May 20–SPS Commerce, a St. Paul company that helps retailers and distributors do business with small suppliers via the Web, said Monday that venture capitalists were giving it $18 million to expandand acquire competitors.

The financing from eight venture capital firms is a vote of confidence for privately held SPS at a time when many tech companies find it difficult to raise money. The industry’s prolonged downturn has forced SPS to slash its work force from 185 in 2001 to 81 today.

The company has raised $28 million in venture capital in that time, including the latest funding. It is cash flow positive and expects revenue of $12 million to $15 million this year, CEO Archie Black said Monday.

The latest $18 million in venture capital will be used to buy “three or four” competitors, Black said. He declined to name targets, though he said none are local firms.

“This is a company that managed the ups and downs of the Internet and is a survivor, and now they are thriving,” said Michael Gorman, general partner at St. Paul Venture Capital, one of the investment firms involved in the latest funding round.

The company, which has large customers like Sears and Costco, saw revenue grow 30 percent last year, he said.

SPS Commerce acts as an Internet hub that allows small- and mid-sized vendors without electronic data interchange technology to ship orders directly to a retailer’s data network.

This electronic ordering often is the “Achilles heel” of business-to-business commerce, said Adrian Gonzalez, director of logistics for the executive council of ARC Advisory Group, a supply chain technology research group in Dedham, MA.

At least half of the country’s small- and mid-sized vendors still rely on faxes, phone calls and paper orders to interact with retailers and industrial distributors. Using a Web service allows these vendors to fill orders without buying lots of new technology, Gonzalez said.

“SPS is the first company we’ve found that is able to establish how to efficiently roll out e-commerce networks between big companies and their suppliers,” said Murray Wilson, a principal at River Cities Capital Funds of Cincinnati. The firm is responsible for $3 million of the $18 million SPS just raised.

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