TradeShift launches to disrupt an entire financial system – And Morten Lund is advising it

One of the most potentially disruptive startups of the last ten years is emerging into the light this week. And I honestly don’t say that lightly.

Christian Lanng, a former builder of deep e-commerce and security services for the Danish government is co-founder of TradeShift along with a very hard-core team which includes John Bosak who created XML, who is on the board.

But what is perhaps most startling is the re-emergence of early Skype investor Morten Lund on the project. Lund was made famous in tech circles both for his early Skype investment but also for going personally bankrupt two years ago.

TradeShift, which has been operating under the stealth name of Porta till now, is aiming at a very, very big target.

It wants to disrupt how banks and credit card companies process payments between any kind of business, and use the Internet to do it.

For the last 10 months the dozen strong team in Denmark has been building what could be described most simply as an e-invoicing company.

But instead of the kinds of charges levied for credit card processing and other banking systems, transactions will be free across the network, but with the security of being legally binding. That is incredibly disruptive.

Financially it is backed by seed investors and is “currently self sufficient”.

How so? TradeShift has now signed up two undisclosed regions in northern Europe and a yet to be named city in Brazil for its platform. Crucially, it looks like Tradeshift will be hugely beneficial to emerging nations like Brazil which currently are not locked into old EDI systems.

The problem is simple. Businesses still trade on exchanging and printing out PDFs. Neither Microsoft not SAP haven’t solved this. So Tradeshift wants to let global SMEs participate in hard core business processes traditionally ruled by these companies.

Old fashioned Electronic Data Interchange (EDI) is dominated by huge IBM mainframes and pre-Internet protocols. Of course, it’s only natural that this should move to cloud computing.

The idea is this. Dynamic invoicing will, instead of being laborious hand-created entities, simply move between companies electronically. Accounts running on Tradeshift will constantly monitor exchange rates and automatically withdraw funds or make purchases just when the price is cheapest for the goods your company requires.

The play is not to go to the US first with this, but for Europe and emerging marketing BRIC nations where their systems are being built right now. Europe is very mature for this sort of thing right now.

At the core is UBL – a messaging standard similar to XML.

The scenario facing businesses right now is 12/13 euro per invoice for existing systems. Make that 100 invoices and it starts to add up.

This information is already available with existing real-time financial systems, so Tradeshift is building a platform on which these transactions can take place seamlessly. It will run its own applications on top of it, but the platform itslef will be made available so that other third party developers to create their own.

Christian Lanng has 10 years of experience as former head of the Center for Service oriented Infrastructure in the Danish National IT and Telecom Agency. In other words he is right at the top of his game in working with mobile-services, e-business, SOA and large scale payment systems.

“Tradeshift will be a like a GSM standard for e-business” Lanng told me at a meeting in London recently.

There is an already existing “GSM-like” movement to create electronic standards across Europe. PEPPOL, Pan European Public Procurement Online is a vision to allow any company (incl. SMEs) in the EU to communicate electronically with any EU governmental institution for all procurement processes. The difference is that Tradeshift reckons it’s going to crack this for business to business transactions, and globally, not just in Europe.

The core team is 13 people in Copenhagen, but includes people in Germany, Brazil and Sri Lanka, and totals up to 50 working on this.