Comments from Readers: Tech Valuations, Supplier Negotiation, and a Difficult Question

Welcome back to your column that tries to be fortnightly, Comments from Readers, where readers comment and their comments are spun into a narrative. One day in the far future an anthropologist will look at all of this (hi) and marvel at the inclination towards discussion among the inhabitants of the savage 21st century. But back to comments.

Taulia Raises $27 Million, Valuing Company at 15X Trailing Revenue (Roughly) – Last week Taulia announced the results of their recent funding round. We’ve been skeptical before about technology company valuations, but this time Pierre Mitchell wrote: “Taulia is one of the few vendors that I’d bet my own money on to grow into what is a curiously high valuation based on historical – even historical tech – norms.” 

“Interesting read,” wrote Daisy O’Brien. “Is Tradeshift another you would ‘bet your own money on’ growing into its valuation… $300m at last round I heard??”

Pierre responded: “It’s much easier to grow into a smaller valuation, and Taulia has a very focused value prop. Tradeshift has very big shoes that it has cobbled for itself, so, growing into them is a different scenario. It’s like a VC buying shoes for its ‘kids’ that are 4 sizes too big. You hope they’ll grow into them.

Technically though, I really don’t tend to bet my own money on ‘active’ investments. I put my few shekels into low cost index funds and ignore it. Heck, I haven’t even invested funny money in the Spend Matters ‘fantasy league’ tech portfolio as has Peter Smith and Jason Busch. I’m a UChicago graduate, and believe it’s generally a ‘random walk down Wall Street’ for outsider investors, so I don’t play darts with chimps (stock pickers, not Jason/Peter!)”

Jason Busch also commented: “I have huge respect for what Tradeshift are trying to do in the sector, but I’m very much in a “show me” perspective from customer growth with everyone. Taulia has out-executed everyone in the sector to date in this regard.”

The Role of Rhetoric in Supplier Negotiation: A Rebuttal– This post by Jason was itself a long response to an Inside Supply Management essay titled “Creating Negotiating Excellence.” The author argued that a good negotiator does not have to be a commodity expert. “Repeat that please?” Jason wrote. “The best negotiations that I’ve studied first-hand are a process of information discovery rather than rhetorical skills.”

“Nice rebuttal, Jason,” wrote Charles Dominick. “First, using a ‘commodity-neutral’ negotiator (i.e., someone who doesn’t know a damn thing about what they are buying) does two things: makes it easy for the supplier to skirt around probing questions and avoid disclosing information that could lead to mutual cost take-out (or classic price reduction), and sends a message that the buying organization is focused more on a transactional relationship than a collaborative one. That last point bears a lot of similarity to the feel that buyers create in their supply bases when they use reverse auctions inappropriately.

Second, allowing ‘the supplier to be successful’ while merely ‘protecting the interests’ of the buying organization sounds like backward priorities. Procurement professionals should strive to make their own organizations ‘successful’ while ‘protecting’ the sustainability of the supplier relationship.”

The next commenter, Greg Anderson, also agreed. “Smart strategic sourcing requires skilled people who utilize a commodity-specific process to collect the appropriate information and build a fact base that supports an effective negotiation. ‘Excellent results’ are seldom delivered if the negotiator lacks the expertise to understand the commodity and make the right trade-offs (e.g. higher price for a shorter lead time or guaranteed capacity) during the negotiations.”

“I have to admit when previously working as a consultant I often earnestly argued that it’s all about the process and was frustrated at client requests for deep category expertise,” responded Paul Gurr. “The ‘stages of maturity’ comment is key here. It’s perfectly possible to deliver great-looking results (and deliver a decent ROI to a client) without deep category expertise, but only where the basic skills / tools were not present previously, so the results are only great in comparison to a poor baseline. To truly achieve optimum results, category experience and knowledge is essential. This is a challenge for consultancies, as although it’s possible to capture and retain category knowledge to a certain extent, it’s the individuals with that deep knowledge that become valuable rather than the consultancy itself.”

And sometimes comments appear on posts from over a month ago. Back in early June, Jason wrote a post titled Extended Supply Chain Risk: Questions to Ask Suppliers About Their Supplier Management Practices.

One frequent commenter who uses the nom de plume Bitter and twisted asked, “Why even have ‘tier 1’ suppliers if you have to do their bloody job for them?”

And nobody had a reply.

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