and build transactional tools connecting suppliers, distributors, and contractors. This aims to create “frictionless transactions” in the $8.2 trillion U.S. wholesale distribution industry.

Wholesale distribution moves enormous volumes of goods but remains reliant on fax-like processes, manual data entry, emails, and phone calls. AI addresses high volume, repetitive tasks where accuracy and speed directly impact margins, customer retention, and growth. Canals targets the execution gap: distributors win through operational excellence rather than just pricing or inventory.

The sector’s scale ($8.2T) combined with chronic inefficiencies creates a large TAM for vertical AI automation. Canals’ focus on proven, integrable tools in regulated or complex supply chains (construction/industrial) differentiates it from general purpose or consumer AI plays.

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Traction First Approach: Bootstrapping to 100+ customers and substantial volume processed demonstrates product market fit and revenue viability before VC. This de-risks the investment significantly in an AI market full of pre revenue hype.

Customer Centric Development: Strong testimonials (e.g., from DSG’s CEO) and iteration based on real feedback have built a “gold standard” reputation. High accuracy in domain specific messy data is a defensible moat.

Team and Culture: Founders bring startup experience; emphasis on practical, secure, scalable AI aligns with industrial needs. Profitable, employee owned model supports long term alignment.

Expansion Potential: From order entry to full suite operating system, with room to deepen supplier/contractor connectivity and add features like advanced analytics or predictive capabilities.

Risks and Challenges:

• Competition from other AI workflow tools or ERP enhancements.
• Integration complexities across diverse legacy systems.
• Dependency on distributor adoption rates and economic cycles affecting industrial supply chains.
• Execution risk in scaling product innovation while maintaining accuracy.

This funding validates Canals’ position as a leader in AI for wholesale distribution. With Base10’s real economy thesis and the company’s proven metrics, it is well poised to capture share in a trillion dollar market ripe for modernization. The capital infusion should enable faster innovation toward seamless, AI driven supply chain transactions, potentially setting new standards for efficiency, customer experience, and competitiveness in distribution. Early results suggest tangible ROI that could drive accelerated adoption across the industry.

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