One of the attractive aspects of software that’s sold on a service model (rather than, say, a one-time purchase of a cardboard box) is that, from an accounting perspective, it converts periodic large capital expenditures into more incremental operational expenses.
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Businesses often end up spending the same amount of money (or more) on SaaS as compared to one-time license buys. Assessing the value a given software service provides and managing expenses is the often thankless task of chief information officers and other IT pros. An Indianapolis-based startup aims to mediate and manage the mass of SaaS that companies subscribe to. And, of course, this SaaS management startup is itself distributed on a SaaS-based business model.
Today, Zylo announced that it raised $22.5 million in Series B funding. Menlo Ventures led the round, and, as a condition of the transaction, general partner Matt Murphy will join the company’s board of directors.
Prior investors Bessemer Venture Partners (which led Zylo’s Series A round), Revolution’s Rise Of The Rest Seed Fund, Salesforce Ventures, Slack Fund, and Indianapolis-based venture studio High Alpha followed on their prior investments in this round.
High Alpha’s representation on Zylo’s board has been halved since Series A. The firm is represented by its managing partner Scott Dorsey. Kristian Andersen, a co-founding partner of High Alpha, was a listed board member on the SEC filing for Zylo’s Series A, filed back in January 2018. A representative for the company confirmed that Andersen is no longer a board member of the company. High Alpha initially took three board seats in the company’s seed round, according to regulatory disclosures.
Alongside board members Murphy and Dorsey sit Bessemer partner Byron Deeter, Studio Science chief executive Steve Pruden, and the company’s CEO, Eric Christopher. The current slate of directors was confirmed by a representative for the company.
The Series B transaction brings Zylo’s total capital raised to approximately $35.2 million. It’s among the largest Series B rounds raised in Indiana state startup history, according to Crunchbase data, and the largest since health analytics company Springbuk raised $20 million in its January 2018 Series B round.
Zylo and its investors are looking to capitalize on a large and growing business opportunity.
“Today, enterprises spend an average of $10,000 or more per employee on SaaS, making the stakes higher than ever for CIOs to optimize their investments and give employees tools that maximize productivity,” said CEO Eric Christopher in a statement provided by Zylo.
In that same statement, Menlo’s Murphy likened the rate of new SaaS business creation to the Cambrian explosion, saying that “the buying decision has never been more distributed within organizations.” He added, “Along with that proliferation comes the need for SaaS Management, a category that Zylo created and leads.”
Zylo says its customers include Nike, Adobe, Slack, and Atlassian. Its website also lists profligate spenders WeWork and Uber among its users. The company says it manages over $10 billion in corporate SaaS spending today.
Illustration: Li-Anne Dias