A Procuri Post-Mortem

Over on E-Sourcing Forum David Bush has the scoop on a recent Ariba SEC filing that documents Procuri's numbers going back before the Ariba deal. I'm on the road today, so I'll need to leave my formal analysis of it for a later date. But here are some of David's summary analysis points: "Sales were growing rapidly: $17.4M in 2005, $22.3M in 2006, and $21.2M in first 9 months of 2007 … Procuri paid $2.2M for TrueSource ($1.5M in cash and $684K in Stock). TrueSource only had $5k in the checking account and $150k in AR, at the time … Procuri paid $14.1M for CMSI ($7.1M in cash, $562K in stock, $4.6M in debt issuance (a note payable at 10%!), and $1.7M in liabilities assumed) ... Procuri spent a WHOPPING 70% of inbound revenue on sales and marketing expenses (if you can assume most of the COGS were sales/marketing commissions)."

What's my quick take? Procuri made some shrewd acquisitions -- one of which involved some significant bottom feeding -- and spent seriously more than most companies its size on sales and marketing. Clearly, this was a company leveraged to the Nth degree. And it's further proof in my book why giving up control to your investors is something that is hazardous to conservative, stable and profitable growth. I doubt that an executive team who had control over the company's future would have followed the same decision path.

- Jason Busch

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