An Audacious Goal: How Clio’s Mission of Transforming the Legal Experience For All Is Helping Lawyers Scale

Scaling a company can sometimes feel like a high-speed dash to the top, making it easy to prioritize activities that yield immediate growth. But it can also take time to educate the industries that a company is transforming with tech, and even more time to build trust with prospective customers. These were headwinds facing Clio, today’s leader in cloud-based legal software, when it introduced the first ever SaaS legal practice management software for attorneys.

When Clio launched in 2008, digital transformation was already driving an increasing number of industries towards cloud adoption. Yet in the legal industry, the question wasn’t which product to use. Instead, it was whether attorneys could be convinced that cloud-based applications were usable and secure enough to become part of their core operations. To foster acceptance around the concept of cloud-based legal software, the Clio team knew they had to plan for the long game by investing significant time into educating its market.

In this episode of Growth Journeys, Clio CEO and Founder Jack Newton joins TCV Principal and Clio board member Amol Helekar to discuss why Clio invested in educating an industry that is known for slow adoption as they climbed to the top and became the market leader for cloud-based legal technology.

Here’s what you’ll learn:

  • Why Clio invested in actively educating its market, rather than waiting for the market to come to them
  • How a strong partnership strategy can become an impenetrable moat
  • Choosing a mission statement that can foster growth
  • How to draw clients, employees, and investors into your mission
  • Jack’s tips on fundraising later rounds

To learn more, settle back and press play.

Please find the transcript below, which has been edited for brevity and clarity.

Amol Helekar: Welcome to Growth Journeys, a podcast series from TCV focused on lessons from the field from entrepreneurs in TCV’s network. I’m Amol, a principal at TCV, and I’m here with Jack Newton, CEO and co-founder of Clio.

Jack has been instrumental in driving adoption for cloud-based technology in the legal industry. In 2008, he brought the first SaaS legal practice management application to market. Today, Clio is a market leader and the only end-to-end solution for law firms.

As an investor and advisor to early-stage startups, Jack is a nationally recognized speaker and author of the bestselling book: The Client Centered Law Firm. I’m really excited to chat with Jack about how to get a business off the ground in times of uncertainty, how to foster a strong community and how to galvanize the team around a joint mission. Thanks for joining me, Jack, and welcome to Growth Journeys.

Jack Newton: Thanks for having me, Amol, happy to be here.

Amol Helekar: Jack let’s rewind back to 2008. When you founded Clio, you were the first to market cloud-based legal practice management software at a time when businesses were really hunkering down. On top of this, you had a baby on the way, and were working with your co-founder, who is hundreds of miles away in Vancouver.

Talk about a challenge! Many would have shied away, and yet you saw an opportunity there. How did you do it and what kept you going?

Jack Newton: Yeah. Great question, Amol. And what we saw back in 2008 was obviously a really tough macro environment from a financial crisis perspective. Fundraising was extremely difficult, people were really hunkering down and battening down the hatches for the impact of the great recession.

But we also saw at this point in time, a unique opportunity to bring the cloud to legal. When Rian and I came up with the idea for Clio back in 2007, what we saw with the advent of the cloud was a really clear signal that this was a technology and an approach to delivering software that was going to transform virtually every industry in the world.

Amol Helekar: Yeah. And it’s been quite the journey ever since. You know, it’s one thing to identify a market opportunity, but it’s entirely different to convince skeptical customers that there’s a real need for your product. How did you win customers over?

Jack Newton: Yeah, I would say in the early days of launching Clio, we had some customers just rush to the product and give us feedback along the lines of: “I’ve been waiting for somebody to develop a solution like this for me. Thank you. I’m all in.” And they were our most enthusiastic early adopters and that was obviously a very low friction process.

But for a large majority of the early customers we started onboarding there was obvious advantages to the cloud from an affordability perspective, from a total cost of ownership perspective, from an ease-of-use perspective, all of those things were obvious advantages to the cloud. But what was less clear back in 2008, 2009, was whether it was ethically acceptable for lawyers to put their practice in the cloud and to put really sensitive client data in the cloud. They have a very high bar with regard to privacy and security that they need to meet when they adopt and deploy IT infrastructure into their practice.

What we realized pretty early on in that growth journey was we’re going to need to get ahead of that conversation. We’re actually going to need to lead that conversation and educate the space around the security and ethics of cloud computing as it relates to legal professionals. And that was a big lift. We put a lot of energy into thought leadership, into speaking on this across the country, putting on seminars and writing white papers and even advocating at the bar association level for ethics rulings relating to cloud computing. And in the end, we ended up being successful in educating the market on cloud computing and really helping drive cloud adoption in legal, which is traditionally a pretty slow adopter of new technology.

Amol Helekar: Yeah. And I know it takes a lot of effort to build that type of trust amongst your customer base. And you know, something that a lot of people talk about is building a community. How do you go about doing that? What are the steps and how do you maintain momentum?

Jack Newton: Yeah, it’s a great question. And I think when you’re really trying to transform an industry and how it operates, what we realized pretty early on in Clio’s growth journey is that the product isn’t enough. Just having great technology is part of the solution, but it’s not enough to actually drive that true transformation in how an industry operates.

What we realized was we needed to spark a revolution in legal and a revolution in how lawyers thought about delivering legal services to their clients and how they embraced technology as a really foundational and integral part of the value they’re delivering to their clients.

And we’ve spent a decade building this movement around digital transformation in legal, and also around this concept of a client-centered law firm that is thinking about the way they deliver legal services in a completely different way.

This is something we also realize is bigger than any one company can do. We’ve built a huge integration network with over 200 integration partners that have built on top of the Clio platform. We’ve locked arms with bar associations from around the world to help bring the message around digital transformation and client-centered lawyering to lawyers as well.

Amol Helekar: A decade is a long time to build that type of community, but you guys have put a lot into it. Along the way, how did you know you were on the right track?

Jack Newton: I think one of the really early signals is that you’re seeing the snowball effect build from year to year. And I think one of the really important messages for our listeners today is that this doesn’t happen overnight. When you’re making the kinds of investments that we have been at Clio on thought leadership, on building this community, on building customers that will shout from the rooftops about your product, but also help enroll additional customers in the movement that you’re helping drive.

Partnerships are another example that take years to forge. But once you have those relationships built, you’re building a really defensible moat around your business.

Whether it’s through social channels, or other forms of engagement, you’re seeing evidence that the number of people that are enrolled in the movement and the community you’re trying to create is growing over time. And importantly, you’ve got a high net promoter score and they’re pulling more of their colleagues into the fold.

Amol Helekar: Yeah, that’s fascinating. I know one of the aspects of the community is the Clio Cloud conference, which is now the largest legal tech gathering in North America. What is the event all about and what made you invest the time and money to build it to where it is today?

Jack Newton: Yeah, it’s another great example of one of these investments that takes time to build. It’s the largest legal technology conference in North America. And it’s something we’ve put a huge amount of energy in over the last nine years to make successful.

And if we rewind all the way to the very first year we did the Clio Cloud Conference, it was very humble. It was just over 200 attendees and a very modest venue in Chicago, Illinois. We had 4,000 attendees at our virtual edition of the Clio Cloud Conference last year. We had over 2,500 attendees at the in-person Clio Cloud Conference in San Diego the year before that. And it’s an event that is just so energizing for both our attendees and our employees that attend this conference and just get so energized and excited by the opportunity to connect with both our customers and the prospects that attend this conference.

The way we frame this conference with attendees is really this conference is not about Clio. This conference is about innovation and thinking about what the next 10 years of innovation in legal will look like. It’s really a gathering of the best and brightest minds in legal coming together and what’s amazing for Clio is we’ve become an intrinsic part of that discussion. The conference is continuing to build year over year, and I can’t wait to get back to an in-person conference next year for our 10th year anniversary.

