Why We Invested In Procoto
TampaBay.Ventures First Investment From TBV Fund I
TampaBay.Ventures is thrilled to announce that our first investment originating from TBV Fund I is Procoto, a procurement software platform for SMBs.
Procoto serves as a perfect representation of the TampaBay.Ventures thesis; to invest in the best founders with a deep understanding of an industry challenge through domain expertise. Having developed the idea for Procoto while searching for procurement tools in previous roles, the founding team of Michael and Ryan have a keen sense of problem and customer understanding that is almost impossible to replicate.
As a graduate of the W21 class of Ycombinator, Procoto represents not only a marquee investment for TampaBay.Ventures, but for the Tampa Bay Region as well. As the first Florida-based venture capital firm to invest in a Florida-based Y combinator company, we believe that our investment in Procoto shows founders such as Michael and Ryan can build industry-defining organizations within our own backyard.
The founding team of Michael and Ryan each possess a unique set of career experience, technical backgrounds, and complementary natural skill sets needed to build a company. Having served in leading roles at both fast scaling organizations and leading enterprises, they have a keen understanding of how to lead a technology company at various stages of its life cycle.
In our investigation process, we found that both Ryan and Michael had a clear understanding for the future of their product and could clearly define why they were building Procoto. Each of the founders demonstrated a laser focus on developing a product that solved their customers’ most pressing procurement challenges through an analytical approach. This customer-centric focus, initiated from being a potential Procoto customer in previous roles, is what ultimately led the team at TampaBay.Ventures to backing Ryan and Michael.
Creating software products that are able to serve customers of any size is incredibly difficult B2B software products that can serve customers ranging from the mass market to large enterprises is a relatively new phenomenon that saw a primary emergence alongside cloud-based SaaS proliferation. Recently, a strong trend has developed for either enterprise-focused companies to serve the long-tail of smaller businesses or SMB driven companies scaling up. By creating a company from day one with the ability to serve various team and customer sizes, we believe Procoto has a strong initial competitive advantage in the market.
Globally, over 400 million small and medium-sized enterprises make up 95 percent of registered global enterprises. By applying a more defined scope, we believe that a fully saturated global market could support anywhere between 10–15 million individual customers for Procoto’s initial product. With an immediate focus on 3 million initial customers, Procoto could address an initial market size in excess of $20 billion. As the product becomes more robust and adds features over time, procurement may become merely a customer acquisition vector with numerous additional tools available to Procoto users.
Procoto as a product will provide a level of insight into procurement and spend management that most businesses wouldn’t be able to access without substantial infrastructure investment. Key features such as automated databasing of vendor information and real-time overviews of all procurement activity allow business leaders to understand their sourcing information in real-time. Additionally, Procoto drastically simplifies the process of developing competitive supplier relationships through easy-to-use templates. By creating a frictionless experience for procurement and spend analysis, TampaBay.Ventures believes that future Procoto customers will quickly develop a deeper relationship with the platform over time and incorporate Porcoto as an essential tool in their organizations.
Business Model Innovation
Solving specific challenges for a large number of potential users is always an interesting approach to building a large enterprise. Within the procurement and spend analysis space, the vast majority of large software providers focus exclusively on the enterprise market. As a result, it is almost impossible to access the powerful features these products offer as a small or middle-market business. This often leads to customers creating their own solutions to procurement management through a mixture of ill-fitting tools and human-driven processes. The prevalence of gross inefficiencies provides Procoto with the opportunity to increase efficiency in their customer’s organizations by orders of magnitude.
The combination of a long-tail customer base, innovative business model, under innovated product category, and exceptional founding team is ultimately what motivated TampaBay.Ventures to lead an investment round into Procoto.