When TechCrunch last checked in with the Y Combinator-backed Vendr in October, the company had just raised $2 million, and was crowing about its profitability. Profitable seed-stage companies aren’t super common, so the startup stood out.
Today Vendr is back with more news, namely that it has raised $4 million more, this time led by Craft Ventures, the venture capital shop associated with well-known tech denizen David Sacks. TechCrunch wanted to know why a profitable company would go back to the well so quickly, so I got on the phone with Vendr CEO Ryan Neu to get a handle on the latest.
The timing felt propitious. Vendr tries to help save companies money on their software purchasing — both net-new and re-ups — and given that the startup world just took two punches out of its collective belt, perhaps Vendr was riding some tailwinds.
Neu told TechCrunch in an interview that Vendr’s model wasn’t perfectly aligned with the market back in 2019. Growth, Neu said, was the name of the game. Saving money on software wasn’t as in vogue at the time. Still, the company was growing enough to attract external capital.
Then came 2020, first with Vision Fund cost cutting, followed by the rise of COVID-19, waves of startup layoffs and more. Suddenly conserving cash was hot, and everyone wanted to find dollars to squeeze from budgets. Vendr, which works to save its customers money on their software budgets, was primed for demand.
And it showed up. The new $4 million round was put together after the start of COVID-19; many rounds announced in recent months were pre-baked before the pandemic. This one isn’t like that.
How did it come together, then? On the back of growth. According to Neu, Vendr has more than doubled its revenue and customer base since it raised in October. In far less than a year, then, the company managed the 100% growth rate that is a minimum for attractive growth in venture circles.
Even better for the small company, Neu told TechCrunch that Vendr is adding customers even more quickly now than it was before, that it is “growing non-linearly.”
David Sacks told TechCrunch via email that “Vendr’s capital efficiency and burn multiple are incredibly impressive,” which, given the metrics we have, seems correct.
Nearly as good as growth, however, is the fact that Vendr has raised $6.1 million to date, and, per Neu, has nearly all of it still in the bank. Sacks found that particularly enticing, saying that “fast growth is great, but it’s even more meaningful when you’re hardly burning any money to do it. That kind of product-market fit can’t be faked.”
Closing, Vendr is an odd duck when it comes to product. According to Neu, Vendr effectively started off as a consultancy, with him helping companies save money. It then grew into an increasingly software-powered business. In time, the firm expects to move from being a tech-enabled service to more of a service-enabled technology company.
The new money should help the startup keep writing its own code. And given the company’s ability to charge yearly rates of five-and-six figures to customers to help them control costs, baking a little more software into its internal operations could boost its gross margins nicely. That would make the company even more profitable.
Let’s see how long it takes for Vendr to double in size yet again.