Amol Helekar: Yeah. Having attended the Clio Cloud Conference for the past few years now, I can attest to how inspiring it is for customers, employees, and investors too. Everything we’ve talked about is about community building, but it’s also part of your mission to transform the legal experience for all. What does that mission mean to you?

Jack Newton: The mission is really an important part of everything we do at Clio and it’s really become a north star for our company, our employees and our customers attached to our mission. That mission, which is to transform the legal experience for all, is number one, big and audacious.

At the heart of this is a massive access to justice gap. And one of the statistics that I was blown away by the first time I heard it, is that 77% of consumers that had a legal issue, did not see that legal issue resolved by a lawyer. And I describe this as the latent legal market. This is a vast market that is not currently being served by how legal services are delivered today. What I see as the opportunity is to better connect the millions of consumers that have legal issues with lawyers that can help them solve those legal issues.

Jack Newton: But to do that, we both need to create more efficiency and ease around accessing legal services in the first place. Most consumers are scared off by how lawyers price their services. They’re scared off by the idea of paying 400 plus dollars an hour to arrive at a solution to their legal problem. We believe what Clio, in particular, and what technology in general will enable law firms to do is to deliver their services in a much more efficient way. In a way that is more affordable and accessible by the average consumer, that automates big parts of what is done manually today.

And importantly is delivered over the internet. What we’ve seen over the course of Clio’s 10-plus years of growth is a very steady march away from on-premise law systems and bricks and mortar law firms toward a new cloud-based era where lawyers are delivering their legal services online and they’re delivering them in a client-centered way.

Ultimately, we believe being a cloud based and client centered law firm is what is going to unlock our ability to achieve this audacious mission to transform the legal experience for all.

It’s something that inspires not just “Clions,” which is our nickname for our employees, but also inspires our customers and inspires our broader integration partners. Because everyone understands that this mission is so deeply important and something that is going to be good for the public.

But it’s also, if we execute on this well, going to help make lawyers more successful. It’s going to help make lawyers feel like they’re truly bridging that access to justice gap that frustrates so many lawyers today.

It’s a big audacious mission. It’s exciting. It’s so multifaceted in terms of how we’re realizing it. But it is something that inspires our team on a daily basis.

Amol Helekar: Absolutely. And you know, some companies simply put a mission statement on their website, but Clio is really embracing yours. So how did you put that mission into practice across your business?

Jack Newton: I think when you arrive at a mission that is truly resonant with your team and you see the impact and inspiration it can drive in your team, you need to make it a part of your daily discourse. And that’s exactly what we’ve done at Clio.

We’re making decisions around how much this helps accelerate our ability to achieve our mission.

I believe that there’s also a huge role in the importance of the mission as it relates to recruiting. There’s an increasingly large percentage of the talent that’s out there today that is not just looking for pay and benefits as the important factors they’re looking at in the company they choose to work for.

We’re able to recruit the best talent on the planet in large part, thanks to a mission that is powerful and resonant. I really can’t understate how important that is to the overall success of a company, especially when you’re thinking in the long-term and thinking about building a multi-decade company.

Amol Helekar: I can tell you’re really passionate about it and how important it is to Clio’s success. You know, some people feel there’s a tradeoff between tackling the mission or driving growth. You’ve seen both tremendous growth and progress against achieving your mission. What’s your secret to achieving that?

Jack Newton: So, yeah, Amol completely agree. I think we’ve been really successful in pursuing both a mission that resonates and driving extraordinary growth and, and rather than being at odds with each other, I think in a lot of ways we’ve actually seen these be in service of one another. What we really talk about is, is our growth is what enables us to have broader impact and to achieve our mission.

The energy needs to go into finding how you can actually build, a bit of a flywheel where the progress you’re seeing on your mission and the team, and customers, and the broader movement that is helping attach to your mission is actually helping drive your overall flywheel of growth.

Amol Helekar: It’s something that Clio has put a lot of effort into and has been able to execute against. You know, over the years you’ve grown tremendously and successfully raised your series D and E rounds. Any advice you’d give to entrepreneurs who are fundraising?

Jack Newton: Yeah, absolutely Amol. One thing is you need to be executing really well and have a long-term vision that you’re talking about with investors and hopefully inspiring them in a way that they want to be part of that story and part of that mission and want to be partners with you in realizing that mission.

If you look at how lawyers practice today in the year 2021. In a lot of ways, it’s not that different from how they were practicing in the year, 1981. And when you’re looking at that scale of transformation, that scale of opportunity, it can be just such a gigantic opportunity that is hard for investors not to get excited about the opportunity.

The second piece, I think that is really exciting about the Clio opportunity in particular, but in general, something entrepreneurs can think about when they’re fundraising is, are you driving the kind of transformation in your industry that will actually expand the TAM of your customers? As a first step, can you expand the TAM of what your customers are able to address?

And with Clio, if we’re successful in our mission, we’re going to allow our customers to address that latent legal market which will vastly expand the TAM of the legal industry. Which in turn will expand our TAM as well. So that’s been one part of our story that I think is, is really powerful and exciting.

But Amol maybe you’re best positioned to comment on, on what attracted you to Clio in particular and what attracts you to companies in general. What advice do you have for other mission-driven founders and entrepreneurs?

Amol Helekar: I think to your point, investors are really recognizing how important it is for companies to have a strong vision and a culture that supports their growth agenda. So being mission-driven is not only great for the broader community. It also leads to stronger company culture, a deeper focus on the product and the customer experience and brand.

And ultimately this is in service of the company’s growth over time and can differentiate it in the market as it has for Clio. My advice to other entrepreneurs is to lean into their company’s mission statement and really incorporate that statement into the company’s products and growth strategies and to consider it central to their culture, rather than at odds with the growth agenda.

Jack Newton: I love that.

Amol Helekar: Jack, thank you. This has been an incredibly educational and inspiring discussion. It was great to have you on Growth Journeys today. And thanks to all of you out there for listening.

Jack Newton: Thanks for having me, Amol. It was a great conversation.

***

The views and opinions expressed are those of the speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the speakers and disclaims any responsibility therefor. This interview and blog post are not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this interview and blog post, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.


AxiomSL: A Fintech Franchise Takes Off

The financial crisis of 2008 came as a resounding shock for countless companies, including many in the financial industry itself. But not for AxiomSL, a leading provider of cloud-enabled software for governance, risk, and compliance (GRC) regulatory reporting solutions to the financial services industry.

AxiomSL was founded by Alex Tsigutkin and Vladimir Etkin in 1991. As data management experts they had seen disorganized, unintegrated GRC processes even in highly regarded financial firms. “Everywhere I went, it was the same. The data was all over the place, in different systems and different departments,” explains Tsigutkin, CEO of AxiomSL. “We saw a real need to bring all of this enterprise data together at a granular level.”  Large financial institutions soon began adopting AxiomSL’s software to assemble data they used for assessing risks and reporting financial results to investors and regulators.

Then the repeal of the Glass-Steagall Banking Act in 1999 freed financial institutions to diversify into a wide range of new activities, and GRC processes took a back seat comparatively. The new priority was financial innovation and growth, to extend the United States’ position of prominence in global finance. “For years, the government and regulators didn’t put that much pressure on financial institutions,” Tsigutkin points out. “That changed completely after the 2008 financial crisis, and that’s when AxiomSL really took off.”

By this time, the company’s software data management platform and related algorithms organized operating data to align with the latest requirements of various regulatory authorities in multiple countries globally. These category-leading capabilities spurred AxiomSL’s sales growth into double-digit territory. International business began climbing too. “We were growing like wheat in the fields,” says Tsigutkin, a native of Ukraine.

