Companies tend to divide their procurement spending into two main buckets. The first is large purchases over $500,000 with some starting $1 million, depending on the size of the organization. Anything below that figure falls under a category known as “tail spend.” Boston-based startup Fairmarkit has been working on a tail spend procurement solution for several years now, and has built a modern platform with a large dose of artificial intelligence to help companies find the best deals when it comes to their tail spend.
Today, the company announced a $35.6 million Series C, the kind of investment that’s been harder to come by this year in a tightening VC environment.
Fairmarkit co-founder and CEO Kevin Frechette says that legacy players like Oracle and SAP have tended to dominate the industry up until now, concentrating on the largest purchases with what he calls “clunky and manual” systems. He and his co-founders saw an opportunity to innovate around the tail spend space when they launched the company in 2017.
“We have really doubled down on completely owning and becoming the leader in the tail spend management space,” Frechette told TechCrunch. Yet the company recognized that large companies weren’t simply going to rip and replace those legacy solutions, so they came up with a way to work with them.
“We integrate with their existing procurement solutions. We then use AI to determine what they're looking to buy and match that to suppliers in our marketplace, do competitive sourcing, and then push results back into their procurement solution to finish the purchase,” he explained.
The AI comes into play in the automated vendor selection process. Companies configure Fairmarkit for things like price, sustainability and vendor diversity and the system finds the best match for them, a process known as autonomous sourcing.
“We've really [committed to] something called autonomous sourcing. It's the idea that you can fully automate the sourcing process and do it intelligently with data. So it's not just pulling in a request for a purchase, but automatically recommending [vendors], automatically sourcing and automatically awarding [the contract],” he said.
The company has 100 customers including large players like British Petroleum, BT Group (formerly British Telecom), Snowflake and ServiceNow (which is a strategic investor in today’s round).
He said from a momentum perspective, the amount of spending moving through the platform grew 4x in the last 12 months. The startup makes money via SaaS licensing fees, which scale as customers process more spend through the platform. While he didn't get specific about other numbers like revenue, the platform growth combined with investor confidence suggests the company is moving in the right direction.
The company had 70 employees when we spoke to Frechette about his Series B at the end of 2020. Today the startup has 135 workers with plans to double again in the next year. Frechette has committed to building a diverse workforce, while building a product that enables his customers to buy from a diverse set of suppliers. Since we last spoke, the company has brought in a head of belonging, inclusion and culture.
“So the head of belonging, inclusion and culture is responsible for reporting how we're doing, while also creating the programs and the engagement, both actively with the team, but then also through third party platforms. [The goal is] to make sure that we're not just thinking about it when we're [hiring], but that we’re also being inclusive once people are at the company as we keep scaling,” he said. He admits that it's challenging, but they are working hard at building 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 HighlandX. The company also got a strategic investment from customer Service Now.