Customer Success Doesn’t Matter

Customer success doesn’t matter is everything”

Back in my role running sales and marketing at Trilogy, I learned one of my first lessons about business: “customer success doesn’t matter.”   While the statement sounds ridiculous, in the world of enterprise software circa 1995, it was actually true.  We could sell a customer tens of millions worth of software and get paid entirely up front even though the deployment could take many months or even years.  And if for some reason the deployment was delayed or the software didn’t deliver, the customer would pay us millions more for our consultants to fix the issue.  The entire industry of 1990s enterprise software was built on this bizarre premise.

But as we all know in the technology industry, times have changed and this approach to business ultimately was wrong and unsustainable . The growth of SaaS and the switch to a subscription-billing model has forced vendors to deliver value early and often.  Even outside of the software space, the bar around customer success has been raised dramatically.  Customers across the board are more educated, more vocal, and more willing to switch.  This empowerment of the customer (through the web and social media) combined with the growth of the subscription economy has driven a sea change in global business, elevating customer success to a C-suite initiative.

It is this sea change that led us to invest in Gainsight.

Today we’re pleased to announce our investment behind Nick Mehta and the entire team at Gainsight, the leading provider of SaaS solutions to manage customer success.  With Gainsight’s solution, companies can now see a daily snapshot of the health of their customers.   They can proactively manage their most at-risk customers ahead of the curve leveraging early warning triggers from the Gainsight system.   And they can, for the first time, truly see a 360 degree view of their customers: financial data, billing data, support call data, product adoption data, and activity data all in one place.

And just as companies have systemized their acquisition of new customer logos using software from companies like Salesforce and Marketo, with Gainsight, a company can now systematize the management of the entire customer lifecycle post initial sale.  What this means in financial terms is reduced churn, higher revenue, and increased up-sells.  In other words, every business that has an ongoing relationship with its customers needs Gainsight. 

The team at Gainsight impressed us with their product vision, their leadership, and most importantly with their passion for customer success.  These guys really do walk the walk and we heard in customer call after customer call how committed and focused the Gainsight team has been on their success.

We are proud to welcome them to the Bain Capital Ventures portfolio and we look forward to the journey with them to help every business in the world deliver customer success!

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Big Data meets Marketing Again – this time in the world of “offline” CPG

Today InfoScout announced the launch of their company and their analytics dashboard for Consumer Packaged Goods (CPG) marketers. Bain Capital Ventures, along with Founder Collective and Dunnhumby Ventures, led a $5M Series A funding round in the company. We are thrilled to be partnering with the InfoScout founders, Jared and Jon, along with the entire InfoScout team.

We’ve discussed in the past here and here the rise of Marketing as the next great function in enterprise technology. A new wave of startups is leveraging Big Data and cloud computing to deliver incredible power to CMOs, giving them access to real-time insights and helping them drive faster, more data-driven decisions. InfoScout is leading this trend in the CPG industry where the marketing challenge is even more acute since the CPG brands don’t’ have direct access to the customer data (this is owned by the retailers) and the customer purchases take place primarily offline.

Given the lack of access to customer data, the 4 trillion-dollar industry of Consumer Packaged Goods (CPG) spends tens of billions of dollars on market research, syndicated data, and panel data to determine which products are selling to whom and why. For instance, why are a particular cereal brand’s sales declining? Are households substituting the brand for a private label brand? Are they shifting to other breakfast substitutes such as yogurt and granola bars? Or, are they simply eating less breakfast? Retail point of sale (POS) data is helpful for understanding aggregate SKU sales by retailer but sheds zero light on the behavior of individual consumers or segments of households.

The incumbent market research firms have tried to solve this problem by conducting surveys of households or by building panels of families who have to “self-report” their purchase behavior with the assistance of proprietary hardware solutions. The problem with the legacy data providers is that their solutions are typically not real-time (they often are one to two quarters behind); they have significant underlying data problems because they rely on human recollection and require significant reporting effort; and their solutions require significant professional services and consulting support to use.

InfoScout is entering this market with a disruptive solution – the first module of which they are launching today. With InfoScout’s dashboard, marketers at retailers and brands can access real-time household purchase data built on fifteen million offline receipts captured a year (via smartphones) containing 100 million SKU-level purchases with accurate prices and descriptions. The marketers can review and manipulate this data in an easy to use web and mobile interface – no coding, no data consultants, and no data warehouse folks required. Brand managers, shopper marketing analysts, CMOs, and CEOs can now for the first time (without calling a data jockey internally) see how their new product launches are performing instantly; how their marketing campaigns are affecting household buyer behavior; how competitor’s launches are impacting their sales; and whether these insights are consistent by demographic and geographic segment. In addition, because InfoScout has the richest data solution for offline CPG purchase data, these marketers can drill into granular levels of analysis that were never before possible.