But growth also brought some challenges. AxiomSL had always given its customers attentive support, especially when they were new to automating GRC processes. With rapid growth, that level of care was becoming harder to sustain; a successful strategy for landing and expanding clients was reaching its limits. “It’s very difficult to do everything on your own, especially dealing with a large and growing client base at the same time,” Tsigutkin says. “I felt this was a great opportunity to put some expert disciplines together. When I got advice on how to do that, it was to bring top notch growth equity into the mix.”

So Tsigutkin invited growth-stage investors to present their ideas for AxiomSL, including TCV, a firm he knew well from regular interactions in the past. With around $2 billion already invested in fintech, TCV understood that AxiomSL’s business could grow even faster for three interrelated reasons: an explosion of data in the financial world, proliferating regulations around the globe, and sharply higher consequences for financial companies that mismanaged them. With tighter financial discipline, more proactive sales efforts and scaling up systems and processes, AxiomSL believed it could become not just a category leader but the global standard for risk management and regulatory infrastructure solutions for the financial services industry.

“As we talked with private equity firms, TCV was distinctive in a number of aspects,” recalls Etkin, the company’s CTO. “They had proven success with fintech and GRC companies, so their long-term vision for AxiomSL and their approach to collaborative business-building really stood out.”

TCV invested in AxiomSL in June of 2017, and the new partnership moved fast. “TCV knows how to focus on what’s key for scaling a company, not just growing in the same way,” Tsigutkin explains. For example, TCV pinpointed the need for industrializing sales, sales leadership as well as more robust processes for planning and budgeting. “They also helped us understand how to use equity to attract and reward people,” Etkin notes, which enabled the company to recruit multiple new executives with significant experience scaling similar organizations.

“TCV saw in AxiomSL a category leading industry-specific software business with next generation technology, a highly satisfied client base, a mission-critical use case, – and most importantly, product-centric co-founders and partners in Alex and Vlad who had deep subject matter expertise and a strong growth orientation.” recalled Nari Ansari, TCV general partner and former board director at AxiomSL.

The collaborative approach between AxiomSL management and TCV helped AxiomSL accelerate growth, increasing software revenue over 150% in three years. Its ControllerView® intelligent data management and analytics platform could provide thousands of reports across dozens of jurisdictions and more than 100 regulatory agencies. From 60 employees during the financial crisis, the company had grown to nearly 900 globally. According to Tsigutkin, “having such a strong team really helped us to build a world-class organization.”

Consistent with TCV’s longstanding investment thesis for governance risk and compliance solutions, change and complexity can provide for significant opportunities for leading software vendors.  Indeed, AxiomSL’s positioning for its offering set has been as a “Platform for Change” given the constantly evolving regulatory environment for financial services market participants.  As the business entered 2020, that change orientation would become even more paramount.

“As COVID-19 started in early 2020, the world changed quickly, and the swiftness of market happenings was adding increased complexity for banks and regulators alike. During this period, AxiomSL’s value proposition in understanding and managing risk continued to demonstrate its importance and the business saw sustained momentum throughout 2020,” remarked Amol Helekar, a TCV principal. 

When the pandemic hit, AxiomSL as an organization had to adapt as quickly as its customers. “Being with TCV during this period was absolutely a blessing,” Tsigutkin recalls. “First they helped us to stay calm and provided very sound advice about our talent strategy and the welfare of our valued Axiom team members. Then they helped us focus on execution and growth. Moving more into digital marketing, for example, really enabled us to keep growing in 2020.  TCV also supported us as we increased our investment in cloud offerings which became even more important in a distributed COVID world for our bank clients.”

AxiomSL’s hyper-growth during the TCV partnership resulted in consistent market share gains. Along with the company’s strong profitability, blue chip client list and technology leadership, these attributes brought interest from outside parties, particularly private equity firms. As Rick Kimball, TCV founding general partner and former AxiomSL board director remarked, “Alex, Vlad, and the team transformed the organization during our partnership while deftly executing a growth agenda that expanded the business on multiple dimensions.”

In the fall of 2020, TCV worked collaboratively with Alex, Vlad, and the AxiomSL management team to assess this external investment interest and prepare the business to explore various alternatives. Ultimately this brought an offer from private equity firm Thoma Bravo to acquire a majority stake in the company.  The new investment closed in December of 2020 in one of the largest GRC transactions of its kind, and Tsigutkin took a moment to reflect, “Our growth is due in no small part to the contributions of TCV, who has been a critical partner for AxiomSL for the past three years as we grew the franchise at a record pace.”


OneTrust Secures $300 Million Series C Funding at a $5.1 Billion Valuation led by TCV

ATLANTA, Dec. 21, 2020 /PRNewswire/ — OneTrust, the largest and most widely used privacy, security, and data governance technology platform, today announced a $300 million Series C funding round. The funding values OneTrust, founded in 2016, at $5.1 billion and brings the company’s total money raised in the last 18 months to $710 million. TCV signed on as a new investor and led the round, joined by OneTrust’s existing investors, including Insight Partners and Coatue.

Watch the video: Kabir Barday, CEO and Blake Brannon, CTO, discuss OneTrust’s growth to a $5.1 billion-valued leader in privacy, security, and governance

OneTrust’s technology sits as the epicenter of trust for organizations, enabling strong privacy, security, data governance, and ethics and compliance practices that underpin their digital transformation. As organizations strive for increasing levels of efficiency and agility in their transformation journey, they are looking for a platform approach to managing privacy, security, and governance requirements across an increasingly complex regulatory environment.

Today, 7,500 organizations, including more than half of the Fortune 500, use OneTrust’s technology to comply with the world’s privacy, security, and compliance requirements, including GDPR, CCPA, LGPD, ISO 27001, NIST, DOJ Guidelines, and hundreds of other laws and frameworks. The list of regulations an organization must comply with continues to rise. In 2020, sweeping privacy laws came into effect in California, Brazil, and others, and Gartner predicts 65% of the world’s population will be covered under modern privacy regulations by 2023, compared to just 10% today.

OneTrust has pioneered a true platform approach to trust with its modular products that are built on a single code-base and have been awarded 130 patents. Product offerings include:

  • OneTrust Privacy – Privacy Management Software 
  • OneTrust DataDiscovery™ – AI-Powered Discovery and Classification 
  • OneTrust DataGovernance™ – Data Intelligence Software
  • OneTrust Vendorpedia™ – Third-Party Risk Exchange 
  • OneTrust GRC – Integrated Risk Management Software 
  • OneTrust Ethics – Ethics and Compliance Software 
  • OneTrust PreferenceChoice™ – Consent and Preference Management Software 

In less than 18 months, OneTrust raised $710 million in funding. Since its founding in 2016, OneTrust has grown to the largest and most widely used privacy, security, and governance technology and achieved the #1 spot on the 2020 Inc. 500 list of fastest-growing private companies.

“OneTrust is leading the market outright and showing no signs of slowing down or stopping,” said Ryan O’Leary, senior research analyst, Legal, Risk, and Compliance at IDC in the report: Market Share Worldwide Data Privacy Management Software Market Shares, 2019: OneTrust Dominates the Competition. Other key analyst recognition includes:

“Our mission is to build the technology platform that creates the trust fabric of an organization, while addressing the hundreds of privacy, security, and compliance requirements they are faced with today,” said Kabir Barday, OneTrust CEO and Fellow of Information Privacy. “We were excited when TCV approached us for an investment. Even with most of our previously raised funds still available, their partnership allows us to further accelerate our mission, leverage our capital and currency to drive organic and inorganic growth, and deliver for our customers and partners long term.”

