Vendr, a Boston-based startup that aims to help companies buy, manage and renew software more quickly and at a lower cost, has reached unicorn status. On Thursday, Vendr announced that it was valued at $1 billion after raising $150 million in a Series B venture round amid a tough market for new venture funding.
Craft Ventures and SoftBank Vision Fund 2 co-led the funding round, which was previously reported by Bloomberg. The firm, which landed on Forbes’ Next Billion-Dollar Startups List in 2021, claimed a $600 million valuation before the raise.
“We created this category,” says Ryan Neu, Vendr founder and CEO. Neu, 37, founded the company in 2019 because 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 businesses to shift towards using more subscription-based software. As SaaS software usage has increased, companies spend more time and money buying it, while SaaS firms hire ever more salespeople to break through the noise. Sales cycles for software companies can take 60 to 90 days with only 20% to 30% close rates, Neu says, emphasizing that there’s also often overlap in what the different software products do.
Customers approach Vendr with a suite of existing software and some business goals. Then, Vendr helps those customers identify, buy and manage their software for a flat rate that usually falls between 1% to 5% of the customer’s software spend.
In the past three years, Vendr has raised $216 million in equity from investors, processed more than $1.3 billion in software transactions and built 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 put estimated revenue at $12 million.
Thus, the company’s valuation represents a lofty 83 times last year’s estimated sales. Neu explains that Vendr is valued on annual recurring revenue (a metric that subscription-based companies prefer to use) and on its growth prospects.
The funding came quickly and in “the eye of the hurricane,” as Neu says, alluding to inflation, the war on talent and a possible looming recession. He says that 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 in an economic downturn.
“We guarantee to save them more than we cost, achieving a 9x ROI for them on average,” Neu says. The savings come from Vendr’s ability to negotiate fairer software prices given the firm’s broader knowledge of industry prices that are not typically public.
There’s quite a bit of potential to keep expanding on top of Vendr’s early success, something SoftBank partner Priya Saiprasad says she’s believed since she first met with Neu last August. SoftBank, one of the most aggressive tech investors, is facing plunging earnings and slowed investments following a crash in tech holdings.
“Spending on software solutions has drastically increased over the last decade and the number of software companies out there continues to grow,” says Saiprasad, who joined Vendr’s board. The system is “broken for both buyers of software as well as sellers of software,” she adds.
Gartner estimated that worldwide spending on enterprise software will exceed $670 billion this year. Vendr claims to be the world’s first software-buying firm, although competitors like Zylo SaaS Management, Hudled and Spendflo have sprung up since Vendr’s 2019 launch.
Amid this landscape, Vendr plans to use the new funding to continue investing in its current business model across the board, but especially in product and engineering teams, Neu says. Vendr currently lists 31 open roles on its website, with 10 of those in product and engineering, and plans to add more in the near future.
The firm is also looking to expand its presence in Western Europe and build out its capabilities with 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.
“A lot of our advantage comes naturally with our scale because we get stronger with every customer,” Neu says.