Jared and Jon are domain experts who have spent years in this industry. They know their customers well and are the first ones to build a solution the market has been asking for. The launch of the analytics dashboard is just a preview of the many great things InfoScout will be introducing in the coming months. We are proud to be backing Jared and Jon and to welcome them to our family of CMO oriented companies alongside Bloomreach, Captora, Cquotient, Hooklogic, Optimizely, Persado, Survey Monkey, Symphony Commerce, and Tellapart.

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“Magic in a Can” Why we invested in Optimizely

Today Optimizely announced their Series A funding round of $28 million led by new investors Benchmark and Bain Capital Ventures along with several other existing seed investors. We are thrilled to be partnering with the Optimizely founders, Dan and Pete, as well as the entire Optimizely team.

We’ve discussed in the past here and here the rise of Marketing as the next great function in enterprise technology. Chief Marketing Officers (CMOs) are leveraging big data to drive marketing insights, campaigns, programs, and personalization that have never before been possible. A new wave of startups is giving incredible power to these CMOs, allowing them to optimize their programs without having to deal with the bottlenecks of corporate IT. Optimizely is clearly leading this trend.

With the Optimizely solution, CMOs and their marketing teams can now set up UX experiments and A/B tests on their websites in a matter of minutes, without any IT involvement. As we spoke to users of Optimizely, we heard the same refrain over and over: “thanks to Optimizely, we are running 10x the number of experiments – this has led to new levels of iteration which in turn has driven more traffic, higher conversion, and increased revenue”.

Over the past few months, we have seen the Optimizely team in action in front of multiple CMOs of large multi-billion dollar ecommerce companies. It’s been incredible to see the reaction of these CMOs as Dan and Travis have, in a matter of a few clicks, moved around images, text, headlines, fonts, and buttons on the retailers’ site. One CMO sat back after the demo and said, “Wow- this is magic in a can! We have to use this solution”.

The power of Optimizely has led to an extremely high velocity business. Prospective users can try the solution simply by going to http://www.optimizely.com (I’d encourage anyone reading this post to try it out for your own website!) The implementation effort requires only the addition of one line of JavaScript to your web page. And while the solution is extremely powerful, the cost is dramatically lower than many other competitive solutions which have the hallmarks of classic heavyweight enterprise software: long sales cycles, long implementation cycles, and heavy professional services.

Because of this velocity, Dan and Pete have built a double-digit revenue business growing at exponential rates without raising equity capital before today. This is an incredible achievement!

Most importantly, Dan and Pete have managed this extraordinary growth without sacrificing their commitment to their users and their commitment to a strong culture and team at Optimizely. When we visited the Optimizely headquarters and watched the team in action, it was clear they have the ingredients and DNA of a “built to last” company. This is a real testament to the leadership and vision of the founders.

We are proud to welcome Optimizely to our family of CMO oriented companies alongside Bloomreach, Captora, Cquotient, Hooklogic, Infoscout, Persado, Sneakpeeq, Survey Monkey, and Tellapart.

Ajay

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Commerce technology is a massive opportunity (and retail is not dead)

Commerce technology is a massive opportunity (and retail is not dead) (via Pando Daily)

By Ajay Agarwal On February 22, 2013There has been recent discussion about whether retail is dead. We couldn’t disagree more. We predict that over the next five years consumers will experience completely new retail models that effectively use physical locations combined with world class Internet…

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What’s next after SaaS? Big Data Applications

Today one of our portfolio companies, Bloomreach, announced a new funding round led by NEA and their partners Scott Sandell and Ravi Viswanathan.  Bain Capital Ventures and Lightspeed also participated in the round.  We are thrilled to work with NEA and welcome them to Bloomreach.  I have known NEA for 17 years…their managing partner, Peter Barris, was on the board of Trilogy.  Peter, Scott, Ravi and the entire partnership at NEA are world-class.

I had the good fortune of meeting Raj De Datta and Ashutosh Garg, the co-founders of Bloomreach, four years ago.  At the time, it was the two of them and an idea. The founders wanted to solve the “content discovery” problem online and make sure that every web business in the world could be effectively “found” by their respective customers.   Together, we at Bain Capital Ventures and the founders spoke to over 25 CMOs to validate this opportunity – the feedback was extremely strong and helped shape the initial product vision. We subsequently led the Series A funding in March of 2009, alongside a great group of strategic angel investors.