“Consumers and regulators are demanding that every company on the planet comply with complex and ever evolving privacy regulations,” said Tim McAdam, General Partner at TCV. “There are hundreds of regulatory initiatives in the works emanating from all major countries. OneTrust has emerged as the runaway SaaS leader in the trust and privacy arena. Kabir and his team have built the only truly global privacy platform allowing companies at any stage or size to own their privacy initiatives and remain compliant. TCV is honored to partner with such a rapidly growing and category-defining company led by an outstanding team of innovators.”

For information or to request a demo, visit OneTrust.com

OneTrust, OneTrust DataDiscovery, OneTrust DataGovernance, and OneTrust PreferenceChoice are registered trademarks or trademarks of OneTrust LLC or its subsidiaries in the United States and other jurisdictions.

About OneTrust
OneTrust is the #1 fastest growing and most widely used technology platform to help organizations be more trusted, and operationalize privacy, security, data governance, and ethics and compliance programs. More than 7,500 customers, including half of the Fortune 500, use OneTrust to build integrated programs that comply with the GDPR, CCPA, LGPD, ISO 27001, NIST, DOJ Guidelines, and hundreds of other laws and frameworks.

The OneTrust platform is powered by the OneTrust Athena™ AI and robotic automation engine, and our offerings include:  

  • OneTrust Privacy – Privacy Management Software 
  • OneTrust DataDiscovery™ – AI-Powered Discovery and Classification 
  • OneTrust DataGovernance™ – Data Intelligence Software
  • OneTrust Vendorpedia™ – Third-Party Risk Exchange 
  • OneTrust GRC – Integrated Risk Management Software 
  • OneTrust Ethics – Ethics and Compliance Software 
  • OneTrust PreferenceChoice™ – Consent and Preference Management Software 

Be a More Trusted Organization™. To learn more, visit OneTrust.com or connect on LinkedIn and Twitter

About TCV
Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. TCV has invested over $14 billion in leading technology companies and has helped guide CEOs through more than 125 IPOs and strategic acquisitions.

TCV’s software investments include Alarm.com, Altiris, Ariba, Avalara, ExactTarget, ETQ, FinancialForce, Genesys, IQMS, OSIsoft, Oversight, Silver Peak, Sitecore, SMT, Splunk, Vectra, and many more. TCV is headquartered in Menlo Park, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, please visit http://www.tcv.com.

1IDC, Worldwide Data Privacy Management Software Market Shares, 2019: OneTrust Dominates the Competition, Doc # US46214219, April 2020

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

Media Contacts
Gabrielle Ferree, OneTrust
+1 770-294-4668
media@onetrust.com

Katja Gagen, TCV
+1 415 690 6689
kgagen@tcv.com

SOURCE OneTrust


Commerce Technology Provider Spryker Announces $130 Million Financing Round Led by TCV to Accelerate U.S. Centric Global Expansion to Enable Transactional Business Models

NEW YORK AND BERLIN (PRWEB) DECEMBER 17, 2020

Spryker, a fast-growing commerce technology for global enterprises, today announced that it has raised over $130 million in a Series C financing round, led by Silicon Valley-based TCV. Existing investors One Peak from London and Project A Ventures from Berlin also participated in the round.

The funding will be used to expand Spryker’s proven B2B and Enterprise Marketplace products and create a compelling 3rd party technology AppStore. Spryker also intends to grow its international footprint with a focus on the U.S., which already accounts for 10% of its annual software revenue. With $7 billion in annual spend, the potential in digital commerce software is massive — and Spryker is rapidly increasing its market share. Spryker also intends to grow its global talent to maintain its innovative edge and continue to build new products for future use cases and touch points, including IoT commerce, subscription, and click & collect.

Used by over 150 global customers, Spryker accelerates the deployment, time-to-value, and transformation towards transactional business models beyond e-Commerce, retail, and desktop. These benefits stem from Spryker’s innovative headless and API-based architecture, combined with a modular packaged business capabilities (PBC) design. The cloud native PaaS (Platform as a Service) delivery model empowers sophisticated businesses that have outgrown SaaS (Software as a Service) and on-premise single tenant models. As more companies shift to become “composable enterprises“ led by multidisciplinary “fusion teams”, Spryker is at the forefront of this movement having pioneered and predicted these approaches.

Founded in 2014, Spryker has been growing its recurring revenue more than 100% annually. The global team counts more than 250 employees with over 35 nationalities, working out of offices in Germany, USA, U.K., Netherlands, and Ukraine. Spryker recently pioneered a “New Work” model, offering remote first options for talent worldwide. Spryker is expanding operations in the U.S. in early 2021 to continue its rapid growth and support global customers, such as Ricoh, Siemens, and Toyota.

Spryker was named the most innovative and visionary of all new vendors in the Gartner Magic Quadrant for Digital Commerce, recognized as a major player in B2B e-Commerce by IDC, and has partnered with leading global software integrators.

Boris Lokschin, Co-Founder & CEO at Spryker Systems said:

“With more industries beyond traditional retail building transactional business models we enable our global enterprise customers at any touchpoint. Verticals like Food & Beverages, Manufacturing, Services or FMCG transform to become composable enterprises and demand for cloud native, modular commerce technologies to power their sophisticated B2B, Enterprise Marketplace, or Unified Commerce initiatives. They want the platform to respond to digital best practices and enable shorter time-to-value, better TCO, and faster innovation which always was Spyker’s DNA. With TCV we are happy to have one of the most reputable global growth funds joining us to support our global, U.S.-centric expansion as well as groundbreaking product roadmap.”

Gopi Vaddi, General Partner at TCV who will be joining Spryker’s board of directors, said:

“We at TCV are pleased to partner with Boris, Alex, and the team at Spryker in their effort to provide a modern commerce platform that revolutionizes the deployment model with packaged business capabilities. With the acceleration of the digital adoption curve in the global pandemic, there has never been a better time for customers to rethink their digital commerce strategy.”

Bob Burke, Venture Partner at TCV, said:

“Digital commerce is a strategic priority for enterprises operating across consumer (B2C), business (B2B), direct to consumer (D2C) and marketplaces. Spryker offers a next-generation solution with a modular, API-first solution that is extensible with the ever-changing business & technology needs of enterprise organizations. We look forward to supporting the Spryker team as they expand internationally and empower businesses in their digital transformation.”

David Klein, Co-founder and Managing Partner at One Peak, said:

“Similar to how Hybris and Demandware led the first wave in commerce infrastructure software solutions, Spryker is now leading the way with a best-of-breed, highly scalable cloud platform which drives sales for its customers. Boris, Alex, and the Spryker leadership team have done an outstanding job in hyperscaling the Company to a global leader in the past three years since our investment, and we are thrilled to continue to support their expansion into the US and beyond.”

Florian Heinemann, General Partner at Project A Ventures, said:

“Since its founding in 2014, we have been excited about Spryker’s development and growth. We are confident that with this new funding and the world-class team, they will become one of the global leaders in e-commerce software. New transactional business models require innovative technical implementation and Spryker is the best solution we know of to do this. For many companies with sophisticated business models, Spryker is the right partner, especially in B2B and marketplaces.”

Oscar Jazdowski, Co-General Partner at SVB, global banking Partner of Spryker said:

“SVB is excited to be part of Spryker’s growing success story. We are extremely impressed by the management team and are convinced that their commerce solutions are building the backbones of today’s enterprises. We are confident that Spryker will successfully scale globally, and we are pleased to provide support with funding and expertise across Spryker’s core markets in Germany, EMEA, and the U.S.”

With $130 million raised in this round, Spryker’s company value exceeds $500 million which makes it one of the fastest growing enterprise commerce software companies ever.

