T - ??? for Procuri ...
In the past week, I've been able to piece together a good half dozen different data points that suggest Procuri is close to joining forces with another provider -- potentially very close. When the deal breaks, Spend Matters will be quick to analyze it. But in the meantime, for the many who asked me who the players were in this post, yes, Procuri was one that I referenced, the "one on the rise ... which [has been] since its inception." In other words, given their growth and reputation, I expect Procuri to sell for a premium. In my view, the valuation will be very important to watch given their SaaS revenue mode. If it's low (less than 3.5-4x revenue), then in general, that will be bad news for SaaS valuations across the market.
But what about the other acquisition activity that I referenced in the above-linked post? Well, we'll have to wait and see whether that deal, too, is strategic or whether it becomes a fire sale. For the sake of the (shrinking) management team and investors -- hint, hint, that I previously chided for putting $30 million in a terribly risky investment, at least in my view at the time -- let's hope it's the former. They're a tremendous number of under-used assets inside this particular vendor which will take a creative team to put to good use.
- Jason Busch
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One would think that such a model should be worth more on a valuation basis than a conventional feast or famine software sales model, because revenue is predictable and stable. As opposed to a situation where a pipeline analysis is a critical valuation factor, and where uncertainty is lurking as to whether the sales will keep going or not.
But I've talked to VCs and private equity folks about this, and they shrug their shoulders. Yes, they see my point. No, they can't see the valuation being done any differently than they've always done it.
It's exasperating. Not that I'm trying to sell our company, but I have lots of friends in the biz, and I've been curious if a working SaaS model changes anything. Bottom line, it doesn't, at least not yet. The old rules continue to apply: a random nut may pay more than 3x. Others will not.
My feeling is, if you don't like the product, let's find out quickly and let's part friends. No hard feelings. Maybe I can convince you to try it again later.
I've been on the purchasing side of the shelfware problem, and nothing pissed me off more than having some $200,000 hunk of crap lying around for a year or two that I clearly messed up buying and absolutely don't need or want, but cannot return.
Not to mention the embarrassment of having management look over my shoulder and ask me how I'm leveraging my $200,000 investment.
It's hard to say what impact a merger or acquisition would have. You could always bypass your potential problem with all the M&A talk that's been surrounding Procuri and VerticalNet by potentially considering Iasta and Ketera instead.
You can't go wrong with any of those you bring up. But I would suggest you open your search to Iasta as well (per the previous comment). Ketera is Iasta when it comes to e-sourcing, so see how much they're charging relative to Iasta, but personally, I would go direct if the deal is as good or better given the importance of direct relationships with those actually doing the code. Also, if you're an SAP user, check out their stuff as well. Emptoris deserves consideration too, among others
Are you primarily looking for sourcing, procurement, or both? If you're primarily looking for sourcing, then you're probably looking at Procuri, VerticalNet, Iasta, Emptoris, and SAP Frictionless . If you're primarily looking at procurement, then you're primarily looking at Ariba or Ketera or (maybe) AT Kearney (but I thought they were more of an outsourcing solution than a software solution). If you need a mix of both, Ketera stands out strong (because what they lack in sourcing they make up through re-selling Iasta and they have some strong procurement capabilities).
However, there's another way to break them up. And that's by price tag. Chances are, you'll see a clear segmentation into two groups ... Procuri, VerticalNet, Iasta, and Ketera in one group and Ariba, Emptoris, and AT Kearney in another. You could also break them up by true multi-tenant on-demand vs. hosted ASP, but the groups end up being more or less the same as the cost-based grouping.
And between this blog and my blog ( http://blog.sourcinginnovation.com/ ), you can probably find a couple of posts on each solution to give you some unique insights.