When you say the phrase "expense management" in a business context, people might think of software like Concur that tracks what you spend on travel, entertainment and other work-related activities; or the software used by finance teams to help track outgoings across the wider operation. You might even think that it's a problem that has essentially been "solved."
But today, a startup called Vertice -- taking a more granular approach to a specific area of expense, software spend -- is announcing $25 million in funding on the heels of strong growth. The Series B is a signal both of demand in the market, and of how the space is evolving with the rise of AI and other tools.
The funding is being co-led by 83North and Bessemer Venture Partners, which also co-led the London-based startup's previous round of $26 million.
Roy Tuvey, who co-founded the company and is co-CEO of it with his brother Eldar, said this was done as an all-inside round so that they could continue the close relationship with investors they knew and liked. While some inside rounds speak to startups needing a little help in difficult times, that is not the case here: The company now has a valuation, Tuvey said, in the "hundreds of millions of dollars," which is impressive in the current market and speaks to low dilution, since Vertice has only raised $51 million to date.
He declined to give specific revenue numbers, but he noted that annual recurring revenues are now in the double-digit millions, with ARR growing seven-fold in 2023.
Another important factor is possibly the track record of the two brothers: previous exits have included security startup ScanSafe, which they sold to Cisco in 2009 for $200 million; and Wandera, which was acquired by Jamf for $400 million in 2021.
The problem (and opportunity) that Vertice is going after is focused around SaaS and cloud spend, the two largest and fastest-growing areas of IT expense for businesses worldwide, according to forecasts from Gartner (set to grow between 11% and 14% this year depending on the product).
Put simply, the growth of what is available to purchase and use in the cloud has outpaced the tools to track how those products are procured, used, managed and planned. It results in a lot of overlap and often products that are not actually being used in an optimized way.
"It's all about trying to help companies track and optimize their spend," said Roy Tuvey.
"And the reason it's a problem that's very visible for companies is they're spending a lot of money in this area. I don't think there's any company we speak to that thinks that in three years time, they're going to be spending less on software than they do today. And actually, it's really complex to manage, there's hundreds of different licenses. And so what we do is we have a platform where they can track everything they bought. They can run a centralized approval process is really important, because you're calling it expense management but from a procurement perspective lots of companies end up buying lots of tools. And there's no discipline behind that...if you think about CRM and HR tools and cybersecurity and you amalgamate all of them it's a very significant line item. Software spend, beyond physical offices and payroll, is the biggest sort of fixed costs for the business."
The company's approach involves a mix of automation, human evaluation and a suite of AI tools that looks at spending and usage trends across the hundreds of customers already using Vertice -- and the more than $1 billion that is being spent by those customers tracked through the platform. The insights it picks up are both used to help give finance teams, which are its target customers, a better bird's-eye picture of what is being spent, and where. Users can also in turn drill down into more details about why and how some spend is potentially a red flag, since it's for a product that is not in use anymore, or has been superseded by other IT contracts in place.
An example of how automation, AI and human involvement might work together: There might be a team using a premium Zoom subscription, when the larger business already has a Google Cloud Platform contract that covers video, too; it can be flagged and then a conversation can happen to determine whether it's necessary to have both.
I mention Google Cloud Platform, but that really is just a hypothetical: Currently Vertice only tracks cloud spend and cloud usage for AWS. The plan is to add Azure and GCP into the mix in the very near future, but for now Amazon's cloud platform is the only one that it tracks: Vertice can alert users to when instances are no longer cost effective for a company, or overlap with other purchases being made by other teams. This is actually a very interesting space and one that you could see developing in and of itself around areas like AI: As companies buy more compute power to run models and AI services, they will inevitably have to figure out how to make ballooning spend as efficient as possible. That is, if AI proves out to be as big of a juggernaut as many believe it could become, longer term.
It's not all just about cost: The fact that the brothers' background is in IT security gives the platform a very strong angle and focus on security, too. One of the tools that it has built alongside expense management tracks how different software packages align with a company's security compliance profile.
This also speaks to which kinds of companies will evolve as competitors to Vertice: They will include not just expense management giants like SAP, and other startups tracking software usage and spend, but tech companies that track software for any kind of policy compliance.
In terms of investors, it's notable to see Bessemer continuing to stay active in U.K. investing, given bigger news in the last couple of months where others like Omers and Coatue are beating a retreat. Part of that is because of the company, not the geography, said BVP partner Alex Ferrara, and the fact that Vertice is actually targeting priorities that have surfaced in the current market climate.
"One of the reasons we were excited about investing was that when we introduced Vertice to our portfolio companies" -- and these include not just small startups but these giant tech companies, he said -- "we were getting very, very good feedback from the CFOs who were saying that they were able to realize savings, they really liked the product. Startups with $200 million in revenue don't have an on-site procurement team [and] they're all facing a lot of pressure to make their money last longer, and this was a great way for them to reduce the non-payroll expenses. It can cost years that they don't have to, you know, shed any headcount."