About Spryker:

Founded in 2014, Spryker enables companies to build transactional business models in B2B, B2C, and Enterprise Marketplaces. It is the most modern platform-as-a-service solution with a headless architecture that is cloud-enabled, enterprise-ready, and loved by developers and business users worldwide. Spryker customers extend their sales reach and grow revenue with a system that allows them to increase operational efficiency, lower total cost of ownership, and expand to new markets and business models faster than ever before. Spryker solutions have empowered 150+ companies to manage transactions in more than 200 countries worldwide. Spryker is trusted by brands such as Toyota, Siemens, Hilti, and Ricoh. Spryker was named the most innovative and visionary of all new vendors in the Gartner Magic Quadrant for Digital Commerce and named a major player in B2B e-Commerce by IDC and is the only commerce platform to provide full B2B, B2C, D2C and Marketplace capabilities out of one stack. For more information about Spryker please visit Spryker.com.

About TCV:

Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. Since its inception, TCV has invested over $14 billion in leading technology companies, including more than $2 billion in fintech, and has helped guide CEOs through more than 125 IPOs and strategic acquisitions.

TCV’s investments include Airbnb, AxiomSL, Dollar Shave Club, ExactTarget, Expedia, Facebook, LinkedIn, Netflix, Nubank, Payoneer, Splunk, Spotify, Strava, Toast, Xero, and Zillow. In Europe, TCV has invested over $2 billion in companies including Believe, Brillen.de, FlixMobility, Klarna, Mollie, Perfecto, Redis Labs, RELEX Solutions, Revolut, RMS, Sportradar, The Pracuj Group, and WorldRemit. TCV is headquartered in Menlo Park, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, visit https://www.tcv.com/.

About One Peak:

One Peak is a growth equity firm investing in technology companies in the scale-up phase. The firm provides growth capital to exceptional entrepreneurs with a view to transform innovative and rapidly growing businesses into lasting, category-defining leaders. In addition to Spryker, One Peak’s investments include HighQ, Neo4j, DocPlanner, Keepit, Concentra Analytics, Quentic, Coople, DataGuard, Pandadoc, and Brightflag. To learn more, visit http://www.onepeakpartners.com.

About Project A:
Project A is one of the leading venture capital companies in Europe, with offices in Berlin and London. In addition to $500 M in assets under management, Project A provides its portfolio companies with a wide range of operational support services. This includes more than 100 employees from key areas such as software engineering, business intelligence, marketing, recruiting, and many more. In 2020 Project A was named Germany’s best VC by Business Insider magazine. Project A was founded in 2012 and since then has supported more than 60 start-ups in 12 countries. The portfolio includes companies such as Catawiki, WorldRemit, Homeday, Spryker, sennder, KRY, Trade Republic, and Voi.

About SVB:

For over 35 years, Silicon Valley Bank (SVB) has helped innovative businesses, enterprises and their investors move bold ideas forward, fast. Through its various locations in international innovation centers, SVB offers clients targeted financial services and expertise. No other bank in Germany focuses solely on the innovation economy. Europe’s leading technology and life science businesses, in all stages of development, look to SVB’s niche expertise, experience and unparalleled network, as they grow at home and tackle new markets abroad. Learn more at svb.com/Germany.

Media Contacts:

For more information about Spryker please visit Spryker.com.

Media Contact:

Spryker, press@spryker.com
TCV, Katja Gagen, kgagen@tcv.com, 415 690 6689


Selling Success: Secrets of Sales Leadership from Planning and Recruiting to Enduring Customer Satisfaction

Revenue is the lifeblood of any business, yet sales planning in a fast-moving tech world is easier said than done. It includes art and science: to succeed, sales leaders need to be both, creative executers and analytical thinkers. New competitors can launch into your markets more easily than ever, while SaaS business models are making it harder to land and expand enterprise-wide contracts. In this timely episode of Growth Journeys, long-time B2B sales leader Mark Smith (NetScreen, Infoblox, Arista, Rubrik) shares veteran advice on sales planning with Kunal Mehta, a principal in TCV’s Portfolio Operations team. Key take-aways include basing near-term forecasts on long-term fundamentals and applying the power of propensity models to predict sales success. Mark and Kunal also explore the secrets of hiring and motivating successful salespeople, why technology is changing the sales cycle, and how to think about 2021:

  • Using shared data and definitions to integrate sales planning and execution
  • Leveraging sales recruiting for business development
  • Aligning engineering and marketing in support of sales plans
  • Why the pandemic is a tailwind for tech companies
  • How the SaaS model gave birth to customer success management

For all this and much more, settle back and press play.

***

The views and opinions expressed are those of the authors and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the authors and disclaims any responsibility therefor. This interview and blog post are not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this interview and blog post, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.


Redis Labs Raises $100 Million from Bain Capital Ventures and TCV to Help Companies Win in the Data-Driven Economy

Mountain View, August 25, 2020—Redis Labs, the company behind Redis, the most popular open source database and the provider of Redis Enterprise, today announced it has closed $100 million in Series F financing at a company valuation of more than $1 billion. This investment was co-led by Bain Capital Ventures and TCV, with participation by the company’s existing investors Francisco PartnersGoldman Sachs GrowthViola Ventures, and Dell Technologies Capital. With this funding, Redis Labs has now raised over $246 million to-date. 

More than ever, enterprise data is distributed, siloed, and increasing in volume. In order for companies of every industry to maximize and leverage the power of this data, Redis Labs is delivering a real-time data platform that allows them to manage, process, analyze, and make predictions, that will improve their customer experiences and drive their business forward.

“This investment will enable us to meet the surge in demand from companies representing every market and geography, to scale their Redis deployments and to help them win in the data-driven economy,” said Ofer Bengal, Co-Founder and CEO at Redis Labs. “The unprecedented conditions brought on by COVID-19 have accelerated business investments in building applications that require real-time, intelligent data processing in the cloud. During this time, Redis has become even more critical to our customers, partners, and community. We will continue to invest in strengthening our community footprint, advancing the Redis technology, and helping our users to do more with Redis.”

“Redis has become the ideal database for companies to operate intelligently and win in the current economy,” said Enrique Salem, Partner at Bain Capital Ventures. “We’ve long believed in the market opportunity for a high-performance database in the cloud-era and Redis’ potential to lead this category. Since our initial Series A investment, the Redis team has done a remarkable job making Redis an essential tool for developers and being a trusted partner for global enterprises operating at scale. We’re thrilled to continue partnering to build a multi-billion dollar database company.”

“We, at TCV, are delighted to partner with Ofer, Yiftach, and the team at Redis Labs in their effort to revolutionize the high-performance database industry,” said Gopi Vaddi, General Partner at TCV. “The product leadership demonstrated by Redis Enterprise in low latency, distributed, and high availability use cases is particularly remarkable. We believe that applications demanding Redis Enterprise’s market-leading capabilities will continue to multiply in an increasingly real-time world.”

Redis Labs currently has more than 7,500 customers, including MasterCard, Dell, Fiserv, Home Depot, Microsoft, Costco, Gap, and Groupon. With this funding, Redis Labs will continue to grow the global Redis community, expand its go-to-market team and programs, and invest in the product and support services to deliver even more value for customers. In calendar 2020 Redis Labs has seen tremendous momentum to-date, including:

  • Signed a strategic alliance agreement with Microsoft Azure for making Redis Enterprise the top tier of Azure Cache for Redis, and launched it in Private Preview. Public Preview is expected in early fall.
  • Following the availability of Redis Enterprise Cloud as a native service on Google Cloud in October 2019, the service has experienced over 300% growth in just two quarters.
  • Achieved Advanced Technology Partner status with Amazon Web Services Partner Network.
  • Launched RedisAI, for inferencing artificial intelligence requests at the speed of Redis, and RedisGears, a programmable engine enabling data-processing options at milliseconds speed across any distributed Redis deployment.
  • Announced RedisRaft, which brings strong consistency to Redis, making it suitable to serve the most critical business applications on earth.  
  • Named “Most Loved Database” for a fourth consecutive year in Stack Overflow’s annual global developer survey.

