September - 2003 issue > Cover Story

By Karthik Sundaram

THEY JUST KEEP ON KNOCKING DOWN CUSTOMERS and so the board and investors thought it would be wise to open up the third round, give them more cash—an add-on, if you will—to continue sales and marketing efforts and continue to push,” says Steve Vivian, a partner with the Prism Opportunity Fund, which provided seed funding for the firm and has participated in all three rounds. “Their burn rate is de minimis, or so minor as to disregard,” he says.

Not just Vivian, Deborah Farrington, an investor with StarVest Partners in New York, the famed Mohanbir Sawhney at Kellogg, and others confer high praise for Chicago-based startup, Fieldglass. Recently the company signed up insurance giant Allstate for a three-year contract. Christa Degnan, a research director at Aberdeen Group, says she was not surprised to learn of the Fieldglass funding, given the promising opportunity represented by the sector at large.

“The segment has never really been adequately addressed by large corporations, but it represents an area of significant expense, with one-third to one-half of all purchasing dollars devoted to its costs,” Degnan says. She adds that the opportunity is large and worth the ongoing attention by venture capital investors. Only 128 companies implemented Web-based procurement services last year, she observes, “but when the market starts to take off, this will be huge.”

Jai Shekhawat takes the praise and interest in his stride. “Fieldglass almost didn't get started. When we first studied the space, there were five or six firms already offering pretty good products. But their business models didn't appear sustainable. They were either too closely affiliated with a supplier or tried to entirely disintermediate the supplier via an exchange,” says the co-founder and CEO. A break-away from a family that served traditionally in the Indian armed forces (Admiral Shekhawat was the Chief of the Indian Navy a few years ago), Jai Shekhawat started off with Tata Burroughs (now Unisys) as a programmer. One of his stints brought him to Atlanta, Georgia in the late Eighties. A business degree from Northwestern’s Kellogg School followed and Shekhawat joined McKinsey & Co in Chicago.

“At McKinsey, we consulted for large clients who were often contracting temporary staff in big numbers. There were many supplier-side procurement software applications, but the buyer-side was minimally served or the learning curves were steep,” recalls Shekhawat. The buyer could perceive the enterprise's problems—on one end, the company would have different projects and on the other end, different groups of contract resources. “Two very similar projects would be contracted out at different prices from the same company, and the project managers wouldn't even know,” recalls Shekhawat. One of the company’s initial insights was that the procurement methods then in use—largely paper-based, manual processes were riddled with inefficiencies. E-procurement was the obvious answer; however, people can’t be described by simple attributes such as a part number, weight or other dimension. Therefore, an entirely different approach than that applied to the e-procurement of products was needed.

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