Insight's Growth Gurus series showcases inspiring leaders from our portfolio of ScaleUp software and internet companies. In this episode, Insight Principal, Thomas Krane, interviews Kevin Frechette, Co-Founder & CEO of Fairmarkit. Insight Partners invested $11M Series A to help Fairmarkit accelerate the digital transformation of procurement. Below is the abbreviated transcription of the audio interview.
As a relatively young entrepreneur, how would you describe your experience as a CEO and how you've evolved as a leader over the years?
I've had to evolve as we've pivoted the company, as we've hired more people, changed offices, and expanded out to international offices. In the beginning, when you're a team of only a few people, you have to touch everything and you can't delegate tasks because there isn't anyone to delegate to. What's most important is to find a couple of core people who are excited about the idea and will scratch and claw to figure out the business pain, identify where the challenges arise, and find a big enough market to address in a way that shows measurable value for our customers.
As we've grown as a company, I personally have had to wear many hats and learn how to do each role while trying to solve different problems. Then, once I felt like we have a playbook, I found someone more equipped to fill that role. Also, from my previous experiences at two tech companies, I have operated under the mentality that any successful business needs to be run on a hybrid of intuition and data. That gut feeling works in the beginning, but it doesn't scale.
If we have the data and we put smart people in the right place, then we give ourselves more time to try to solve the problems that are really slowing the company down or identify massive areas of opportunity.
Where did the original idea for for Fairmarket come from?
The original problem that we were trying to solve is that in the enterprise B2B market, specifically for IT purchasing, no two companies had any idea what the other one paid for the exact same software, hardware, or service. Two organizations that were in the same industry could pay two different prices for the same software because of how the sales rep negotiated the deal or how the buying team procured it.
We built the company with the mission of giving information and purchasing power to customers. In the beginning, we started by cold calling large companies and pitching our idea to CEOs, CTOs, and CFOs. What we learned is that many enterprise companies use consultants to help them make these large IT purchases and have long standing systems in place to negotiate multimillion dollar contracts. As we began to dig into this more, we found that there's a non-strategic space, typically purchases under a million dollars, where it's difficult to decide if you want to put strategic resources behind optimizing the cost. Many times they give up. It's then that we realized that we could build a solution to optimize the space, deliver better business outcomes, assist with compliance and time savings.
What were some of the early challenges that you had to face as you grew the business?
The first challenge was that we almost accidentally became a services company versus a SaaS company. It's a fine balance that I'm sure many founders face when they're starting, but the key is to learn from your first customers and build a repeatable model. We hit an inflection point about a year and a half in when our Tech and Product team, which was about three people at that time, said that they couldn't build a scalable SaaS solution.
The second challenge was that we were asking too much feedback. This is great in the beginning when you want to learn, but as we became experts in the space, we realized that we needed to be a lot more prescriptive. Initially, this was difficult for my co-founder and I to do because we didn't have backgrounds in procurement. We had to learn through experience and hire tenured employees who could help us scale the company, which helped us earn respect as experts in the industry.
What do you find most exciting about the procurement market?
The most exciting part is that procurement is not exciting. When people think about procurement, they see it as a roadblock that's part of an archaic and clunky industry. But to me, that's why it's so incredible. It's a massive area that is tied solely to business outcomes and requires a large amount of spend and people's time. Every organization is reliant on it; we're not vertical specific.
What was the fundraising process like for you? What mattered most to you when selecting an investor to partner with?
I would compare the process to speed dating with advisors. It was an exciting process that allowed us to meet a lot great people. Every meeting allowed us to receive valuable feedback on our business model and how we go-to-market. We also wanted to use this process to help us build a foundation and setup processes from Legal to Finance.
We ended up selecting Insight Partners as an investor for multiple reasons. From a cultural perspective, we were aligned. We wanted to build an engine and then accelerate and execute against that engine. It's not growth at all costs. Instead of throwing cash into sales and marketing, we both wanted to make sure that we were rock solid across all functions before we hit the jets.
Another reason that we went with Insight is because of its army of resources and the community that you've built. Whether it's working with marketing, sales, customer success, or recruiting teams, Insight has a specialized group of operators to support. As a first time founder, we wanted feedback, playbooks and roadmaps, and speak to experts who have seen it before.
What's on the horizon for Fairmarkit for 2020 and beyond?
We want to secure our spot as the leader in tail spend. As I mentioned before, the procurement industry is old. We want to be known as the company that's bringing machine learning and AI to transform historical processes for buyers, enterprises, and vendors. It's a marketplace, so we also help vendors source competitive bids and generate more revenue in an easy way.
Finally, we also want to build a brand that started in Boston, but will expand across the world. Amazon disrupted the way users made purchases. We want to be known as the company that disrupts how businesses make purchases from a B2B marketplace perspective.