About Redis Labs

Data is the lifeline of every business, and Redis Labs helps organizations reimagine how quickly they can process, analyze, make predictions with, and take action on the data they generate. As the home of Redis, the most popular open source database, we provide a competitive edge to global businesses with Redis Enterprise, which delivers superior performance, unmatched reliability, and the best total cost of ownership. Redis Enterprise allows teams to build performance, scalability, security, and growth into their applications. Designed for the cloud-native world, Redis Enterprise uniquely unifies data across hybrid, multi-cloud, and global applications, to maximize your business potential.

Learn how Redis Labs can give you this edge at redislabs.com.

Media Contact
Steve Naventi
Redis Labs
press@redislabs.com

Katja Gagen
TCV
kgagen@tcv.com


Toast Announces $400M in Series F Funding

OSTON–(BUSINESS WIRE)–Toast, the fastest-growing restaurant management platform in the U.S., today announced a $400M Series F funding round led by Bessemer Venture Partners, TPG, Greenoaks Capital, and Tiger Global Management with participation from Durable Capital Partners LP, TCV, funds and accounts advised by T. Rowe Price Associates, G Squared, Light Street Capital, Alta Park Capital, and others.

Focused on empowering restaurants of all sizes to compete on a level playing field with global brands, Toast has quickly become the go-to partner for the restaurant industry, from entrepreneurs opening their first restaurant to enterprise brands scaling across hundreds of locations. During the course of 2019, revenue increased 109 percent as tens of thousands of new restaurants joined the Toast community.

“As a result of our tremendous growth and commitment to the restaurant industry, we have continued to see a significant amount of demand from the investor community,” said Chris Comparato, CEO at Toast. “As the clear platform leader in the restaurant space, we are excited to use this investment to extend our capabilities and drive a bigger impact for the restaurant industry.”

Toast will invest proceeds from this fundraise into its technology platform to meet the evolving needs of the restaurant industry including:

  • New products designed to both deepen restaurateurs’ connections with guests and increase restaurant revenue;
  • Hardware and software investments to increase speed of service, streamline the guest experience, and reduce operational costs;
  • Capabilities to improve the restaurant employee experience, reduce employee turnover, and address the industry’s pressing labor challenges; and,
  • Financial products that provide quick and reliable access to funding to help restaurateurs grow their businesses.

“Just as the retail industry weathered disruption from e-commerce over the past two decades, restaurateurs now face shifting consumer expectations and a changing landscape of tech players who threaten to erode restaurant brands,” said Kent Bennett, partner at Bessemer Venture Partners. “Toast wants to partner with the restaurant community to level the playing field and strengthen this nearly trillion dollar industry. We’re thrilled to continue to support this incredible team in 2020 and beyond.”

Restaurant owners and operators can learn more about Toast and schedule a personalized demo here.

About Toast
Launched in 2013, Toast is democratizing technology for restaurants of all sizes. Built exclusively for restaurants and driven by a passion to enable their success, Toast connects employees, operations, and guests on an easy-to-use platform so restaurateurs can stay one step ahead of a rapidly evolving hospitality market. Tens of thousands of restaurants partner with Toast to increase revenue, streamline operations, retain great employees, and create raving fans. Toast was named to the 2019 Forbes Fintech 50, 2019 SXSW Interactive Innovation Finals, and 2019 Forbes Cloud 100. Learn more at www.pos.toasttab.com.

Contacts

Karen DeVincent-Reinbold
Sr. PR & communications manager
media@toasttab.com
857-301-6074

Katja Gagen
TCV, Marketing
kgagen@tcv.com
415-690-6689


FULL POTENTIAL SAAS

We believe that SaaS vendors, particularly vertical and SMB, that provide a “system of record” are seeing massive increases in TAM, competitive moats, and economic opportunity. By extending and leveraging their workflow, data, and account ownership, SaaS vendors are delighting end customers while creating platform and networks.

With opportunity comes competition, both from within one’s category (e.g. application area) or from adjacent categories within one’s vertical (e.g. industry). As boards and management teams wake up to the opportunity, they realize that the race is on to capture the full potential of their vertical.

This post is a framework to help leaders of SaaS companies think through the strategic choices and hopefully increase the odds of reaching their full potential.Strategy is implemented by focused alignment of execution, talent, M&A, organizational structure, functional excellence, and financial and governance/board frameworks. I hope to write about these supporting pieces over time, but I wanted to start with strategy first.

Finally, I think it’s important to acknowledge that very few companies have reached “full potential,” and this framework is inherently aspirational. However, “most entrepreneurs aren’t building a house, they are putting bricks in the foundation of a skyscraper” (Naval Ravikant). Aspiration is important, so hopefully this is an articulation of what is possible.

Special thanks to my co-authors John Burke, Katja Gagen, and Payam Vadi from TCV as well as Tim Barash, Kevin Burke, Henrique Dubugras, Mike Ford, Marc Fredman, Noah Glass, Andrew Low Ah Kee, Ara Mahdessian, David McJannet, Aman Narang, Sankar Narayan, Githesh Ramamurthy, Jason Randall, Bob Solomon, Connor Theilmann, Dan Wernikoff, and Dai Williams for great insight and support in creating this framework to date. We’ve also learned a ton from working with great management teams in the TCV portfolio[1] as well as across a broad network of friends.

Lead the Category

This phase of the SaaS strategy is well understood so I won’t spend much time on it. A SaaS company aspires to:

  1. build a great product (and service)
  2. over time, build an efficient and repeatable go-to-market model (marketing -> sales -> onboarding)
  3. and then “add capital” and execution to press its advantage against sluggish incumbents or poorly capitalized competitors

This is the playbook that Omniture and our portfolio company ExactTarget pioneered a decade ago. Despite massive capital inflows into SaaS and deteriorating economics, this model generally still works today.

On the product side, scale in data + AI can create increasing differentiation. For example, when you start to have more data than anyone else, you can flip your product from being reactive to proactive — having the product tell users where to look and how to optimize the system. Both Xero and Shopify have done this well.

Five other things to think about in this early phase that don’t get enough attention:

  • Scalable onboarding: Onboarding friction can be unaccounted drivers of CAC and churn. A great onboarding process builds the trust and confidence that are the foundations of virality/word of mouth, future cross- as well as third party channel strategies. Carefully measure funnel metrics and be attentive to new customer NPS. Automate early as “throwing bodies at it” can create process debt that will be difficult to unwind later.
  • Expansion: Expansion drives net revenue retention and most of the strategies we are about to discuss. With all sales processes, it’s a lot easier to learn, iterate, and optimize with fewer bodies and less complexity.
  • UI and Architecture: Like onboarding, these can be long-lead time fixes that compound as your business scales and gets more complex. A specific call out is to plan for an API strategy. It can facilitate future partner strategies and increase the value and stickiness of your offering.
  • Pricing structure/strategy: You will constantly revisit tactics, but it’s important to have some sense of how your pricing structure might change over time.
  • Foundations for global, including a work culture that can support distributed executives and operations, and good product feedback loops that incorporate non-home market needs.

