The software-as-a-service (SaaS) industry is facing budget constraints and staff cuts due to the pandemic and the broader technology slowdown. Companies have tightened their budgets for SaaS purchases to save cash while growing more efficiently.
That’s why Kush founded Kella and Ahmed Sharif Vartana (which my colleague Mary recently dealt with). While working together at fleet management company Motive, Kella and Sharif say they tackled the pain and issues caused by broken SaaS contract management and rigid payment infrastructure. After years of seeing deals fail due to a lack of payment flexibility, they left Motive to build Vartana, aiming to equip businesses with a managed platform that helps merchants close deals.
“Vartana is a win-win for sellers and buyers of SaaS services and hardware products,” Kella told australiabusinessblog.com in an email interview. “It gives suppliers new tools to close contracts and generate cash with prepaid deals, while providing buyers with multiple payment options and a simplified purchasing experience so buyers can buy the best technology available to grow their business.”
Vartana announced today that it has raised $12 million in a Series A round led by Mayfield with participation from Xerox Ventures, Flex Capital and Audacious Ventures. This brings the total to $19 million. Vartana also secured a $50 million line of credit from i80 Group, which Kella says will allow funded deals to be managed through Vartana’s new capital marketplace.
“With the launch of the Vartanas ccapital marketplace, Vartana no longer holds buyer debts on their books, making for a low-balance-sheet business,” Kella said. “We are focused on streamlined, effective growth. We have found great success in the SaaS industry and we are doubling down.”
Vartana’s platform, which Kella refers to as a “sale close platform,” is designed to be used by vendors of business-to-business software, hardware, and hardware in conjunction with SaaS software. Vartana helps manage tasks such as contract tracking, payment terms and signature capture, accepting a range of different payment options (e.g. full payment, deferred payment), and installment plans. Sellers can send multiple quotes at once and give buyers the flexibility to select which payment method works for them. Once payment is selected, the buyer can sign the agreement electronically via web or mobile, finalizing the deal.
On the capital market side, algorithms developed by Vartana normalize data, rate each buyer and expand debt financing offers. The platform connects buyer loan applications to a network of banks and lenders, enabling buyers to apply for funds and receive quotes in real time.
“When deals are financed, traditionally through a bank or through the Vartana platform, sellers get paid on day one,” said Kella. “New non-dilutive cash flow is acquired for the entire deal, sometimes up to five years future money, and buyers don’t have to pay up front, which means they can keep money in their bank account and pay a monthly fee, keeping them nimble and can invest money in the areas of their business that need it most.”
Kella sees Vartana — which has “dozens” of sales departments at companies like Verkada, Samsara and Motive and more than 10,000 buyers, he claims — as a competitor to startups like Ratio, Cashflow and Gynger. Ratio has been particularly successful recently, raising $411 million in equity and credit last September. But he doesn’t see them as direct competitors, pointing out that Vartana’s model revolves around providing financing to buyers and targeting late-stage technology companies.
On this topic, Vartana recently launched a closing platform that allows sellers to “market” financing and deferred payments to any buyer. “This is especially important in a world where cash is king and businesses are looking for ways to keep cash on hand,” explains Kella. “Offering self-service financing as an option to all buyers allows buyers to keep cash and pay for products over time, while sellers gain access to the full contract value on day one.”
Kella didn’t answer a question about Vartana’s earnings. But he said financing volume grew 600% year-over-year while the company’s headcount increased 4x. The plan is to further expand the size of the workforce from 40 to 85 employees by the end of 2023.
Patrick Salyer, a Mayfield partner and a Vartana investor, added via email, “In business-to-business enterprise software, time kills all deals. This is especially true in deal closing, where there is a shocking amount of offline back-and-forth between sellers, buyers, and finance teams, lasting for weeks and causing deals to roll over to the next quarter or die all at once. Vartana’s business-to-business enterprise sales closing and financing platform puts an end to this with a fully digital POS platform with integrated proposals, signatures, payments and self-service financing, improving conversions, sales cycles, order values and cash flow management, obviously crucial for today’s economy .”