Pactum raising up to USD 4m seed round
Pactum raising up to USD 4m seed round
TIM LEEMASTER
Pactum co-founders Kristjan Korjus, Martin Rand and Kasper Korjus
Pactum, the San Francisco, California-based business services firm using AI, is currently raising an up to USD 4m seed round to build out staff, according to co-founder and CEO Martin Rand.
“It’ll be a mix of old and new investors,” Rand says. “We’re mainly talking to US [venture capital funds].”
Pactum came out of stealth last fall after it raised USD 1.15m in a pre-seed round from investors that included Jaan Tallinn, the co-founder of Skype and Ott Kaukver, chief technology officer of business communication software services firm Twilio.
The firm currently has 10 employees and plans to triple that by bringing in analysts, negotiation designers, enterprise sales people and full stack developers.
Pactum has developed a corporate negotiating platform and is targeting the, according to some estimates, about 80% of contractual agreements that aren’t even subject to an actual negotiation. Many are also just rolled over without much or any analysis. Such agreements are called “long tail” in the industry.
In March, the company announced a deal with Walmart to automate negotiations with part of its global supplier network. Interim chief marketing officer Rich Lehrfeld saw the efficiency benefit to its contracting system, Rand says.
“He immediately got it when we mentioned long tail . . . he knew it was a problem that their people are nowhere enough to manage such a large number of vendors,” according to Rand.
Another deal with an industry giant may also be soon announced, Rand says. The company has four clients including Walmart and is working to build that out to 10 over the next two years.
Beyond retail, Pactum is also targeting real estate and online marketplace and advertising companies along with other industries such as music licensing. The music licensing industry in particular is well suited to the company’s approach where even the smallest use of a song, say for a charity video for example, needs to be contracted, Rand says.
“We are perfect for a firm that has thousands of similar negotiations in a year,” Rand says.
Pactum earns money either through a profit share of renegotiated contracts or on a fixed per negotiation cost. It is generating revenue and would expect to hit profitability within the next two years.
Rand says suppliers can win as well since there are so many steps in the logistical chain between them and their ultimate customer such as transportation, warehousing and all the different payment terms that can be targeted for more meaningful discussions.
The Covid-19 pandemic is causing chaos in the business world as economies shut down and companies struggle to keep products and services moving.
“The price of commodities and supply chains have turned upside down so we’re seeing a lot of inbound interest,” on managing existing deals and from CFOs that haven’t realized the savings they could generate, Rand says. “It’s our opportunity to help companies get through this.”
Rand was co-founder and CEO of VitalFields, a digital farm management company, which was acquired by Monsanto unit The Climate Corporation. Rand had also earlier worked at a subsidiary of TeliaSonera, the Nordic telecommunications firm.
Rand, who hails from Estonia, cottoned on to the idea of automated negotiations after constantly sitting through business meetings in Europe where the multitude of nationalities and cultures each with different sensitivities and styles struck him as inefficient in some ways.
Kaspar Korjus, a former colleague, and his brother Kristjan, who had helped develop the AI behind the autonomous delivery robots at San Francisco-based Starship, then reached out to him about a startup they were considering and Rand managed to convinced them to work with him on what became Pactum instead.
Pactum means “agreement” in Latin.
Targeting some of the largest enterprises on earth can be challenging for such a new and small firm.
“The sales cycles are mind-blowingly long and there’s a lot of bureaucracy to crunch through so we’re on a learning curve there on how to speed up the process,” Rand says.