Less than four years later, Bloomreach employs 100 people and is on path to being the fastest growing SaaS company in history.  They are one of the pioneers in the emerging Big Data Applications space:  using data from inside and outside the enterprise to transform enterprise functions.  Bloomreach uses techniques such as machine learning, web crawling, and search technology to mine a massive amount of data. That data drives marketing insights, new customer traffic and most importantly, new revenue.  On average, BloomReach customers see 94% lift in non-branded, natural search traffic.

Unlike the last generation of SaaS and cloud marketing applications, Bloomreach is not a “form on top of a database” or a repository of manually entered data and workflow.  These types of sales and marketing automation solutions are necessary and important, but fail to deliver real measurable business value and ROI to the enterprise.  In contrast, Bloomreach and companies like it are helping web businesses large and small enjoy high margin revenue through an automated service and by doing so, are transforming the marketing function….which we believe is the next 10 Billion dollar opportunity in enterprise technology

Raj and Ashutosh have been outstanding founders and exemplary leaders.  They have created a company and culture that is built to last.  The last four years have been a fantastic journey.  The opportunity for Bloomreach is awesome and we look forward to deploying the new funding in relentless pursuit of our vision.

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Lessons Learned from Kiva Systems

This morning, Amazon’s purchase of Kiva Systems for $775 Million officially closed.

Mick Mountz, Kiva’s CEO and Founder, and his team did an amazing job of creating, building, and commercializing a revolutionary technology to transform how ecommerce distribution is done.  We, at Bain Capital Ventures, were fortunate to fund Kiva’s first institutional round in late 2004, when the company was turning its initial prototype into a commercial product.

We later led Kiva’s two subsequent rounds of financing, and while serving on its board the past 7+ years, I’ve learned many invaluable lessons about entrepreneurship and building a company.

1.   There is still a place for entrepreneurs to solve really hard problems with massive innovation 

There have been several blog posts, most notably by Peter Thiel and Founders Fund, discussing the venture community’s lack of desire to fund transformational companies –those with disruptive technologies taking on big problems.  Mick saw this firsthand. When Mick first started Kiva shortly after the bubble burst, he was unable to raise funding on Sand Hill Road.  This ultimately caused him to move to Boston, where he raised his angel round and eventually his round from Bain Capital Ventures.

Before Kiva, Mick spent years at Webvan, and he could never stop thinking about changing the way ecommerce distribution was done. It became his mission and what led to Kiva. Mick’s eventual solution was simple but not an easy task technologically.

Instead of making warehouse workers go to the inventory, Mick set out to make the inventory come to the worker. He believed placing inventory on mobile pods controlled by autonomous robotic vehicles would significantly improve labor productivity. And by placing those mobile inventory pods on a grid pattern that could be dynamically altered based on demand, Mick could ensure that any of the millions of SKU’s that a customer ordered could be “picked, packed and shipped” as any other SKU in the warehouse. But Kiva’s real magic is behind-the-scenes software that powers the entire system.

The truth is, Kiva simply wasn’t a company that could be cranked out in weeks with some seed money, and the technical obstacles inherent in building a solution like this forced Kiva to invest years working on the solution pre GA. However, once they built a working and viable solution, they had the advantage of significant IP and few direct competitors.  This allowed the company to be laser-focused on R&D versus having to fund a sales and marketing arms race in a more typical crowded VC-backed space.

Kiva’s success proves there is still a place for entrepreneurs like Mick to solve really hard problems with massive innovation.

2.    Backing a founder who can go the distance

Kiva is a great proof-point in the power of founder-led companies.  Mick is a brilliant founder who has that elusive combination of technical horsepower, domain expertise, charisma, incredible confidence in the clutch, and inspirational leadership.  What Mick didn’t have was prior CEO experience as this was his first company.  However, what Mick lacked in experience on the general management front, he more than made up for in his product strategy, the effect he had on customers with his insights about distribution automation, and his commitment to building a strong company culture.

Clearly Kiva wouldn’t have been nearly as successful without the executive team that worked alongside Mick. In particular, Mick’s President and COO, Amy Villeneuve, brought tremendous organizational leadership and operational capability to the company. She was instrumental in helping scale the business.

But having Mick lead the company from beginning to end, made sure innovation, customer success, and culture trumped everything else.

