In 2018, Vendr’s founder and CEO Ryan Neu left his sales career of 7+ years to start a new company. For Ryan, entrepreneurship was a force, and he was ready to heed the longstanding advice of his dad to follow his gut.
Two and a half years later, Vendr announced raising a $60 million Series A at a $600 million valuation to change the way people buy and sell SaaS forever.
What started as a team of three at Y-Combinator in Silicon Valley has grown into 67 people and counting, helping companies manage more than $300 million in SaaS spend.
What made this growth possible? I sat down virtually with my new boss to hear what inspired Vendr, the challenges he faced along the way, and what hopes he has for the future of SaaS buying.
Lessons learned from a first-time founder
1. What inspired Vendr?
I came from a career in software sales, working for a couple of high-growth tech companies selling to organizations of all sizes, SMB to Fortune 500. In every scenario, I was surprised by the inefficiencies of selling software. I never understood why it takes almost 90 days for someone to make a B2B purchase (the sales cycle) and why close rates were so low.
Extended purchase cycles with drastic shopping cart abandonment are a recipe for disaster. On average, 80% of opportunities don’t close. That’s an 80% drop-off rate over 90 days.
It’s the reason so many companies have to spend a substantial amount of money on sales, business development, and marketing – you need to cast a wide net since the majority of the pipeline will fall by the wayside.
That was the inspiration behind Vendr. Traditional B2B sales is broken, and I thought in order to change how people sell, you first need to change how people think about buying.
2. How is Vendr fixing B2B sales?
Most people assume that Vendr is outsourced procurement or that we obsess over negotiations. That’s not actually what we’re up to. We don’t believe that SaaS should be negotiable in the first place.
Vendr is eliminating friction in the B2B buying process. The outcome will be a world where buyers can get the SaaS they need when they need it, and salespeople can sell without friction – meaning shorter sales cycles and higher close rates. Frictionless buying is a no-brainer for both the buyer and seller.
A vital part of this is buyers' and sellers' ability to speak the same language. Often salespeople and stakeholders buying software have different priorities, slowing down the buying process and causing a disconnect in communication. Putting an equal party of knowledge on the phone who speaks the same language as sales naturally allows companies to buy faster at fairer prices.
3. Why do you think companies follow the same broken buying process time after time?
I think of the parking ticket analogy. Every time you get a parking ticket, you relearn how to pay it. You reread the back of the ticket and go on the city’s website to pay. Since it’s not a part of your day-to-day, and the frequency (for most) is low, you relearn the process each time.
Buying software is similar because it’s a responsibility spread throughout an entire organization. A director of engineering might own five to ten tools which means they go through the purchasing process five to ten times, relearning it each time, per supplier. Time passes, and those tools come due every single year. It becomes death by a thousand paper cuts for companies at the stakeholder level where their tech stack gets significant over time. That director of engineering doesn’t realize it, but they're spending a good portion of their job figuring out how to buy SaaS.
Typically, once companies identify the problem, they form procurement teams to make it go away.
But the problem doesn't just vanish. Procurement teams get weighed down by the same problem: SaaS management's sheer quantity makes it impossible to spend adequate time on every single purchase.
So they prioritize their time at the top of the spend, and downstream, the lower spend goes underserved. Procurement teams are typically overworked and understaffed, and SaaS buying is one of the culprits.
4. What’s one lesson you learned building Vendr that you would share with first-time founders?
I learned how to sell Vendr before we had a product, and I did that by making myself the product. I knew we were onto something because people were buying.
We didn’t build the company with hopes or assumptions that people needed our service. We proved it by acquiring paying customers and then worked backward to iterate on our offering based on what customers were asking for, rather than building bells and whistles, hoping people needed what we built.
Everything we built was based on fact – which I think was our competitive advantage (and still is). Our customers’ needs determine our roadmap instead of relying on our intuition. That’s been true since day one.
5. What’s one piece of advice you wish someone gave you earlier on?
Hire ahead. Instead of hiring once a need or gap has been identified, plan for the gaps and fill them before the pain is felt.
We built the plane as we were flying it and our growth surprised us. Last year we went from 10 to 50 people while also increasing our customer count by 5X. We didn’t have time to plan for that growth adequately.
I remember an early conversation at Y-Combinator about bringing on our first customer success hire. We decided we didn’t need that person yet because we didn’t have a full book of business for that person to manage.
Looking back, that was the wrong debate. The question should have been, “How many customers do we think we’ll have at the end of the year, and what type of leader do we need to run that organization?” With this mindset, you can go after the right people months in advance rather than rushing to react later.
6. What’s been your top win over the last two years (aside from Series A, of course)?
One of the coolest things was continuing to hear one word from our customers during our growth that we care tremendously about: kindness.
We’ve been very intentional about kindness at the core of Vendr since day one. We don’t hire jerks. We want to work with kind people because, well, it’s more enjoyable. We believe our customers like working with kind companies, and we think we’re more effective in SaaS buying using kindness in negotiations.
It’s easy to risk kindness as a company grows quickly. Yet, we’ve maintained that quality and I'm most proud of that. We recruited the right people with the right mindset and continue to deliver the results our customers are looking for.
7. What does $60M in Series A mean for Vendr?
It means validation that SaaS buying solves a major problem for many companies. There’s a better way to buy SaaS, and we are capitalized to pursue our passion.
It also shows real value in building a business on capital efficiency. We value saving money for our customers and grow our business with that same mindset: to make more than we spend.
Capital efficiency allows you to control your destiny. We get to build Vendr the way we believe is best and we have amazing partners to support us.
Today isn’t about what we’re going to do with the money. It’s also not about our plans to change the world. Today is about being proud that we survived the past two years and put ourselves in a position to survive many more.