Why we are still in love with Procurement 💌

My ProcureTech-Landscape v02 & what’s 🔥 hot 2y later

Once upon a time, procurement had 3 objectives: Savings, savings and savings. 🐽 The world has changed 👩‍🚀

After officially announcing “Why we fell in love with procurement” and sharing a perspective on how Corona will affect Procurement Tech, I figured that it was about time to take this romance one step ahead. Why is that?

Well first, it’s been quite overwhelming to not only receive lots of feedback on the last articles— but to actually become part of an emerging “community of #ProcureTech Affecionados”. Maybe the best part so far has been to meet a whole bunch of (aspiring and) inspiring entrepreneurs and industry professionals within the #ProcureTech community. I‘m very much looking forward to continue this exchange.

Secondly, ProcureTech has proven itself as an attractive vertical to fall in love with — the space has gone ahead of itself with impressive exits + funding rounds since my last post. To name a few: Microsoft just acquired Suplari to boost the Dynamics 365 supply-chain spend analytics. Workday acquired the VC backed company ScoutRFP for USD 540M . McKinsey acquired the spend analytics provider Orpheus — kudos to the early backers UVC Partners and Senovo. Cosuno raised a EUR 13M A-round from Spark Capital, Brightflag raised a USD 28M B round, Fairmarkit pulled in USD 30M led by GGV capital and Insight Partners, Vendr raised USD 60M from Tiger Global — and Globality closed a whopping USD 140M round with the Softbank Vision Fund. Meanwhile, I expanded the ProcureTech portfolio with the Investment in Keelvar and another super exciting deal which you are going to hear about rather sooner than later (🧨).

So, roughly two years after I published my first post on ProcureTech, it has evolved into one of the hottest investment areas in start-up land (.. fast time to value, measurable ROI, lots of data to work with, yada yada — remember?). This has created a flywheel effect and makes me super pumped about the years ahead. ➡ Many of the very best founders out there have ProcureTech on their shortlist of opportunities when thinking about founding their next company. Looking at just the last two years: The average founding team caliber has increased tremendously. A development that I believe is far from over. 🤘🤘 If you are one of them founders: let’s have a (virtual) coffee asap!

Now, this post is meant to touch upon two things that I hope will be of relevance if you are building a tech start-up with a procurement angle (or plan to do so):

1. My ProcureTech-Landscape back from 2019 has quite literally exploded from a couple dozen to now more than 100 European ProcureTech ventures.

2. Talking to numerous ProcureTech entrepreneurs & their customers, I further developed my take on what are the hot subtopics within ProcureTech. Happy + curious to hear your thoughts on this!

Without further ado, let’s get into it!

1. My ProcureTech-Landscape (v02!) 🥁

You might notice there is a structural change to the map with “Supply Chain-, Sustainability- & Vendor Management” joining the stage as a new cluster. When I introduced this (heavily simplified) market landscape in my last post, each cluster came with a short explanation. To stay consistent here, let me tell you what this new cluster tries to encapsulate.

2020-Supply-Chains exhibit an increasingly intransparent degree of interdependencies — globalized sourcing models and hyper-fragmented value chains are just 2 driving forces of this. The technologies within the “Supply chain- , Sustainability- & Vendor Management” cluster help to optimize these complex systems. To give some illustrative examples: CarbMee, Responsibly or Integrity Next are offering supply chain sustainability solutions while Cleanhub.io offers a certification technology for traceable recycled plastics. Prewave or Risk Methods are focused on various supply chain disruption risks while ProcureAI or Brooklyn Vendor Assurance offer a product suite focused on managing vendors & contracts.

Other than that, a whole bunch of new start-ups has been added throughout the last months — if you feel like there is something missing: Reach out and let me know! This landscape will certainly grow even larger over time.

The ProcureTech-Landscape v02

2. White-hot procurement tech from the VC watch-tower

Again: There is lots & lots of opportunity to capture in Procurement-Land. However, there are a couple of areas that I think are especially exciting to look at as a VC. While I see less potential in what I call “ProcureTech 1.0” , e.g. workflow tools & “systems of record” that have been created throughout the last decade or so (think suites like Ariba & Co. — Kearny takes a similar stance here) — I expect a lot of magic to be unlocked where data is bubbling but not leveraged in an intelligent way. The good news: Within procurement, there is data bubbling left and right. If I could just pick 4 themes around which I believe ProcureTech start-ups are about to disrupt the status-quo, then it’d be the following ones:

I) Intelligent Automation

If you visit a procurement event these days, RPA often is the talk of town: A lightweight implementation with minor changes to the IT environment that drives home a quick ROI. It’s especially sought after in the procurement world, where some say employees spend 60% of their time with manual tasks that a “click-bot” can take over and automate. That’s quite impressive, right!?🤯 Well… Yes, and No. RPA comes with many limitations. Most importantly: It’s not an “intelligent system” that’s making informed decision, but rather a “dumb robot” that’s pushing the mouse button faster than a human could do (agreed, this is somewhat simplified). Thus: To many problems, it’s more of a painkiller than a sustainable solution.

