Inspired by the Social Capital Index located here on xigi.net, two analysts are posting their take on the enterprises listed in Deals in Play monthly. These DEAL REVIEWS highlight some of the market opportunities and challenges, and are based on reviews of publicly available information. Our hope is that these reviews - and importantly the dialogue and feedback on the deals that follows - will add further clarity to the growing social venture finance space. The following is Jason Rissman’s analysis of Collaborent:

COLLABORENT 

By Jason Rissman

Collaborative purchasing for the public and nonprofit sectors

Overview

How is this not happening already? That’s my reaction to learning about Collaborent’s business model of facilitating group purchasing programs for the public sector. The budgets of public entities ranging from municipalities to school districts to transportation authorities add up to $3-$4 trillion annually. Much of that spending includes goods and services that can be discounted with aggregated buying power. Enter Collaborent. By negotiating group purchasing programs for these public sector entities, Collaborent saves them time and money, and it keeps a percentage of the spending as its fee. Essentially, Collaborent’s business model helps make the public sector more efficient and frees up resources for other important programs. As it turns out, Collaborent’s innovation isn’t the group purchasing program. There’s already non-profit buying consortia that serve the public sector. What Collaborent brings is a for-profit, growth oriented strategy and more aggressive sales approach. The bigger the group it can serve, the deeper the discounts it can offer. Its not sexy, but its solid.  

The Offering

Collaborent has begun to build a local presence and hopes a small equity round will help fuel its growth nationally. The company built the Northeast Ohio Sourcing Office, a council of governments in 13 counties, and has begun demonstrating that public entities are willing to share the savings Collaborent can deliver. Its current funding round is aimed at expanding its sales team and improving its IT infrastructure. Its founding team brings strong domain experience in sourcing and operations. I think Collaborent’s potential to scale is a major upside. If it’s able to expand into other regional markets, I think it will offer strong validation for the company and an improved value proposition. Turning down a way to save money should be a difficult thing for the public sector to do. But I think turning that corner to reach beyond Collaborent’s local market in Northeast Ohio and gaining momentum elsewhere will be an important and telling challenge. All politics are local, and its surely easier to gain the trust and business of those nearest by.  

Social Impact Economic Impact: Saves public sector money that can be spent on additional services.