Procurement remains a largely offline and fragmented endeavour, but over the past couple of years, digital solutions have grown exponentially as businesses worldwide continue to opt for technological solutions to help them rein in costs and achieve long-term agility. Across the region, the B2B marketplaces are becoming more common, particularly for procurement. Last year, B2B marketplace startups raised in excess of $225 million across 26 deals. The growth in this market is largely tied to the ongoing push towards digitisation across traditional sectors.
Saudi Arabia-based B2B SaaS platform Penny Software is carving a niche of its own. Founded by Iyad Aldalooj, Majid Aldalooj, and Mohammed Ibrahim in 2020, the startup offers a procure-to-pay platform that helps companies digitise procurement and sourcing management processes. It offers a solution that automates the whole procurement process from request to pay and thus enables companies to gain full visibility into their spending activities and conduct better forecasting.
Last year, Penny launched its own B2B marketplace that is embedded in the procurement software, which is available for users across Saudi Arabia.
“[Procurement] is vastly happening in a fragmented manner, whether in different emails and Excel sheets," says Iyad Aldalooj, co-founder and CEO of Penny. "So if you are a procurement manager, and you are sending requests for quotations to multiple vendors, and those vendors call you, so instead of you taking every cost from every vendor putting them together during the comparison and analysis, the system does all of that for you.”
At its early stages, the startup initially went after SMEs to build its proof of concept, then later realised that its minimal viable product (MVP) better resonates with medium and large-sized companies. The reasons can be traced to the fact that the cost of SaaS adoption is too high for a small business to afford and that Penny tends to serve clients with more complex and rigorous procurement needs.
Currently, it targets several industries such as oil and gas, construction, real estate, and semi-governmental agencies.
Almost a year after raising a $1.5 million pre-Seed, the startup recently closed a $5 million Seed round led by Outliers Ventures Capital, with participation from its existing investors such as Shorooq Partners, Hambro Perks ORYX Fund, Wamda and Class 5 Global. According to Aldalooj, the aim of this round is to speed up the development of its product as well as support its global expansion, further unveiling plans to launch in the UK in 2022.
Penny is looking to tap into the global market which is estimated to be worth around $120 billion. According to a report by IDC, global procurement software earnings are expected to reach $7.3 billion by the end of 2022, up from $6 billion recorded last year. The global procurement landscape features companies like SAP Ariba, Jaggaer and Coupa, the latter is a publicly-traded company with a valuation of over $20 billion.
“The valuation of these software businesses is 30x revenues. It’s becoming a very hot, fast-growing industry. And we are seeing an influx of startups from all over the world coming to disrupt procurement,” says Aldalooj.
Building a product that can be easily accessed and scalable to users across domestic and global markets has been the greatest focus for Penny. For Adalooj, there’s still a globally pronounced need for a product like his.
Over the past couple of years, the number of SaaS startups has significantly risen, with an excessive amount of funding being poured into the sector. Last year, SaaS startups in Mena collectively raised $176 million, indicating that the sector is slowly maturing. But, for Penny, the market in Mena is not growing fast enough to facilitate proper and quicker scaling.
“Our intention for Penny is to build a global product with a global brand. From day one, we are competing with all the global startups. We still don't have an enterprise software ecosystem, and therefore we're not competing with a lot of local startups from Saudi or Mena. However, this is changing," says Adalooj.