Startup of the month: Pactum

Our interview partner today is Fabio Herle, EPM – Head of EMEAI Markets at Pactum.

Fabio, could you please give us a brief description of Pactum?

Pactum is an AI-based system that helps global companies to conduct autonomous, personalized, commercial negotiations on a massive scale. The system adds value and saves time for both the client and the suppliers by aligning their values to determine win-win agreements. We achieve this via an easy-to-use conversational interface that implements best-practice negotiation strategies. Our cloud-based tool’s applications currently focus on enterprise procurement negotiations. The company is based in Mountain View, California with engineering and operations in Estonia.

Tell us a bit about the founding story for Pactum. How and when was it established?

When having to negotiate in their previous jobs, Pactum’s three Estonian founders realized that there is potential to generate more valuable and sustainable negotiation outcomes for all involved parties by leveraging technology. Keep in mind that Estonia is one of the most digitized countries in the world and has produced the highest number of unicorns per capita today. In 2019, Pactum’s co-founders saw the potential for this technological solution and had the entrepreneurial drive to turn their idea into reality. When Pactum was first founded, the procurement community often judged the concept of autonomous negotiations as unrealistic. Despite this, or perhaps due to this, Pactum has evolved rapidly and our revenue has grown 10x since inception. Very recently, we were recognized as a “Cool Vendor 2022” by Gartner as we have proven that autonomous negotiations are real and generate value.

Who are the people behind Pactum? Tell us about the founders and initiators of Pactum and of course also about your role?

Pactum was founded by Martin Rand, Kristjan Korjus, and Kaspar Korjus who are luminaries from Skype, Starship Technologies, and the Government of Estonia’s e-Residency program. Myself, I was the first person with an actual procurement background to join what was then a small, yet very motivated, team. I am currently responsible for our Enterprise engagements in EMEAI. Before joining Pactum, I was a pioneer in the “negotiation intelligence” space (the first digital approach that supports procurement in learning and conducting the end-to-end negotiation process) and I have 10 years of leadership experience in different roles in Procurement and Supply Chain in global corporations.

Let’s get back to the solution itself. Which problem does Pactum solve for its customers?

Negotiation is an incredibly important skill, however it is very difficult to master this complexity for the general population. The problem is that many people treat negotiation as a zero-sum game – one in which someone must lose. At Pactum, we think the best deals achieve optimal outcomes for both parties without harming each other – something known as the Pareto optimality. This is a challenge for most companies, as around 80% of their deals are high volume and low value – the long tail. Since there are so many suppliers, it’s impossible for Procurement to manage these deals productively. This is how value gets left on the table – but Pactum changes that. Our AI autonomously negotiates between businesses and their suppliers. It can complete complex negotiations in just a few clicks and find a deal for both parties in as little as 15 minutes. And because it’s autonomous, you can engage suppliers simultaneously on a mass scale while you are in control – freeing Procurement to get on with strategic work.

What is the USP of Pactum? What’s the secret sauce that sets you as a company apart from anyone else?

Pactum is the global leader in autonomous negotiations and the technology behind it is at the heart of our organization. In addition, Pactum does not focus solely on price, but can also handle different kinds of terms, communicate with suppliers, understand their preferences, and make trades across those. Our solution is able to, jointly with suppliers, come up with win-win deals instead of just conducting a one-sided interaction. In comparison, when you standardize, this way you usually leave value on the table as it is difficult to get the best out of each individual negotiation. This capability to reach Pareto optimal deals is one of Pactum’s core differentiators and is a new approach to how procurement can autonomously negotiate with suppliers and consequently, generate additional value per deal, whether it is via different contract durations, pricing or any other tradeable terms.

Who are your target customers then? Can you describe your ideal customer profile and maybe name some reference customers already using your product?

At the moment, we focus on Fortune 500 enterprises as they have many suppliers to engage with, and thus, enormous potential to unlock that hidden value. While North America is the largest geographical market for us with many +5BN revenue enterprises, we do not have a specific geographic focus and our customers are located across the globe. Some of our well known customers we can publicly name are Walmart, Maersk and Wesco. If you are a procurement leader in such a corporation and aim to have a fast and positive impact on your bottom line, you should reach out to us.

What kind of negotiation challenges are you confronted with the most? Can you give us an example use case, optimally within the Supply Chain space?

One factor that immediately comes to mind is the variety of goals that drive our customers. Some are mainly interested in automation, while others are interested in savings, value generation or cost aversion. This variety is challenging to approach, but also makes the use cases very interesting. One can imagine that negotiating spot rates in logistics is a completely different use case compared to, for example, generating value in the IT Software Category.

What are the challenges you face when dealing with your clients’ existing IT and data infrastructure? What do you usually need from their side and how do you work with them?

In our experience, during the implementation, the challenges are usually related to the initial ideas about managing suppliers rather than issues with the existing IT and data infrastructure. Most often, a client’s focus has always been on the top 20% suppliers (the valuable ones from a spend perspective). Historically, smaller suppliers have only been engaged with for infrequent, ad-hoc inquiries. With Pactum, customers can suddenly engage with these other 80% of lower spend suppliers. What to do with them? How to negotiate with them? This is an exciting learning process for our customers, as new ideas and innovations arise regarding what is possible. That being said, our customers need to provide Pactum with the tradeable terms as well as a list of suppliers that shall be negotiated with.

With headquarters in the US and engineering and operations based in Europe, Pactum has a very international footprint. Do you see any difference between your US customers and European customers when it comes to implementation?

One significant difference that we experience is that the North American market is moving faster than the European market when it comes to new technologies like Pactum. This is a fact I can personally attest to and, as a European, this was difficult for me to acknowledge. In my humble opinion, this challenge exists not just due to higher standards regarding data storage and processing, but seems to be also an organizational topic. Simultaneously, and despite the above, there are some very innovative, globally leading elements from this region, ranging from procurement technology startups to scoutlabs like DPW or this platform. So, this seems to be a general challenge and I believe that everybody would benefit if we would all manage to move faster where it makes sense, across startups, enterprises, investors, and society alike.

What can we expect from Pactum in the future? What direction will the product be developed in? How will you position yourself as a company in the future?

Only recently, there were just a few among us who believed that negotiations can be conducted autonomously. Pactum has pioneered this and proven that it is possible across many different use cases and industries; we are continuing to further grow and expand globally. Procurement (whether Direct or Indirect) is just one area where negotiations are a form of interaction. This is the big picture and I can tell you, without a doubt, that the potential impact of autonomous negotiations is tremendously large. Due to digitalization, there are many processes that don’t remove humans yet enhance what humans can do. We are only at the beginning of this as a civilization. For example, procurement personnel need to work less and less on routine tasks, and consequently, can focus more on strategic activities.

Thank you, Fabio, for  glimpse into the exciting company that is Pactum. Anything else you want to tell our readers at the end of our interview?

We have clearly established with our many customers across both direct and indirect procurement that autonomous negotiations are generating value. Pactum is growing, including in Europe. If you are a +5B revenue corporation and are interested to engage with us, please contact Florian Geserich (florian.geserich@pactum.com). Florian leads Pactum’s sales efforts across EMEAI and has more than 15 years of experience in procurement. He knows the business, the tools, and the platforms and can help you quantify the value that you can unlock.

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