Contract management is the steps taken to ensure that the terms agreed upon between a company and its suppliers are met. It’s an important part of doing business, and the consequences of getting it wrong can be severe. McKinsey estimates that poor contract management can cost organizations up to 9% of their total revenue, amounting to $1.4 trillion for the Fortune 500 alone and $6.4 trillion for all enterprise business-to-business companies.
Challenges around contract management have fueled the rise of startups like Icertis. LinkSquares landed $100 million in April on its AI-powered contract analytics platform, while ContractPodAi, a close competitor, raised tens of millions to digitize contract reviews.
A relative newcomer to the space is Terzo, which was co-founded in 2020 by Brandon Card, Al Giocondi and Pradeep Tangvel. A suite of contract management software, Terzo uses AI to extract information on contracts related to a company’s costs and revenues. Their supplier and customer relationship.
As if investor interest in the contract management startup hasn’t waned, Terzo today closed a $16 million Series A round led by Align Ventures with TYH Ventures, Engage Ventures, Human Capital and other unnamed institutional investors. The proceeds bring the company’s total revenue to more than $18 million, and the card used in Terzo’s CEO said it will leverage Terzo’s sales and marketing initiatives as well as the platform’s AI capabilities.
“As our technology continues to evolve, we aim to provide greater insights into finance and budgeting,” Card said. “Contract systems are built for legal use cases and legal teams to focus on drafts and clauses. There’s no analytics or financial insights for leaders to make smart decisions. Terzo was created to solve that problem.”
Card’s experience at Microsoft, where he was an enterprise portfolio manager for Microsoft Cloud, inspired him to co-found Terzo. Giocondi comes from account manager roles at Oracle and IBM. As for Tangavel, he spent seven years on the engineering side of Freshworks before joining Card and Jokondi.
The card is trained using real-world business contracts to extract data such as inventory and costs under the supervision of a quality assurance team to ensure the accuracy of the initialization. Terzo integrates with enterprise resource platforms such as SAP and Oracle to track contractual obligations and service expiration dates, including metrics related to environmental, social and governance policies.
“Terzo is useful for the IT audience because it allows them to visualize data quickly,” said Card. “We’ve created a platform that combines data management, automation and AI, but keeps people focused.”
VCs see promise in contract management legal technology like Terzo’s, perhaps in part because of its high customer adoption rate. In the year According to a 2020 Bloomberg Legal Survey, more than half (56%) of in-house lawyers say they are using contract management programs. (That said, the legal industry has been slow to adopt new technology.) If current trends continue, Markets & Markets predicts the contract management lifecycle market will grow from $1.5 billion in 2019 to $2.9 billion in 2024.
Card says it has “more than a dozen” customers, including a Fortune 50 retailer and the world’s largest financial transaction processor. Next year’s plan is to record more than 50% of Terzo’s total revenue and break even by 2024, he said.
“We are positioned to be a profitable business by 2025,” Card added. “Both the pandemic and the current technology slowdown have taught us how to run a healthy business focused on efficiency growth. The current recession has made our customers prioritize spending and budgeting, so we see this as a positive tailwind heading into 2023.”