Mapping VC funding in Procurement
By: Emelie Stark
Tags: Procurement Software, Supply Chain, Investment, Venture Capital, Procurement

This reflects the maturity of the NAM technology market, and the fact that many of the biggest startups in the space, including the unicorn Tradeshift are headquartered on NAM soil (although some Danes would claim that Tradeshift is a Danish unicorn due to the founding team’s passports!)

3| Downstream heading upward 📈

Our data showed that downstream procurement startups have attracted €7.83 billion of investment over the past 10 years, while upstream startups have received only €1.46 billion.

How to explain this trend? One can speculate that downstream is more mature because of its proximity to consumer solutions in payments and contract management. At the same time downstream is perhaps a slightly less complex field than upstream, where the pace of technological progress is only now starting to facilitate innovation.

So it’s not that downstream is inherently more attractive — there are simply more solutions that are accessible to investors.

Payment solutions has attracted high volumes of investment in recent years

Although our data is primarily focused on operational purchasing, transaction, invoice & payment and contract management solutions, a large chunk of the downstream procurement investment has in fact been channeled into payments and financial services.

This reflects a deeper trend, as payments and financial services have attracted a lot of funding from VC investors over the past decade; in fact the true figure for this segment is likely to be far higher when including all payment solutions into the equation (which hasn’t been a focus area for this study, hence it hasn’t been fully explored).

Another buoyant area of investment is analytics and data foundation/visualization, which have received €2.63 billion in VC funding. The explosion of big data over recent years is likely to have fueled this trend.

4| Deals on the (relatively) small side 💰🔍

Although attention has inevitably focused on the more high-profile procurement investments (such as Tradeshift’s Series E round of $250 million), many deals have been on the smaller side.

In Europe, our data show that the average VC investment in procurement last year stood at around €2.4 million. Again, the North American market is further ahead; the average NAM VC investment in procurement last year was €6.73 million, around 2.6x its European counterpart.

However, both figures pale in comparison with the global VC average. According to figures from Crunchbase, which covered the year up to Q4 2019, early-stage funding rounds attracted an average of $17.2 million (€14.2 million).

Early stage showing promise

Overall, only 18% of startups across both continents have raised a venture round larger than €10 million since 2009. However, of these €10 million rounds, 50% have been raised since 2017 — even though this time period accounts for only 33% of the total deals made over the 11 years.

Based on this, one can conclude that the amount of larger rounds has increased over the last four years (most likely due to there being more startups getting past the initial stage of fundraising to be able to raise them). However they are still quite a small portion of all investments made overall, which indicates that the early stage procurement space is attracting increasing attention from investors, and that in the coming years there will most likely be several early stage startups in the procurement space looking to raise larger venture rounds 👩‍💻👨‍💻