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AOP BlogBusiness of ProcurementGuest Post

Are Investments in Procurement Startups a Sign of Industry Potential?

By November 14, 2017January 4th, 2019No Comments

Editor’s note: Pierre Laprée is the Founder of Per Angusta, a SaaS sourcing pipeline and benefits tracking solution based in Lyon, France. On October 19th, Per Angusta announced that they had secured 1 Million Euros in funding. We know Pierre well from The Procurement Revolution and The Art of Procurement podcast, and so we took the opportunity to ask him what he thinks is driving all of the recent startup activity in procurement. – K.B.

Recently there has been a steady stream of announcements about investments in procurement-related startups. Per Angusta is just the latest.

I think this proceeds from two things:

1. People are fed up with the ‘main market’ solutions currently available and they are coming up with their own as a result. All other things being held equal, it is getting easier and easier to design software and host it with very high quality and security standards. This creates an opportunity for people who have good ideas to bring them to market. Per Angusta got our start in this way, and we’re clearly not alone.

2. Investors can see the evidence that people are not satisfied with monolithic, expensive, inflexible, resource-gulping solutions. More and more companies refuse to settle for a solution just because it is well-known, and so they search for better options. This mirrors the choices consumers make in their day-to-day lives, and furthers a trend already underway: the consumerization of enterprise technology.

The first big wave in B2B software came with the move to SaaS and the availability of the cloud as a hosting platform. Investors have put in some money with good returns. In parallel to this, we see daily evidence of how B2C technology startups, like Uber and Airbnb, are disrupting traditional markets (with the help of VC money of course).

My take is that investors believe (or maybe I should say hope?) they could see similar levels of success and returns with B2B startups. To my point about ROI, there’s another relevant factor here: B2B has a built-in advantage in that corporations pay usually more for subscriptions than individuals. It takes less subscriptions to cover development costs and generate a profit even though sales cycles tend to be longer (not less than 6 months, sometimes 18 to 24 months with a likely average around 12 months).

In a nutshell: today’s lower barriers to entry, increased appetite for better B2B solutions, and possibility for high returns because corporations have deeper pockets than individuals, create a perfect incubator for startups and the right conditions to attract investor attention.

Procurement is a relatively young function. We’ve seen similar progressive waves of investment in CRM and HR systems already because sales and HR are more mature. I believe we can say that procurement has reached the stage where we are primed for a wildfire of technology and service innovation and investment. The real winner here will be the procurement organizations that encourage startup innovation and reap the rewards of experimenting with technology beyond the staid ‘main market’.

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