Hi, my name is James Rush. I am a current freshman studying Economics in the College of Arts & Sciences here at the University of Pennsylvania. During my first semester at Penn, I joined Moso Capital to learn more about VC. I wanted to understand what makes startups successful and what makes the majority fail. Although I may not have concluded on that question, I have spent a considerable amount of time researching and learning about procurement technology! So, what even is procurement technology you might ask? 

Procurement technology, also known as procurement software or e-procurement, is the combination of digital tools and platforms to help streamline and automate the exchange of goods and services within organizations. Some major players in procurement include SAP Ariba, Coupa, IBM Watson, and Amazon Business. The modernization of procurement technology helps businesses efficiently manage strategic sourcing, procurement, supplier management, direct spending, financial supply chain, spend management, and buyers. With this, better cost savings and improved supplier relationships can blossom as a result. 

Procurement is a vast industry and with advancements in technologies there are many applications and verticals:

Some of the categories procurement technology is broken down into are sourcing tools, procure-to-pay (P2P), supplier management software, contract management solutions, and supply chain collaboration platforms. 

Sourcing tools aid in the organizational aspect of companies, helping identify and select the right supplier, negotiate contracts, and manage their relationships. One example of a company I have looked into is EdgeworthBox. They are a developer of an elastic procurement platform designed to integrate as a layer in the procurement technology stack. The company's platform complements the incumbent approach to sourcing with tools from financial markets. This includes central clearing of vendor administration and data, a social network that connects suppliers to buyers for collaboration, reinventing business processes.

There are many verticals to procurement as it is a very broad industry. For starters, manufacturing is one as procurement technology helps manufacturers source raw materials, optimize production, and reduce costs. In retail, procurement technology is used to manage relationships between suppliers. For example, a shoe store like FootLocker waits once a week at around 9:00 am to collect the delivery of new shoes to restock its shelves. Then there is healthcare, where procurement technology is utilized to streamline the purchasing of all medical supplies, and pharmaceuticals. Again, financial services also rely on procurement technology to assist financial institutions in sourcing IT services and other supplies. These are only some of the verticals that apply to procurement as there are endless cases to where procurement can be applied.

The problem that many businesses have, both suppliers and buyers alike, stems from many other simple procurement practices such as emailing and creating Excel spreadsheets because they are no longer effective. The opportunity cost is extremely high and large amounts of labor are required for sellers and manufacturers to find potential buyers. The problem is that most small-sized, medium-sized, and small divisions within large businesses have been using practices that will take anywhere from one to six months and sometimes even more. Otherwise they would have to hire an outside consulting firm which can be very costly. 

An Emerging Market

Another procurement-based company is Approve.com, a procurement automation platform that provides tools to automate purchasing workflows and vendor interactions. Rapicare is another startup that enables healthcare companies to purchase supplies digitally and receive them directly at multiple destinations. Lastly, Tropic is a buyer enablement platform that makes software purchasing easy, focusing on transparency. With the growing implementation and adoption of AI and cloud-based solutions, companies are embracing digitization to save on expenses and streamline procurement processes. With the global market projected to grow from almost $6.67Bn in 2022 to $13.80Bn by 2029, at a CAGR of 10.9% from 2022-2029 per Fortune Business Insights, the procurement space will only become larger and larger. 

Emerging trends and innovations in the industry, and opportunities that startups can capitalize on:

1. Sustainable procurement: There is a push for the integration of environmental, social, and governance (ESG) into the procurement process – low impact, reduction of carbon emissions, improvement of efficiency, and the implication of ethical measures to protect these practices.

2. Cybersecurity: After discussing with EdgeworthBox and conducting research on my own, there is pressure now more than ever for updated and effective security systems. With the transfer of contracts, invoices, and payment details alongside other sensitive information, suppliers and buyers must be protected while navigating the procurement process.

3. Supplier management: Supplier management has become increasingly more challenging as procurement deals with more suppliers, more categories, more regulations, and more disruptions. This is how startups, like EdgeworthBox, have the opportunity to become the middleman, facilitating and managing the processes that happen between suppliers and buyers.

How To Think About Procurement Technology

Approaching procurement technology is a strategic game. Although I, myself have only spent a couple of months delving into the procurement technology industry, I learned that there will never just be one factor that will set one startup away from another. Talking to different founders, I gained insights into how AI and automation will be vital in the streamlining of procurement processes. As investors, the adoption of new technologies will change the outlook of sustainability and risk management along with operational efficiency, cost savings, and value creation within companies. 

The processes of procurement require many strategies, relationships, and reliance on technology. By investing in new technologies such as procurement automation, investors can position startups for success in an increasingly competitive and dynamic environment. 

I am super excited to watch closely and see how this industry rapidly develops over the coming years! If I were a betting man, it would be time to invest in procurement technology and be on the lookout for startups with new, innovative procurement automation technology. As AI continues to break out, not just procurement, but almost all aspects of our lives, I believe, will change.