Procurement solutions have evolved from horizontal, legacy procure-to-pay applications to purpose-built and connected point solutions

What’s driving activity in this trend?

1. Historically, large players like Ariba (acq SAP), Coupa (IPO) have focused on procure-to-pay and spend management, acting as the system of record for all things corporate cost-related. These platforms digitized tracking of purchase orders, which were traditionally managed and negotiated via phone, email, etc and paid through traditional methods (wires). These spend management platforms became vital for large enterprises and connected to their existing ERP systems to track spend, stay in compliance, and keep up to date with contracts, while the majority of procurement was still done by large procurement teams within an enterprise.
2. The proliferation of SaaS tooling has driven the emergence of purpose-built point solutions within procurement. If you believe every company has become a software company, then you can also see how every software company must employ a procurement strategy, both in a centralized function and throughout the enterprise. Software proliferation has moved procurement outside of just procurement teams into ICs, managers, and non-procurement and non-IT owners.
3. There is a new generation of tools focused on sourcing (materials, software, etc), supplier communication, and supplier management, which allows non-enterprise grade businesses to digitize their procurement, access the benefits of group buying and purchasing, and take advantage of more instant payment methods or fintech products. Many of these payments and financial outcomes need to be tied directly to procurement.
4. COVID-19 was a wake-up call for businesses to better understand their procurement strategies, supplier bases, and overall supply chain risk. In the current macro environment, more teams are focused on both operational and capital efficiency, bringing spend management into the forefront of planning. This is not just about procurement as a cost savings initiative but as a marker of company efficiency.
5. Many vertical-specific solutions (in areas like construction, logistics, manufacturing, tech/software) have emerged due to the specificity of products being purchased and supplier networks that need to be tapped into, or due to particular nuances of management in that vertical (e.g. everything in construction is project-based).

The Base10 View

• Supply chain challenges over the last several years have brought physical goods procurement into the forefront. Enterprises have had to build redundancy into their supply chains to avoid disruption of core business activities. Having access to analytics which support a greater understanding of one’s full supply chain, and the ability to action upon that data is now vital. For businesses that rely on a large number of third-party vendors and physical goods suppliers, connected systems with built-in ability to action on disruptions is a must-have.

• Starting from the top with regulators and impact on public companies, there is a very clear thread between the need to understand more about an organization’s own supplier data and broad-based ESG initiatives. It is no longer enough to collect this data, but will become increasingly important to both consumers and businesses that this data is made transparent, public, and actionable. What we refer to as “Supplier Data” can be bucketed into specific ESG data platforms, of which there are many, and broader solutions aimed at fully understanding the nature and risk of your full supplier base. We believe more specific solutions aimed at ESG and targeting full risk, compliance, governance, and reporting will emerge over the next several years.

• The movement of procurement activities outside of the core specialized procurement team has incited a need for more pure workflow, permissions, compliance product overall and will only continue as procurement becomes a core operation for both software and physical goods producers. From buyers we've spoken to, there's a desire to have horizontal procurement solutions that look more like workflow automation than legacy materials sourcing, which mostly sits within the procurement organization.

• As B2B payments have become more digital, albeit still evolving, they have also become more engrained in operational and procurement workflows. This has become especially apparent within particular verticals (manufacturing, construction, building materials, manufacturing, logistics). Oftentimes, these businesses tend to be working capital constrained, yet slower to adopt digital solutions due to distributed and disparate workforces and payment methods. A number of early-stage businesses have emerged that are working to solve procurement of historically challenging physical goods, along with workflow automation for fairly specific verticalized constituents. The introduction of direct payment solutions into these workflows is a natural extension for these platforms, especially given the working capital challenges of many of the buyers. We are sure we are missing many solutions aimed at solving the needs of particular large and evolving verticals, and are excited about businesses that solve complex needs for sneakily large parts of the real economy.

• We’ve bucketed the broad patterns of innovation we’re seeing into 6 segments:

  1. Supplier Data - focused on ingesting data about a company’s supply chain and supplier base, and reporting on supplier risk, compliance, characteristics. Includes emerging categories of vendor compliance, supply chain risk and resiliency, and vendor ESG reporting.
  2. Procurement Analytics & Ops - insights and analytics around performance of one’s procurement operations; includes companies focused on “predictive procurement” and contract management businesses which help to control risk, while managing financial performance of vendors and contracts
  3. SaaS Procurement - initially focused on helping technology and software companies to source and negotiate discounted SaaS contracts, the next generation of SaaS procurement businesses have expanded across the enterprise to include features to help manage risk and compliance, as well as move into spend management
  4. Sourcing + Supplier Management - a broad group of businesses focused on helping businesses source and manage their suppliers, includes a grouping of industrial-focused software companies focused on this vertical
  5. Vertical Procurement - sometimes operating as managed marketplaces, but often a set of sourcing tools built for specific industry verticals which require a more tailored supplier group, buying cycle, and financing options. Several early-stage businesses have risen that are focused on verticals like construction, industrial assets, building materials, and agriculture
  6. Spend Management - modern expense and spend management solutions built for both mid-market and enterprise businesses, including tail spend management (non-strategic suppliers) and AR/AP management and automation

Top Companies

• Zip (SaaS Procurement):
  • Zip is an enterprise-focused SaaS solution that allows any employee to initiate a purchase or vendor request such that each request is correctly routed for approval across procurement, finance, information technology, data security, legal, and other teams within the enterprise
  • While we bucket this into the broader SaaS Procurement category, there are elements of the solution that fall under risk/compliance, spend management, and analytics/ops.
  • Based on what we know about Zip, its solution fits into existing enterprise workflows and sit on top of ERP systems to allow for maximum collaboration and minimal implementation. This also means wider usage within an organization and enables the company to monetize outside of transactional spend. The solution incentivizes employee participation and adoption which allows finance and procurement teams to have better purview earlier on in the procurement process. Zip fits well into Base10’s investment theses surrounding automation for the real economy.
  • Financing: Has raised $40M+, most recently in a Series B in 2022
• Keelvar (Sourcing & Supplier Management)
  • Keelvar’s SaaS products are focused on sourcing optimization to help its customers optimize its spend and supplier base, as well as sourcing automation to reduce errors and free up time for procurement teams. The spend category that Keelvar focuses most on is logistics spend, including transportation and direct materials. Keelvar directly integrates with SAP Ariba, and boasts large enterprise customers including Novartis, Samsung, and Coca-Cola.
  • Financing: Has raised ~$40M, most recently in a Series B in 2022