This week, Boston-based SaaS management platform, Vendr announced the completion of their $60M Series A round led by Tiger Global Management, with participation from existing investors Craft Ventures, Y Combinator, Sound Ventures, Garage Capital, and F-Prime Capital. The news comes just under a year since the company raised a $4M Seed round in the midst of the pandemic; interestingly enough, Vendr has been profitable prior to both of these capital rounds. When asked about the motivation for raising more capital, the company referenced its accelerated headcount growth in the last year and felt more comfortable with a strengthened balance sheet.
Why this transaction?
The York IE team chose this as our transaction of the week to discuss Vendr’s approach to SaaS management and subscription optimization. Through their platform, Vendr enables customers to reduce their SaaS-related expenses; by reducing inefficiencies in the sales cycle, the company is able to optimize B2B sales for both the buyer and the seller. As companies are continuing to feel the effect of COVID-19, many have looked at ways to cut expenses, often turning to their software budget as a solution. According to a recent trends report, SaaS is now a “top five-line item for many companies”; given this, most teams cannot afford to let go of their valuable SaaS tools. By optimizing the B2B exchange for software, Vendr is able to reduce the sales cycle while also reducing the cost of subscriptions. Given the current environment, Vendr’s business model was primed for success, seeing positive cashflow and nearly 5x growth in 2019/20. Previously, we’ve mentioned the growth in digitization and automation trends in many areas of business; we see this approach to the B2B exchange for software as a new trend that will continue beyond COVID-19. Many companies are realizing the buying process and subscription management end of software can become automated, while also providing cost-saving benefits.
SaaS Continues to Dominate
As mentioned above, SaaS is unsurprisingly a “top five-line item for many companies”. According to a 2020 Flexera report, “81 percent of organizations across all industries expect to increase SaaS spend in 2020, with 28 percent expecting significant increases”; not only does this bode well for SaaS providers, but as we stated before, this also creates opportunity for companies to engage in the B2B SaaS exchange. We expect continued growth in this industry as more companies look to digitize while also looking for opportunities to reduce costs related to the software budget.