When Paul Kennedy talks about the old way of doing things at Dakota Supply Group, there's a weary recognition in his voice. For decades, the electrical distributor—like most of its peers in the sprawling wholesale sector—has juggled legacy enterprise software, manual data entry, and what one executive described as "an unholy number of spreadsheets."
Now Kennedy, who chairs the board of the National Association of Electrical Distributors, is publicly backing a Miami startup that promises to automate the tedious mess. On May 28, 2026, Canals announced it had raised $35 million in funding, led by Base10 Partners, to build what it calls "Operating AI" for an industry worth $8.2 trillion globally—and one that has been notoriously resistant to digital transformation.
The premise is deceptively simple: plug Canals into a distributor's existing ERP system, then let the software handle the grunt work. Order entry. Invoice processing. Purchase order tracking. Customer inquiries. The kinds of tasks that consume hours of back-office time but rarely get the executive attention reserved for flashier technology bets.
So far, more than 100 distributors have signed on. The company says it has processed over 8 million sales orders and $5 billion in payables across its platform—figures that suggest traction in a sector where software adoption often moves at a glacial pace.
The Friction Points
Wholesale distribution occupies an odd position in the economy. It's enormous, essential, and largely invisible to consumers. Distributors sit between manufacturers and retailers (or contractors), moving everything from electrical components to plumbing supplies to industrial chemicals. The sector has long relied on systems like Epicor Eclipse, Infor CloudSuite, SAP S/4HANA, and Microsoft Dynamics 365—powerful but aging platforms that weren't built for the AI era.
Canals has built pre-configured integrations for those ERPs, which means customers can theoretically be up and running with minimal customization. The Kendall Group, a distributor that's been testing the platform, reports 50% time savings on order entry. Zero custom coding required, according to the company.
There are other data points. Turtle, another named customer, saw its quote conversion rate jump from 20% to 57%—a 2.8x improvement that, if replicable, would meaningfully change unit economics. Invoice processing has hit 96% touchless automation for some users, Canals claims, while purchase-order-to-receipt tracking time has dropped by as much as 80%.
Perhaps more revealing than the percentages: the customer roster includes well-established players like Locke Supply, Puget Sound Pipe & Supply, Kirby Risk, and Regency Supply. These aren't early adopters chasing the latest shiny object. They're companies that have seen software vendors come and go, and they tend to move cautiously.
What Convinced the VCs
Jason Kong, a general partner at Base10, says the firm's conviction came down to two things: unsolicited customer testimonials and measurable ROI. Base10 focuses on what it calls "real economy" sectors—industries like logistics, manufacturing, and distribution where automation has lagged behind consumer tech. The wholesale distribution bet fits that thesis.
Canals had already been building momentum. On April 1, 2026, a month before the funding announcement, the company launched AI-powered features for purchase order tracking, accounts receivable cash application, inquiry handling, and live voice order entry. The product expansion signaled ambition beyond simple workflow automation.
Co-founder and CEO Michael Delgado has positioned the company around a specific philosophy: target the "tedious, repetitive parts" of distributor operations—the work that employees tolerate but don't love, and that has stubbornly resisted software solutions for years. Co-founder and CTO Erez Arnon oversees the engineering side, leading what older job postings suggested was a heavily technical team. Current headcount wasn't disclosed alongside the funding.
The Broader Landscape
Canals isn't operating in a vacuum. Supply chain AI has attracted serious venture dollars lately. Loop, which builds predictive supply chain software, raised a $95 million Series C in April 2026. Other distribution-focused startups like InstaLILY and Faction have also landed funding over the past year, signaling investor appetite for back-office automation in unglamorous but high-margin sectors.
The company holds SOC 2 Type II certification—table stakes for enterprise software but worth noting given the sensitivity of distributor financial data. It has also forged partnerships with industry groups like Affiliated Distributors and the Eclipse Users Group, the kind of institutional validation that matters in a relationship-driven industry.
What happens next will hinge on execution. The Series A capital is earmarked for expanding the Operating AI platform, targeting additional workflows across the distributor value chain. The hard part, as always, will be proving that the early results hold up at scale—and that an industry accustomed to stability will embrace change faster than it has in the past.
For now, at least, the spreadsheets may finally have some competition.
