Vendr, a Boston-based startup that aims to help companies buy, manage and renew software faster and at 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 financing.
Craft Ventures and SoftBank Vision Fund 2 co-led the funding round, which was previously reported by Bloomberg. The company, which landed in Forbes’ The next list of billion dollar startups in 2021, claimed a valuation of $600 million before the increase.
“We created this category,” says Ryan Neu, founder and CEO of Vendr. Neu, 37, founded the company in 2019 out of his frustration with buying and selling SaaS in previous jobs — and wanted to address the inefficiencies he saw in the system.
The company emerged around the time the Covid-19 pandemic began to spread, causing companies to switch to more subscription-based software. As the use of SaaS software increases, companies spend more time and money buying it, while SaaS companies increasingly hire vendors to overcome the noise. Sales cycles for software companies can take anywhere from 60 to 90 days with close rates as low as 20% to 30%, says Neu, noting that there is also overlap in what different software products do.
Customers approach Vendr with an existing software suite and some business objectives. Vendr then helps those customers identify, purchase and manage their software for a flat fee that is typically between 1% and 5% of the customer’s software spend.
Over the past three years, Vendr has raised $216 million in equity from investors, processed more than $1.3 billion in software transactions, and grown its customer base — which includes HubSpot, Canva and DraftKings — to over 500. Forbes estimated Vendr’s 2020 revenue at $4 million. Neu confirms that the company tripled its revenue in 2021, which would put an estimated revenue of $12 million.
Thus, the company’s valuation represents 83 times the estimated sales of last year. Neu explains that Vendr is measured by annual recurring revenue (a metric that subscription-based companies prefer to use) and its growth prospects.
Funding came quickly and “in the eye of the hurricane,” as Neu puts it, alluding to inflation, the war on talent and a possible impending recession. He says Vendr has been able to raise funds when many other companies haven’t, in part because Vendr’s services help customers cut costs, which is especially important in an economic downturn.
“We guarantee greater savings than we cost, achieving an ROI of 9x on average,” 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 not public.
There’s plenty of potential to continue expanding on top of Vendr’s early success, something that SoftBank partner Priya Saiprasad has said she believes in since meeting with Neu last August. SoftBank, one of the most aggressive tech investors, is facing falling earnings and sluggish investment after a drop in tech holdings.
“Spending on software solutions has increased dramatically over the past decade and the number of software companies continues to grow,” says Saiprasad, who has joined Vendr’s board. The system is “broken for both software buyers and software sellers,” she adds.
Gartner has estimated that worldwide spending on enterprise software will exceed $670 billion this year. Vendr claims to be the world’s first software buying company, although competitors such as Zylo SaaS Management, Hudled and Spendflo have emerged since Vendr’s launch in 2019.
Amid this backdrop, Vendr plans to use the new funding to continue investing in its current business model in general, but especially in product and engineering teams, says Neu. 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 build 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 advantage comes naturally with our scale, because we get stronger with each client,” says Neu.