Companies divide their procurement spending into two main buckets. The first are large acquisitions over $500,000 and those starting at $1 million, depending on the size of the organization. Anything below this figure falls under the category known as “tail costs”. Boston-based startup Fairmarket has been working on a tail-spending procurement solution for several years, and has built a smart platform with massive amounts of artificial intelligence to help companies find the best deals while tailing.
Today, the company announced a $35.6 million Series A round, an investment that has been hard to come by this year in a strong VC environment.
Kevin Frechette, founder and CEO of Fairmark, said legacy players like Oracle and SAP have tended to dominate the industry until now, focusing on large acquisitions that focused on what he called “clumsy and manual” systems. When he and his partners started the company in 2017, they saw an opportunity to innovate on the tail.
Frechette told TechCrunch, “We’ve really doubled down on being fully owned and a leader in the tail spend management space. But the company recognized that the big companies weren’t just going to copy and replace those legacy solutions, and created a way to work with them.”
“We integrate with their existing procurement solutions. We then use AI to learn what they’re looking to buy and match with suppliers in our marketplace, perform competitive sourcing, and then push the results into their procurement solution to complete the purchase.
AI comes into the automated vendor selection process. Companies configure Fairmarkt on factors such as price, sustainability, and supplier diversity and find the system the best match for them, a process of independent sourcing.
“Of course we have. [committed to] Something called an autonomous source. The idea is that you can fully automate the manufacturing process and work smarter with data. So not only will it attract a purchase request, but it will also be automatically recommended. [vendors]automatically sourced and automatically provided [the contract],” he said.
The company has 100 clients, including big players like British Petroleum, BT Group (formerly British Telecom), Snowflake and ServiceNow (which is a strategic investor in today’s round).
At a glance, the amount of spend moving through the platform has grown 4x in the last 12 months. The startup makes money through SaaS license fees, which customers spend more on the platform. While he didn’t break out other numbers like revenue, the platform’s growth combined with investor confidence suggests the company is moving in the right direction.
In the year At the end of 2020, the company had 70 employees when we talked about its Series B Frichette. Today, the startup has 135 employees, with plans to double again next year. Frechette is committed to building a diverse workforce while building a product that allows customers to buy from a variety of suppliers. Since we last spoke, the company has brought in a head of ownership, integration and culture.
“So the Head of Ownership, Inclusion and Culture is responsible for reporting on how we’re doing, as well as creating programs and engagement, both proactively with the team, but also through third-party platforms. [The goal is] To make sure that we are not only thinking about him when we are [hiring]But as we continue to expand once people are in the company, he said, we are inclusive. They admit it’s challenging, but they’re working hard to build an inclusive culture.
Today’s $35.6 million investment was led by Omers, with participation from existing investors GGV Capital and Insight Partners and new investor Highland X. The company has received strategic investment from existing customer service.
