SaaS cost-management startups draw VC dollars as recession looms
But recession fears are quickly weakening that tailwind. Underused SaaS solutions are now on the chopping block for businesses laser-focused on controlling their budgets.
This could create an opportunity of its own. Investors are betting that the startups helping companies control software expenses will continue to grow during a downturn.
Zylo is the latest startup in this category to raise funding. The Indianapolis-based software management specialist announced Tuesday that it closed a $31.5 million Series C round led by Baird Capital, with participation from Spring Lake Equity Partners and existing investors including Bessemer Venture Partners, Menlo Ventures and Coupa Ventures.
Other startups that help organizations control software expenses include Vendr, which secured $150 million Series B at a $1 billion valuation in June, and IVP-backed Productiv, as well as Torii, which raised $50 million in February led by Tiger Global.
“In 2020 and 2021, a lot of CFOs let their guard down and said, ‘let’s make sure that remote employees get access to whatever they need,'” said Eric Christopher, Zylo’s CEO and co-founder. “But now, CFOs are going to CIOs asking, ‘why did we sign a three-year deal, and why did we buy so many seats?'”
Software cost management has become a complex problem that is difficult to control manually, Christopher said.
Zylo’s technology helps companies such as Adobe, Atlassian, Doordash, Intuit and Salesforce save money on software expenses by identifying redundant applications and licenses that are not used by employees.
Zylo’s research estimates that companies use more than 300 cloud-based software applications on average and overspend about 15% on licensing these products each year.
“Investors are funding companies like ours because it’s a big market,” Christopher said. “Everyone is buying SaaS.”
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