Vendr, a Boston-based startup that aims to help businesses buy, manage, and renew software faster and cheaper, has achieved unicorn status. On Thursday, Vendr announced it was valued at $1 billion after raising $150 million in a Series B funding round amid a tough market for new venture capital funding.
Craft Ventures and SoftBank Vision Fund 2 co-led the funding round, which was previously reported by Bloomberg. The company, which landed on Forbes’ Next Billion-Dollar Startups List 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 frustration with buying and selling SaaS in previous jobs – and wanted to address inefficiencies he had seen in the system.
The company emerged around the time the Covid-19 pandemic began to spread, prompting companies to turn to using more subscription-based software. As the use of SaaS software increases, companies spend more time and money buying it, while SaaS companies hire more salespeople to break the noise. Software vendor sales cycles can take 60 to 90 days with close rates of just 20 to 30 percent, Neu says, noting that there’s also often overlap in what different software products do.
Customers approach Vendr with an existing software suite and certain business objectives. Then, Vendr helps those customers identify, buy, and manage their software for a flat fee that’s 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 more than 500. Forbes estimated Vendr’s 2020 revenue at $4 million. Neu confirms that the company tripled its revenue in 2021, which would bring estimated revenue to $12 million.
Thus, the valuation of the company represents 83 times the estimated sales of last year. Neu explains that Vendr is valued on annual recurring revenue (a metric that subscription businesses prefer to use) and 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 looming recession. He says Vendr was able to raise funds when many other companies weren’t in part because Vendr’s services help customers cut costs, which is especially important during an economic downturn.
“We guarantee to save them more than we cost them, achieving an average 9x return on investment,” 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 generally not public.
There’s a lot of potential to continue to grow on top of Vendr’s early success, something SoftBank partner Priya Saiprasad has said she believes since she first met Neu last August. SoftBank, one of the most aggressive tech investors, is facing falling profits and slowing investment following a slump in tech holdings.
“Spending on software solutions has increased dramatically over the past decade, and the number of software vendors continues to grow,” said Saiprasad, who has joined Vendr’s board of directors. The system is “broken for both software buyers and software sellers,” she adds.
Gartner has estimated that global enterprise software spending will exceed $670 billion this year. Vendr claims to be the world’s leading software shopping company, although competitors like Zylo SaaS Management, Hudled, and Spendflo have sprung up since Vendr launched in 2019.
In this landscape, Vendr plans to use the new funding to continue investing in its current business model at all levels, but especially in the product and engineering teams, Neu said. 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 capacity through acquisitions. Vendr acquired SaaS management startup Blissfully in February 2022.
This funding round also included as investors Sozo Ventures, F-Prime Capital, Sound Venture, Tiger Global and Y Combinator.
“Much of our advantage comes naturally from our scale, as we grow stronger with each customer,” says Neu.