Rujul Zaparde and Lu Cheng wanted to start a company together, but they had some rules.
The couple, who first met at Airbnb, quit their jobs in 2020 at a comically bad time. But Chen and Zaparde were determined to find what worked for them and their business.
As the world around them reeled from the pandemic, the pair spent months developing 16 criteria for determining whether a business idea was worth pursuing. Colorful rules. There’s the “bomb test,” a gallows-humor screening of potential business ideas for scalability, sustainability, and enterprise software-likeness. Furthermore, there is something called the “fire and hair principle.” This represents a problem that must be resolved and cannot be ignored under any circumstances.
“This is a real problem that they have to solve because it’s causing so much pain,” Zaparde said.
Another question is, “Why is now the best time to start a company?” “Is this really so sticky that it’s so hard to peel off?” They tried different ideas and ended up with a promising service business that started generating revenue faster than they imagined. , I gave up on it. Their startup idea had to meet all the criteria. That’s how they entered the business of sourcing, the labyrinthine corporate process of finding, buying, receiving, and verifying products.
It’s a process that every company goes through, but no one seems to like, to say the least. Once, someone complained to Mr. Chen and Mr. Zaparde due to procurement frustration.
“I had a notebook document that was about 120 pages long, and the word ‘pain’ appeared 110 times in it,” Cheng says. “People had a visceral response to the challenges around procurement, how the industry has evolved, how the types of spend have evolved, and how technology hasn’t kept up. ”
And there was that keyword: pain. The issue of procurement was a real hot topic. In the four years since Cheng and Zaparde founded Zip, the procurement software startup has covered a lot of ground. Backed by Y Combinator, CRV, and Tiger Global, the company’s final valuation was $1.5 billion in 2023. Zip’s current customers include OpenAI, Discover. , Sephora, and Snowflake.
This week marks another big milestone for Zip. The company today announced its expansion into Europe, the Middle East and Africa (EMEA) and unveiled a design rebrand. This comes just two days after IDC named Zip the top spot in its newly created Spend Orchestration category, beating out even publicly traded giants like ServiceNow.
“This is an acknowledgment that they’ve actually found a legitimate category,” said Zip, former managing director of YC’s Continuity Fund, former CFO of Pixar, and former COO of Twitter. Investor Ali Loughani said. “I think it’s going to be really big. From an investor perspective, it justifies the hypothesis that here’s the real problem that many companies are having, not just a few.”
And the problem is more or less this. Procurement can include almost anything from pens and printers to industry-specific necessities. It inherently requires approval from many layers. More layers have been added over the years as companies have grown larger and more complex. So the request is rejected, but no one knows why. Procurement has become a procedural maze of trap doors, hidden corners, and pointless dead ends. And like a maze, it’s difficult to see clearly and impossible to see in its entirety (without technological help). Overall impact: Procurement functions feel like a black box, and the people who work there are typically invisible and undervalued. Case in point: when was the last time you thanked a procurement person?
Zip already has international customers, Chen says, and has had that “from the beginning.” For example, Tel Aviv and New York-based Pagaya has been a Zip customer since 2022. David Eckstein, Pagaya’s director of procurement, said in an email that the procurement process is considered “chaotic” in most places, but that Zip is “working hard for me and for us.” It was resolved for me,” he said. Zip’s other existing international customers include UK-based semiconductor company Arm and Germany-based digital bank N26.
So the EMEA expansion formalizes something that’s been going on for years. Zip has opened a new office in London and plans to hire aggressively in London, as well as in Germany and France.
“We’ve seen a lot of natural attention coming from EMEA,” Zaparde said. “Up until about a year ago, we didn’t have an EMEA team at all. There was a difference…all the inquiries from prospects were coming to us because they were very focused on procurement intake and orchestration. Because I had this kind of problem.”
Mr. Zaparde and Mr. Chen, CEO and CTO respectively, have their sights set on APAC next. But that’s still a long way off. Today (and perhaps only today) Zip is focused on San Francisco, where it’s holding its second conference, Zip Forward, and announcing new products like AI invoice coding. The company’s branding will be redesigned on city buses and billboards, turning the frankly generic electric blue.
It’s going to be an important week for everyone. But that’s especially true for a startup that was founded just four years ago to solve a burning problem.
Elsewhere… Yesterday, former FTX executive Caroline Ellison was sentenced to two years in federal prison. Here’s more from my colleague Leo Schwartz.
see you tomorrow,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Nina Ajemian supervised the deals section of today’s newsletter.
venture deal
– San Jose, California-based digital adoption platform Whatfix has raised $125 million in Series E funding. Warburg Pincus led the round, with participation from existing investor SoftBank Vision Fund 2.