Why is it that intelligent automation is going far beyond RPA? Taking an outcome oriented perspective here: First, it can flexibly execute not only a single task, but an entire business logic. Second, it can execute (data driven) decisions not only faster, but also better than a human ever could. Some exciting examples of start-ups that deliver intelligent automation solutions to the procurement world are Pactum as well as Keelvar or Archlet. Their software enables enterprise customers to (semi-)autonomously launch, manage and close (multi-stage) sourcing events or negotiations! 😲 Keelvar’s Alan Holland has written a great piece highlighting the magnitude of impact that intelligent automation can have on procurement as a function.

II) Predictive Analytics

Similar to intelligent automation, (predictive) analytics solutions draw insight from (internal and external) data in order to inform human and/or machine decisions around procurement related questions such as: What exactly should I purchase and who can deliver it? At what time and how much should I buy? How much should I pay? On which saving initiatives should I focus to decrease my spend? Etc. To give just some examples again below:

• E.g. what to purchase from whom? Horizontal solutions like Lhotse, Mercanis, Globality or Fairmarkit support procurement teams to align with their internal business partners on the purchase request for a product or service — and to subsequently identify the right supplier(s) to cater to this request.
• E.g. how much should I pay? Solutions such as Makersite, Costforce or WTP Buynamics help their procurement clients to assess what price they should pay based on, for example, bottom up cost approximations and/or benchmark values.
• E.g. how much and/or when should I buy? A procurement professional tasked with — let’s say: buying chemicals — faces the challenge to decide at what time to best buy what quantity. She must trade off based on factors such as stock levels, product shelf life, production schedules, spot market prices, etc. Companies like GenLots or Datapred enable their users to do just that.
• E.g. how can I improve my spend? Spend intelligence solutions from companies such as Scalue or Orpheus help procurement departments to turn spend data into actionable insight. They help to identify and measure the impact of cost saving initiatives like order bundling or supplier consolidation.

III) Risk, sustainability & collaboration along the supply chain

The importance of solid alignment with upstream supply chain partners has been cemented by Covid-19 at last. I tend to see three areas where I believe ProcureTech will make a meaningful difference in the months and years ahead.

• Supply Chain Sustainability Management: I believe that in little time procurement will have a second North Star KPI despite savings in spend — it will be sustainability (e.g. carbon) related savings. There are more and more ProcureTech ventures emerging that are enabling just that — companies like IntegrityNext, CarbMee or Responsibly are among the few that are leading the pack.
• Supplier Qualification & Risk Management: There are several companies that help procurement teams to proactively qualify suppliers (e.g. Scoutbee) or to reactively monitor and report supply chain risk (e.g. Prewave, RiskLedger or Risk Methods).
• Supply Chain Relationship Management & Collaboration: SRM solutions like Vizibl or Valuedesk enable the realization of joint (e.g. cost saving) projects with suppliers, while solutions like ProcureAI, BVA or Sirion Labs help to stay on top of vendor agreements to unlock contract value & monitor vendor performance.

IV) Category specific, vertical marketplaces

Finally, within categories that exhibit high complexity & multi-step, multi-stakeholder buying processes, laser-focused and verticalized B2B marketplaces will become part of the ProcureTech stack in many industries. A couple of examples for illustration: CarOnSale and Truckoo (used Cars/Trucks), Forto, Sennder, Zencargo or CargoOne (logistics), Spanflug or Laserhub (metal parts) or Packmatic and Paxly (packaging material). Despite facilitating transactions, these platforms are delivering value based on workflow tools and data intelligence. I guess there is not much more to say on this than what the folks at Bessemer have written in this fantastic post one year ago already.

Needless to say, there are many more exciting areas to look at within the ProcureTech space — the above selection reflects my personal and constantly evolving view only. I’m much looking forward to hear your thoughts around this. And in case you are (getting) involved with building something new ProcureTechy: Holla at me!! 👋

📞→ felix@booom.vc ←📞

Thanks for proof reading to my colleagues Charly & Christian! And thanks to You for sharing your thoughts, sharing this post or just providing (a couple) Claps on this one! :-)