Boston, Massachusetts-based Fairmarkit today closed a $30 million funding round led by GGV Capital and Insight Partners. The startup, which develops tools to optimize enterprise tail spend, says it will use the funds to grow its product, support, and sales teams following a tripling in revenue over the past two years.
Tail spend — the purchases enterprises make outside of large, ongoing expenses — is a tricky business. While direct spend is usually well managed, that’s rarely true of indirect spend, despite the fact that an estimated 40% of U.S. businesses devote 40% of procurement to it. In fact, a recent survey from Deloitte found that 65% of companies have limited or no visibility beyond tier 1 suppliers.
Fairmarkit’s platform taps machine learning and AI to automate traditionally manual procurement tasks. It handles communication with vendors and automatically minimizes the volume of purchase orders created by bundling requisitions, as well as culling vendors that aren’t providing competitive prices or responding to requests to optimize the overall vendor pool. Fairmarkit also audits spend performance to ensure it is in alignment with departmental and strategic objectives, and it connects directly to existing enterprise resource planning and procure-to-pay internal systems from Oracle, Workday, and others, along with an ecosystem of over 300,000 suppliers, including Wesco, Fastenal, Tools Unlimited, Radwell, CDW, MSC, and Shi.
To address potential bias in its machine learning models, Fairmarkit says it developed task-specific cross-validation steps with which it tests each model independently. This usually entails data cleansing, outlier and noise removal, and class balancing, including undersampling and oversampling.
On the vendor side of the equation, Fairmarkit invites suppliers to relevant opportunities as soon as they are posted, based on bid history and catalog data. The platform shows the status of all bids within a collated dashboard while analyzing sales across every partner.
With the pandemic negatively impacting supply chains and procurement for enterprises, Fairmarkit — which was cofounded in 2017 by Kevin Frechette, Tarek Alaruri, and Victor Kushch — claims it has seen “significant” growth. The size of its customer base and annual recurring revenue has tripled from three years ago, and the company counts among its client base big-name brands like Snowflake, Cabot Corporation, and Emirates Flight Catering.
“The COVID-19 era compounded a $1.7 trillion procurement problem. At a time when companies needed to manage costs more than ever before, even cost controls became a secondary issue as companies found — and are still finding — that the things they need simply aren’t available because the factories their vendors use to produce products have closed,” Frechette told VentureBeat via email. “Supply chain management, never the enterprise’s sexiest function, is a mission-critical function that unfortunately only the best companies do well. $1.7 trillion is too much money to be spent without oversight, compliance, and efficiency. It is called “tail spend,” and to date, no one has delivered a way to optimize it. This is where Fairmarkit steps in.”
1984 VC, New Stack, and NewFund also participated in Fairmarkit’s series B round announced today. It brings the company’s total raised to $41.7 million, following an $11 million series A in October 2019.