– Quantum Systems, a Munich, Germany-based drone technology developer, has raised €100 million ($111.7 million) in Series B funding from Notion Capital, Porsche Automobile Holding SE, and existing investors.
– M2P Fintech, a BaaS and infrastructure API provider based in Chennai, India, has raised $100 million in Series D funding. Helios Investment Partners led the round, with participation from existing investor Flourish Ventures.
– Torq, a New York City-based cybersecurity automation platform, has raised $70 million in Series C funding. Evolution Equity Partners led the round, with participation from Bessemer Venture Partners, Notable Capital, Greenfield Partners, and Strait Capital.
– HyperLight Corporation, a Cambridge, Mass.-based provider of photonics integrated circuits and photonics solutions, has raised $37 million in Series B funding. Summit Partners led the round, with participation from existing investors Xora Innovation and Foothill Ventures.
– Centivo, an affordable healthcare company based in Buffalo, New York, receives Series C funding from Cone Health Ventures, MemorialCare Innovation Fund, and existing investors B Capital, Cox Enterprises, F-Prime Capital Partners, and others. We raised $25 million.
– New York City-based accounting automation platform LiveFlow has raised $13.5 million in Series A funding from Valar Ventures.
– Los Angeles, California-based retirement technology company Icon has raised $9.2 million in funding. Tom Blaisdell and TTV Capital led the round, with participation from Zeal Capital, ReThink Impact, and BBGV.
– Mesa, an Austin, Texas-based homeowner membership platform, has raised $7.2 million in seed funding. Streamlined Ventures led the round, joined by Starting Line, Assurant Ventures, Vera Equity and others.
– Reflect Orbital, a Los Angeles, California-based developer of reflective satellites for solar energy capture, has raised $6.5 million in seed funding. Sean Maguire led the round and was joined by Starship Ventures, Baiju Bhatt, Keller Rinaudo Clifton and Keenan Wyrobec.
– Wilmington, Delaware-based game developer Darkbright Studios has raised $6 million in seed funding. BITKRAFT Ventures led the round, joined by Play Ventures, Anthos Capital, King River Capital and others.
– Daylight, a Brooklyn, New York-based deal recommendation engine, has raised $6 million in seed funding. Union Square Ventures and 1kx led the round, with participation from existing investors Framework Ventures and Chapter One, and angel investors.
– Platformatic, a cloud-native Node.js application platform based in San Francisco, California, has raised $4.3 million in seed funding. Rialto Ventures led the round, with participation from existing investors Decibel and Panache Ventures.
– Desia, a London, UK-based intelligence and AI productivity system for investment professionals, has raised $3.3 million in pre-seed funding. Dig Ventures led the round, with participation from 2100 Ventures, Exor Ventures, Octopus Ventures, and angel investors.
– Eion, a carbon removal company based in Oakland, California, has raised $3 million in a series extension from Growmark, AgFunder, Ridgeline and others.
private equity
– Blackstone and Vista Equity Partners have agreed to acquire Bellevue, Wash.-based workforce management platform Smartsheet for approximately $8.4 billion in cash.
– Godspeed Capital has acquired BNP Associates, an air transportation design and engineering firm based in Denver, Colorado. Financial terms were not disclosed.
– PAX Services Group, a portfolio company of New State Capital Partners, has acquired Consolidated Coatings, a building restoration services provider based in Baltimore, Maryland. Financial terms were not disclosed.
– Stellex Capital Management has acquired Fox Brothers Holdings Group, a construction and infrastructure industry service provider based in Lancashire, UK. Financial terms were not disclosed.
– Retirement Planning Group, backed by Genstar Capital, has acquired Parrott Wealth Management, an Austin, Texas-based wealth management company. Financial terms were not disclosed.
– Waste Eliminator, backed by Allied Industrial Partners, has acquired Unlimited Disposal Dumpster Service, a commercial waste management company based in Canon, Georgia. Financial terms were not disclosed.
Exit
– Sixth Street has agreed to acquire a minority stake in EdgeConneX, a Herndon, Virginia-based data center solutions provider, from EQT. Financial terms were not disclosed.
other
– Novartis has agreed to invest $65 million in cash in Cambridge, Massachusetts-based generative biology company Generate:Biomedicines.
IPOS
– FrontView REIT, a Dallas, Texas-based outparcel real estate acquisition, ownership and management company, plans to raise $277.2 million in an offering of 13.2 million shares priced between $17 and $21 on the NYSE. . The company had sales of $56 million for the year ended June 30, 2024.
people
– Burlingame, Calif.-based venture capital firm Ten eleven Ventures has added Scott Lundgren as operating partner and CTO. Previously, he was with Carbon Black.
