IPO, Valuation and Funding Musings: Procurement Tech in Q4 2015 and 2016 Jason Busch - October 30, 2015 8:15 AM | Categories: Finance, Solution Providers, Technology | Tags: L1, Technology If you talk to optimistic bankers, the initial public offering (IPO) market appears as if it might be thawing, although large private rounds still remain the preferred means of later-stage financing in the current environment. One could say that unicorns still prefer to eat from inside the private barn versus the public pasture. However, if the markets continue to hold throughout the rest of 2015, the first half of 2016 could be a time keep an eye on the procurement sector and related markets. There are a number of vendors to watch in 2016 from a capital markets perspective, with perhaps Coupa as the obvious child, to borrow a phrase from one of the best musical albums of all time. While Coupa claims that it is satisfied to keep plugging along as a private company — albeit one growing at a clip that suggests the public markets might value it even higher than private investors — realistically, I would put all my chips into the IPO poker game that we’ll see an S-1 filed next year unless market conditions change (and to confront one rumor: even though it makes sense, I just don't see Oracle paying what it would need to in order to make a deal happen. And the same is true for IBM as well, but that dish feels like so 2014). Additional Players While Coupa appears to be the anticipated “shot heard round the procurement funding world,” there are others to pay attention to as well, including companies that are already public. SciQuest and Determine (formerly Selectica) look undervalued relative to peers — especially peers who are private — and have been doing a lot to get their product houses in a cloud-oriented “suite” order. Basware, already public in Europe, has seen a material climb in recent years and is also a public company to watch for a variety of reasons (though has dropped most recently in valuation). Proactis has had a nice run as well, making a series of smart acquisitions that the markets have rewarded. Private companies to pay attention to for potentially larger funding rounds include Ivalua and IQNavigator. Zycus, which remains in the hands of its hands-on founder, is unlikely to raise or sell, but remains a curious gem of an asset, albeit one locked away from the capital markets by choice. And, of course, there are numerous companies that are smaller that would be valued generously as well. Trade Extensions is another highly differentiated provider in this category. Then there’s the question of the procurement asset within Xchanging that could form a nucleus for new owners with large ambitions to build out from (Capita is one of the rumored suitors for the broader BPO and software portfolio). We also can’t forget GEP here, which remains firmly in the hands of the incredibly customer-oriented founders — and is large enough to entertain various options, although we would guess is unlikely to do anything financing related but continue down its current track using its organic growth to fund product- and solution-related investments. And what is the procurement sector wildcard for funding and capital markets participation in 2016? Upwork. Pay attention, especially the second half of the year. Even more interesting, perhaps, are tech firms in adjacent markets to procurement — trade financing, operational analytics (there are a ton of unicorns in this area), supply chain — as well as the next generation of startups in the core procurement sector that are just starting to make some noise. But I’ll leave these subjects for another post. So to sum up for now: All 2016 IPO-eyes on Coupa, especially now that the litigation with Ariba is settled Monitor the valuations of public companies currently trading at a discount to private peers Expect private company rounds to raise some eyebrows — and the potential involvement of private equity as well And finally, don’t forget to get smart on what drives valuation in the sector. Please follow Jason Busch on Twitter @jasondbusch Related ArticlesBuyerQuest — Emerging From Under the Radar With ‘Second-Generation P2P’Fighting P2P Words: 'Coupa is Rehashing Ariba with a Better UI'Coupa Reports Best Quarter Ever – No Surprises HereCoupa on Second Generation P2P, Group Buying and Further European Growth Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of follow-up comments by email. Notify me of new posts by email.