How the best procurement software fuels growth for unicorn companies.

For most unicorns, the average time from initial concept to the coveted $1B+ valuation is about seven years. Over that time, these companies go through many rapid stages of evolution. In this often chaotic push for growth, the prime focus is on obvious revenue drivers, like product development and creating a scaled go-to-market motion. Unless they are a hardware company, having an optimum procurement system is not a typical priority in those early growth stages. But failing to invest in procurement overlooks its strategic potential and ability to drive savings, control, and efficiency. 

Procurement in the early stages: Ad hoc at best. 

In the rush to accelerate market growth, burgeoning unicorns quickly throw new operational procedures together to handle how employees should buy goods and services as needs arise, in a reactive as opposed to a proactive approach.

Different elements of procurement are handled by different people: perhaps compliance is the responsibility of the controller, and the InfoSec team monitors software purchases for things like SOC reports and data retention policies. Employees make purchases in multiple ways, including by corporate card, invoices, or their personal cards. We’ve talked to companies who used to simply pass around a shared corporate card when a purchase needed to be made (and they often weren’t totally sure who had it). It’s not always clear who has to approve what, so employees sometimes take a “ask for forgiveness, not permission” approach with regard to spending company money. And for many companies, that feels “good enough” at the time since they are urgently seeking to find product-market fit and overcome the challenges of early-stage survival.

The sophistication of these ad-hoc procedures typically lags behind the pace of company growth. In the Unicorn Playbook Volume 2, Pedro Monteiro de Barros, SVP Finance at Remote, jokes about the discrepancy at his own company: 

“Most people already have a full understanding of the speed at which we operate by the time they join us and know how fast things are growing. The shock usually doesn’t come from the rate of growth, but from the fact that, technically, we are still at early-stage operations as that growth is happening.”

The move to mid-market: Procurement gaps and weaknesses create problems. 

When processes aren’t keeping up, a company reaches a tipping point where inadequate systems ultimately slow growth down and add to excessive cash burn. Some pain points include:

• As the org chart becomes more complex, confusion arises about approval chains. Some purchases might require legal review, others may need executive team approval. Busy (and even confused) employees may circumvent procedures in order to move quickly, creating compliance leaks or wasteful, duplicate spend. 
• Cross-functional collaboration becomes more difficult as each department develops its own way of doing business and adopts its own systems. When a purchase has implications for multiple business units, it’s hard to know where the relevant information lives. Time is wasted looking for contracts, security certifications, etc. Communication gaps lead to missed reviews and more compliance problems.
• Acquiring dependable, readily accessible data becomes challenging due to the growing volume of financial transactions that are not being captured and recorded in real time.
• Increased volume put through manual processes may lead to overhiring to deal with the problem instead of solving it via intelligent automation.

In our What I Wish I Knew webinar on system optimization, Reuben Cook of Squire talked about the development of siloed systems within a company. “It’s a natural transformation everyone goes through, but we’ve got to keep the next stage of enterprise level in mind.”

Accelerated growth, rising risks.

The next stage of development often focuses on IPO readiness. The finance team must ensure the systems are in place to consistently provide three years of audited financial statements. The IT team must prepare to demonstrate well-defined security protocols internally and externally, with vendors conforming to SOC 1 Type II or SOC 2 standards, or both. An efficient purchasing process becomes imperative as the company looks to minimize wasteful spending and to have the audit trails and controls in place to support being a public company, including SOX compliance. 

If these elements aren’t captured as part of the purchasing process, someone has to untangle the resulting web of documents and information. 

The company is now held to higher standards. But at the same time, as the number of employees, departments, and vendors increases, the risk of mistakes also rises. Companies may invest in more heavyweight systems and processes to minimize risk in procurement, but employees often push back at the increased bureaucracy imposed by legacy enterprise tools. Poor employee adoption leads to gaps in visibility and compliance leaks, and can ultimately slow down growth and waste valuable raised capital.

The challenge is to introduce solutions that minimize the growing risks without creating friction for employees when they have to make the purchases that help fuel company growth. 

The best procurement software gives unicorns the efficiency they need.

Traditionally viewed as a back-office function focused on cost reduction and supply management, procurement has the potential to contribute directly to a company’s bottom line. Since unicorns seek to optimize all of their operations, they use the best procurement software to improve aspects of their operations. Here are just a handful of the considerations that must be made:

Collaboration. Many complex purchases require cross-functional collaboration. Requests and approvals can span procurement, legal, IT, and other teams. The best procurement software integrates with the systems they use, like Jira, Ironclad, and Asana, to facilitate communication and collaboration.

Compliance. When controls are built into the purchasing process, employees can rest assured that purchases are compliant with company policy. This ensures budgets are adhered to and preferred vendors are used.

Cost optimization. With improved visibility into purchasing and alerts for duplicate or wasted spend, procurement can reduce expenses and negotiate favorable terms with suppliers, such as bulk discounts. The cost savings through procurement initiatives can be reinvested into research and development, marketing, or resource management. Or, if the focus is on greater profitability, every dollar saved can flow straight to the bottom line.

Supplier relationship management. Having the tools for easy onboarding, timely bill payments, and smooth vendor communication strengthens vendor relations. Building strong partnerships with suppliers fosters collaboration, so procurement can access suppliers’ expertise and market insights, and even influence product development. Strong supplier relationships also contribute to supply chain resilience, something that has been put to the test in recent years. It can also enable faster response times to market demands.

With the increased pressures on creating durable growth, the number of newly minted unicorns has fallen from the highs of 2021. Ambitious companies who want to join this exclusive club need to couple their rapid user and revenue growth with an intelligent approach to spend management. That starts by leveraging the strategic advantages of the best procurement software. Take a tour of Airbase’s new Guided Procurement module today!