SAP Ventures Backs Lavante: Despite Hiccups, the Supplier Management Gets a Vote of Support (Part 1)

Spend Matters has spent quite a bit of time covering vendor happenings in the supplier information management (SIM) and related markets of late. Some providers in the sector, such as Aravo and Rollstream, appear to be winning a select number of middling to larger deals (not to mention, in Aravo's case, rolling out key new functional capability for direct materials). On the other end of the spectrum, SupplierForce has entered voluntary liquidation in Ireland. And there are two other vendors which have been actively shopped on the market of late and a third, that earlier this fall was in the midst of trying to raise a funding round. In this niche market, it's certainly been a busy -- and bifurcated -- fall from a vendor perspective, that's for sure. Capping this activity last week was Lavante's Series C funding round announcement, with SAP Ventures taking a lead role in the investment.

According to the announcement, in addition to SAP Ventures, "This C round of funding also includes participation from current investors ATA Ventures and Venrock." But outside of SAP, the specifics of the backers are not important (even though I suspect that all will receive a decent payout at some point, as we believe that Lavante is approaching the supplier management market from a unique and arguably more attractive and lucrative manner than many other providers in the space). As we have written in the past, "Most traditional supplier information management vendors approaching the supplier management challenge have opted to focus on enabling specific tasks, largely centered on improving the procurement and auxiliary supplier management functions. These tasks and focus areas have included supplier enablement (for eProcurement and general on-boarding), supplier diversity (both single and multi-tier management and tracking), supply risk reduction and visibility, CSR, supplier performance management, supplier development and supplier quality (note that not all of these are mutually exclusive) ... Lavante, in contrast, has sold into the sweet spot of the audit recovery market: finance organizations -- and to a lesser degree, finance adept procurement teams."

This business model twist has allowed Lavante to grow and deliver revenue growth more closely tied to actual value created rather than just an annual subscription software license. Yet the functional similarities with existing supplier management applications are very real. To wit, as we observed previously, "The process of collecting and presenting invoice, payment and related information for an audit recovery application very much works out to deliver a solution that is somewhat of a strange -- but very useful! -- hybrid between spend analysis and supplier management (or supplier information management) solutions. Lavante's toolset not only helps users to identify audit recovery opportunities and credits, it also allows them to see relationships between themselves and their suppliers in a manner that goes far beyond the balance of trade visibility that companies have today with traditional spend visibility tools."

Specifically, per our previous analysis, "This can help companies to see parent/child relationships in the context of dollar recovery opportunities and credits (e.g., don't go asking for a $20K credit from someone who contributes $10 million to your top-line). It can also allow companies to negotiate better rates and terms based on rationalizing spend with preferred suppliers (in a way that mimics the capability in more traditional spend analysis tools). But perhaps most important, in terms of supplier management, it can provide the basis of hybrid visibility into spending and supplier information from basic contact details such as names, phone numbers, etc. all the way to the type of basic supplier management information (e.g., banking details) that" companies, often providers, facilitate and automate the collection of on behalf of users.

Given this context and the potential market opportunity for Lavante as it expands within -- and unites -- the audit/recovery and supplier management market niches, what moves might Lavante make with its newfound war chest? And what types of customers are most likely to be the best fit to leverage their capabilities? Stay tuned as we investigate this question in Part 2 of this post on Monday, featuring Spend Matters own analysis as well as the Lavante perspective gleaned from our discussion with their team last week.

Jason Busch

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