Hyperscale Locations, Feed the Beast

A lot of ink has been spilled on forward investing in sales and marketing, and arguably it’s part of a/the “lead the category” strategy. But, it’s worth a call out as it’s important you don’t take your eye off the ball too early. So much of winning and future monetization is getting location market share. When the wind is at your back, go get it done! Market structures have a nasty habit of shifting, future secular tailwinds may abate, or competitors may leapfrog your product or your go-to-market model. If your churn and sales economics are sound, keep “feeding the beast!”

One particularly powerful unlock is Channel. There are verticals and categories, where influencers in a channel are kingmakers and can help you engage with segments that are otherwise difficult or uneconomical to reach.  Furthermore, Channel partners’ engagement and contributions can enrich your products and increase overall customer value. A great example is in tax software, where Xero’s wooing of accountants proved to be an effective source of customers and a formidable competitive moat (thereby disrupting the incumbent provider). Xero went as far as offering free practice management tools to help accountants run and grow their business on Xero.

Win the Control Points: Own Your Vertical

This is where management teams are faced with a paradox of choice: “Where should we go next? How should we spend the next incremental dollar? On increasing ARPU, acquiring incremental locations, or expanding into new verticals, geos or segments?” At this juncture, it is my belief that you should focus on winning the control points. In vertical SaaS, there are typically one or two control points, “systems of record.” Usually one control point in the front office (e.g. Point of Sale, CRM, e-commerce) – “that drives sales, that grows the business, that serves as the cash register.” And one control point in the back office (e.g. general ledger) – “where everything else reconciles to.” Hopefully, you provide one of the systems of record, so go build or acquire the other system(s) of record and secure the high ground! 

Pragmatically, a system of record is the last software package a customer will “turn off” in a tough economic time.

I also like to think about the concept of “gravity”:

  • Workflow gravity – the system that all other systems integrate to – it’swhere the most users spend the most time. Not all workflows deliver the same value; in my experience the system of record workflow tends to deliver the most value.
  • Data gravity – the system that creates and holds the most critical information and is the hardest to migrate. That data can be critical to a client for a wide range of applications, from understanding their customers (e.g. CRM) to managing risk (e.g. compliance). Data also can be critical in two-level situations, such as loan underwriting (e.g. a bank underwriting a merchant’s risk via POS data) or supplier information management (e.g. a client managing risk by validating supplier capabilities and quality). Data depth and scope also create gravity where AI technologies can be highly productive.
  • Account gravity – the user/sponsor of the system is the highest-ranking individual in the customer organization; it’s the system that requires the biggest financial outlay, etc.

Winning the other system of record is not easy. By definition, a system of record is hard to displace and unless the market is greenfield pen and paper, competition can be challenging. You may be able to do it organically with product innovation, but M&A can be the more desirable path if “integration debt” is manageable. If M&A is not possible, a slow winnowing of your competitor may be the only approach available to you.

If you own multiple systems of record in a vertical, the benefits are enormous:

  • Customer delight: automation from integrated workflows and potentially unified data and data models allow efficiencies and offerings unavailable before
  • “SaaS as a Platform and SaaS as Network” opportunities
  • Stronger account ownership to capture incremental spend and drive more efficient growth
  • A new level of durability and stickiness

A good example is Veeva. The company started in 2007 with the launch of a CRM and a sales automation platform for pharma sales reps (e.g. record their activity, keep track of the doctors they meet with or drop off samples for, etc.). After becoming the dominant player in that category, Veeva saw an opportunity to move backward into research and development for their life science customers (developing new drugs, conducting clinical trials and bringing those drugs to market). In 2011 Veeva launched Vault, a suite of applications that first centered on the core content management needs for clinical trials, regulatory submissions, and quality documentation. The company then expanded to include a series of core data applications that help manage clinical trials, quality processes, safety processes, etc. Veeva is expected to finish 2019 with $1.1B in revenue (26% YoY Growth) and 37% EBIT margins. Vault represented 51% of total revenue and grew 38% YoY. Analysts also estimate Vault meaningfully expanded Veeva’s addressable market. 

Another recent example might be front office player Shopify’s $450M acquisition of 6 River Systems to move into back office fulfillment and warehouse management. Some financial analysts estimate that merchants spend up to ~10-15% of their GMV on logistics which could potentially provide multiples of Shopify’s current take rate.

Expand Headroom

With category leadership comes high market share and potentially high saturation. Long-term growth is driven by location growth, as there’s generally a finite share of wallet you can access. It’s important to invest in the S-curves of geos, segments, and adjacent verticals that can unlock new location TAM. This can take a couple of tries before you’re successful, so start this during your growth phase when there’s less pressure on maximizing profitability.

Extend Through the Value Chain

This stage of growth can be transformative. By leveraging the strengths of your core customers, you can expand into a new market with a new set of customers. Typical patterns include moving from front office software to extend to your customer’s customers, or from back office software and extending to suppliers. These can be riskier bets, but success can pay out big here:

  • Increased TAM
  • Workflow that spans multiple parties and creates increased customer value and vendor stickiness
  • Two-level network effects

Supplier

Extension seems to work best by “following the money” and leveraging purchasing power. TCV portfolio company Ariba articulated the “golden rule”— He with the gold rules! By using their leadership in procurement software at large corporate buyers, Ariba extended to build a robust suppliers software business for merchants that serviced those corporate buyers. More recently, Avetta has followed a similar path in the supplier information space by building a strong two-level network effect. We believe corporate clients want to be on Avetta because it has the largest network of suppliers, and suppliers want to be on Avetta because it has the most corporate clients. Avetta’s advantage gets stronger as it scales. Moreover, Avetta has an opportunity to help suppliers do more than just manage compliance information. As a result, Avetta sees growth in helping suppliers grow and operate their business.  

CCC is on the third generation of this approach. They started by serving large auto insurance carriers and then extended into autobody repair shops that serve the carriers. CCC is now in the process of expanding to parts suppliers. By getting all the key constituents on its software platform, CCC is able to leverage AI and automation to massively reduce friction and provide a great customer experience across all steps of the auto insurance process.

Employee

The employee opportunity is similar to the supplier opportunity in terms of “following the money.” Companies can use integrated payroll or time & attendance offerings to establish a relationship with the employee. Employees are also consumers who represent significant B2C opportunities such as consumer lending, insurance, etc. There are big dollars here, but perhaps less opportunity to build significant network effects.

Consumer

The consumer/demand opportunity is the white whale. We believe that SaaS companies tend to capture ~ 50-100bps of GMV for software subscription, whereas online demand channels can take 15-20% of GMV in categories such as hotels and restaurants. In addition to the massive revenue opportunity, Consumer also represents a strategic flank worth monitoring carefully. Online marketplaces have large competing salesforces that engage with your merchant customers and have strategic interests encroach on the software layer to try to control supply.  Booking.com bought Buuteeq and Hotel Ninjas to vertically integrate into hotel supply. Uber is rapidly expanding its driver offering to over-draft protection, a debit card, and likely lending over time to manage driver churn. This is another example of increasing marketplace + SaaS convergence.

That said, success stories of extending SaaS to Consumer are rare. Few SaaS companies have consumer product DNA, the funds, or the skills to build a consumer brand. While a SaaS provider can have a high market share of merchants in a vertical, it’s rare that it has the supply ubiquity that an online marketplace would require. Eventbrite is one of the few companies that has landed as a software tool for creators, built liquidity, and created a marketplace.

