Vendr, a Boston-based startup that aims to help companies buy, manage, and innovate software faster and at a lower cost, has achieved unicorn status. On Thursday, Vendr announced it was valued at $1 billion after raising $150 million in a Series B venture round amid a tough market for new venture capital financing.
Craft Ventures and SoftBank Vision Fund 2 jointly led the funding round, previously reported by Bloomberg. The company that landed on Forbes’ Next Billion-Dollar Startups List in 2021, claimed a valuation of $600 million before the raise.
“We created this category,” said Ryan Neu, founder and CEO of Vendr. Neu, 37, founded the company in 2019 due to his frustration with buying and selling SaaS in previous jobs — and wanted to address the inefficiencies he saw in the system.
The company came into being around the time the Covid-19 pandemic started to spread, leading companies to move towards using more subscription-based software. As the use of SaaS software has increased, companies are spending more time and money buying it, while SaaS companies are hiring more and more vendors to cut through the noise. Sales cycles for software companies can last 60 to 90 days with only 20% to 30% closing rates, Neu says, stressing that there is also often overlap in what the different software products do.
Clients approach Vendr with a suite of existing software and some business goals. Vendr then helps those customers identify, purchase and manage their software for a flat rate that is usually between 1% and 5% of the customer’s software spend.
Over the past three years, Vendr has raised $216 million in equity capital from investors, processed more than $1.3 billion in software transactions, and expanded its customer base — including HubSpot, Canva and DraftKings — to more than 500. Forbes Vendr’s estimated 2020 revenue at $4 million. Neu confirms that the company has tripled its revenue in 2021, bringing estimated revenues to $12 million.
Thus, the company’s valuation represents a lofty 83 times last year’s estimated revenue. Neu explains that Vendr is valued based on annual recurring revenue (a metric subscription-based companies prefer to use) and its growth prospects.
Funding came quickly and in “the eye of the hurricane,” as Neu puts it, referring to inflation, the war on talent and a potentially looming recession. He says Vendr was able to raise funds when many other companies couldn’t, because Vendr’s services help customers cut costs, which is especially important in an economic downturn.
“We guarantee to save them more than we cost, and achieve an average of 9x ROI for them,” says Neu. The savings come from Vendr’s ability to negotiate fairer software prices, given the company’s broader knowledge of industry prices that are typically undisclosed.
There’s quite a bit of potential to continue to expand on top of Vendr’s early success, something SoftBank partner Priya Saiprasad says she believes since she first met Neu in August. SoftBank, one of the most aggressive tech investors, faces declining profits and slowed investment after a crash in tech holdings.
“Spending on software solutions has dramatically increased over the past decade and the number of software companies continues to grow,” said Saiprasad, who joined Vendr’s board of directors. The system is “broken for both software buyers and software sellers,” she adds.
Gartner estimates global business software spending will exceed $670 billion this year. Vendr claims to be the world’s first software purchasing company, although competitors such as Zylo SaaS Management, Hudled, and Spendflo have emerged since Vendr’s launch in 2019.
Amid this landscape, Vendr plans to use the new funding to continue investing across the board in its current business model, but especially in product and engineering teams, Neu says. Vendr currently lists 31 open positions on its website, 10 of which are in product and engineering, and plans to add more in the near future.
The company is also looking to expand its presence in Western Europe and expand its capabilities through acquisitions. Vendr acquired SaaS management startup Blissfully in February 2022.
This funding round also included Sozo Ventures, F-Prime Capital, Sound Venture, Tiger Global and Y Combinator as investors.
“A lot of our benefit comes of course with our scale as we get stronger with every customer,” says Neu.