Some derivative Consumer monetization models include:

  • Consumer pay: FareHarbor approaches tour and activity operators with a free to merchant, consumer pay model: “We’ll build your website and booking engine for free, with no work on your part; you just pay us for payment processing and the customer will pay us a booking fee.”  
  • Channel management: SiteMinder offers channel management to help hotels manage existing channels in real time. SiteMinder has extended that value proposition to “Demand Plus,” an offering that helps hotels easily expand into new channels to scale demand.
  • Existing customers: While 15-20% marketplace take rates may be sensible for new customer acquisition/discovery, companies such as Olo are looking to move existing customers to lower cost channels through their dispatch offering while taking a much lower percentage of GMV.
  • Customer Co-opt: By seeing consumer data pass through their systems, some SaaS vendors are building consumer profile databases that they might monetize over time. In the recruiting market, we’ve seen players leverage job distribution tools to build a candidate database. Shopify similarly has built a large shopper profile database across all their merchants. While Shopify hasn’t monetized directly, the uplift in conversion rate is likely significant. This model is the most capital efficient but can create conflicts with the vendor’s core merchant customers.

The biggest benefit of extending through the value chain is that it gives you a beachhead and a right to win in a new vertical to start the “full potential” growth cycle again. As you do this, it’s important to reconsider your end market and focus. When Ariba transitioned from procurement software to supply network, they started to represent a front office “system of record” for their suppliers. In doing so, Ariba was both a large enterprise “procurement company” and an SMB “supplier enablement company.” The question was: “Which priority should dominate?” When extension leads to conflicts, there are no easy answers. As such, it is important to acknowledge that this growth strategy is ever-evolving.

Deepen Functionality/ Monetization

Deepen Functionality/Monetization doesn’t literally mean waiting to pursue this step until all other strategies have been completed. It’s more a reflection of priorities. Acquire as many customers as you can, win the control points, and you will likely have many of these profit pools locked up to pursue in the future.

In winning the key control points, for the same reason a single system of record has a lot of “gravity,” you now have an even stronger opportunity to turn your product into a channel. This enables entry into adjacencies with data, workflow, and account ownership advantages for you as well as for the end customer. The most extreme example is the “platform/ecosystem” play, where you monetize third party vendors that want access to the channel your product has become (e.g. Salesforce, Intuit, Shopify). However, most commonly a SaaS vendor will pursue additional monetization with in-house or white-labeled products.

Another key consideration in prioritizing adjacent function/monetization is consistency with your core go-to-market channel and proximity to key decision makers. Go-to-market will determine the financial leverage of the cross-sell and often the overall success. The core advantage of SMB software here is that often the decision-making is relatively consistent and concentrated across software purchases.

Every vertical is different, but there are some common functionality/monetization patterns emerging. Each of these patterns deserves its own write-up, but for the sake of brevity here are some highlights:

  • “Integrated payments -> integrated banking”: The attachment of payments to SaaS has been well covered. That trend is expanding to the attachment of integrated banking. I had an opportunity to interview two of the smartest people in the business, Tim Barash and Jackie Reses. Square is out front here with broad based merchant and consumer plays. To understand the magnitude of the opportunity, Square’s Subscription & Services (most of which are financial services) are expected to reach $1.3B in 2020. This represents 23% of 2020 total GAAP revenue and 47% of 2020 Total Gross Profit (incremental gross profit is ~90%). Brex is earlier in its progression, but we’re excited to see how the company leverages its initial corporate card and expense management offerings to extend into broader financial services.

  •  “Follow the workflow”: At times SaaS companies have actually observed customers at work or mapped out the physical sites to understand all the areas their workflow touches as areas of expansion.
  • “TAM shark”: HashiCorp CEO David McJannet describes expansion as “TAM Shark,” constantly circling the biggest, fastest growing (most change/opportunity) markets. He requires product managers to report on market size and growth of all adjacent categories to make sure they are focused on the biggest opportunities. Generally, over a 2-3 year period companies have one, maybe two opportunities to build distinct add-on businesses. Make sure you’re picking the biggest markets and therefore the biggest payoffs.

Summary

If the typical SaaS playbook is “Lead the Category” and “Hyperscale Locations,” clearly the full potential for vertical SaaS players is dramatically larger than conventional SaaS wisdom would suggest. We’re excited to work with — and hopefully invest in —the frontier players as they explore the “Full Potential of SaaS.”  

If you found this useful, let me know, and we’ll continue to publish and explore the topic. I look forward to hearing your adds, edits, and challenges.

Caveats

  • There’s a tension between aggregating as big a profit pool as quickly as possible vs. “winning the market.”
  • This framework is characterized as a sequential strategy. In reality, most companies are pursuing multiple steps concurrently, and the sequence is more a reflection of prioritization.
  • Time horizon: this approach is a long-term strategy to winning, which may often be at odds with short-term maximization of valuation multiple and financial performance.
  • This approach is informed by a U.S./western/mature approach. In emerging/more greenfield markets, less focus and value chain expansion earlier in company development may make sense.

The views and opinions expressed are those of the authors and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the authors and disclaims any responsibility therefor. This blog post is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified above are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this document, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.

[1] See TCV’s SMB and Vertical SaaS investments at the end of the document.


TCV Welcomes Gopi Vaddi as General Partner

TCV is delighted to announce that Gopi Vaddi, a seasoned investor with broad international experience, has joined the firm as a General Partner. Founded in 1995, TCV has invested over $13 billion in more than 350 consumer and enterprise technology companies, including $2 billion in Europe, where Gopi will be focused. TCV investments in Europe include Believe, FlixMobility, Brillen.de, RELEX Solutions, RMS, Sitecore, Sportradar, Spotify, The Pracuj Group, and WorldRemit.          

Gopi is an excellent fit with TCV’s long-term strategy and focus of investing across geographies and domains, often far from major technology and financial hubs. He was born and raised in India, took degrees in business administration and electrical engineering in the U.S. and India, and has experience investing in the U.S., Europe, and Asia. Most recently, he was a partner at Providence Equity’s growth fund, where he worked on growth buyouts and minority investments in software and payments. At TCV, Gopi will focus on software and software-enabled businesses covering business applications, vertical software, digital marketplaces, and infrastructure software.

“We take as much care in adding a new partner as we do in making a new investment,” said Jake Reynolds, General Partner at TCV. “Gopi’s success springs from the same qualities that have driven TCV for nearly a quarter-century: deep domain knowledge, keen market insight, and a passionate commitment to helping entrepreneurs achieve category leadership. He also complements the firm’s broad growth-biased investment approach with expertise in software buyouts and buy-and-build investing.”

Gopi understands TCV’s approach, just as we recognize the value he has brought to his investments, including a willingness to roll up his sleeves and work side by side with management. As a citizen of the world who started his career as an engineer and data modeler, he has an innate ability to identify and partner with the next generation of category leaders and the entrepreneurs steering them.

We are thrilled to welcome Gopi to the team.

The General Partners of TCV

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The companies identified above are not necessarily representative of all TCV investments and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/portfolio-list/. For additional important disclaimers regarding this post, please see “Informational Purposes Only” in the Terms of Use for TCV’s website.                                                                                                 


Making the Mundane Sexy: How Intuit Turned SMB Bookkeeping and DIY taxes into Massive Business Lines

Dan Wernikoff rose to become an EVP at Intuit and general manager of its small business unit and consumer tax group. In both cases he scaled the business-within-a-business from small groups of early adopters to huge hordes of happy SMBs and consumers, by relentlessly measuring early indicators, leveraging core strengths, and focusing on long-term growth goals.

In this conversation with TCV General Partner Tim McAdam, he shares:

  • Lessons about how selling into SMB markets differs from enterprise
  • The best metrics for tracking success, and
  • Why empathy and understanding matter more than slick ads and sales techniques.

He also explains how to infuse human expertise into SaaS models in a way that fits the SMB/consumer mindset.

For these insights and more, settle back and press play.

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Dan Wernikoff is a former Venture Partner at TCV.

The views and opinions expressed are those of the speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the speakers and disclaims any responsibility therefor. This blog post is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified above, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this document, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.