3.    The influence of Apple is far and wide

Many people who have read about Mick’s story know that his time at Webvan inspired the idea behind Kiva.  What is less known is that prior to Webvan, Mick was a product manager at Apple.  Mick’s Apple experience was formative and influenced his product decisions at Kiva.

As you can see from the picture, the Kiva robots are elegant and beautiful – these are not your “father’s” industrial robots!  The entire Kiva system, the orange robots, the blue shelves, and the user-friendly station software, works together and is tightly integrated.  Back in 2005, I recall our board discussion about why Mick insisted Kiva construct the shelves in-house since we didn’t feel the shelving was as proprietary as the software or robots.  Mick’s response was really interesting.  He asked me if I thought my experience as an iPod owner (this was pre iPhone) would be nearly as seamless and awesome if Apple hadn’t provided an integrated solution with the player, the cable, the headphones, the software, and the iTunes store.  In a world where enterprise products are typically sold piecemeal (think SAP plus Oracle database plus Accenture consulting plus IBM servers etc.), Mick sold an end-to-end solution.  The result was that the Kiva solution simply worked and the customers loved it. – and that’s what matters.

4.    ecommerce changes everything

While the revolutionary Kiva system was the foundation of the company, the fuel that accelerated growth was the ecommerce wave.  The growth of and transition to ecommerce was a forcing function to cause companies both big and small to rethink their entire distribution strategy and fulfillment operations.  While large centralized DCs worked for retail store restocking, in an ecommerce world, companies need smaller, more flexible DCs that were closer to their customer for faster delivery times.  This sea change is what drove Kiva’s steep revenue curve.

Ecommerce has also led companies to fundamentally rework how they think about demand generation, content creation, customer analytics, customer retention, merchandising, and order management.  Every major function of enterprise technology will have to be rethought, reformulated, and redone in light of ecommerce.  Kiva is a great example of a disruptive company in distribution.  Similar to Kiva, we will see other game-changing companies in these other functional areas.  These spaces are all up for grabs. Bain Capital Ventures has a number of portfolio companies in some of the spaces, and I expect we will see a long list of “winners” ride this wave.

Congratulations again to Mick and the entire Kiva team for building a truly great company and a disruptive technology.  We are thankful we were able to participate in this amazing journey.

Here is one of Kiva’s most iconic videos, the Kiva robots performing the Nutcracker…I never get tired of watching this, and I look forward to watching the Kiva team continue to pioneer bigger and better things as a part of the Amazon family!

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Marketing – the next multi-billion dollar category of enterprise technology

“By 2017, a CMO will spend more on IT than the CIO” —Gartner Group

For the first time in history, businesses can leverage big data for the benefit of driving marketing insights. We are at the very beginning of this wave, but this fundamental shift will create several multi-billion dollar winners. And a set of technology companies will emerge as the marketing equivalents of Salesforce and SAP.

Based on this thesis, my partner Scott Friend (founder of Profitlogic) and I have been actively investing in this arena on behalf of our firm, Bain Capital Ventures. Bloomreach, cQuotient, Hooklogic and TellApart are among our recent early stage investments in this new category of marketing innovation.

At the heart of each of these companies are CTOs and engineers that have experience with big data and modern techniques for data mining, analytics, and machine learning. These companies typically charge on a performance basis as opposed to charging traditional enterprise software license fees. And these companies are a having significant impact on their customer’s revenues and profitability.

Why has it taken so long to get here? Enterprise software began in the back office

The world of enterprise application technology has gone through a number of iterations and evolutions over the past 30 years. In the late 70s and 80s, enterprise software consisted of mainframe and minicomputer solutions designed to handle various back office functions: finance, HR, and manufacturing. Over time, the winners in each of these functional applications areas: SAP (manufacturing), Oracle (financials), PeopleSoft (HR), began expanding into the adjacent categories spawning the ERP wave (enterprise resource planning). In the 90s, these companies became behemoths thanks to a concurrence of factors — the movement to client server infrastructure, the trendiness of corporate “reengineering,” the urgency around Y2K, and the growth of the large system integrators.

The focus on the front office

As of 1995, the majority of enterprise software dollars were focused on back office functions while the sales and marketing functions were largely ignored or served by smaller point solution vendors. This opportunity led to the creation of several companies, including Siebel and Trilogy (the company I was with for 8 years). Siebel became a very large and successful company and was ultimately purchased by Oracle for $5 billion (its market cap at one point was over $60 billion). More recently, Salesforce has leapfrogged Siebel with its SAAS approach. With a market capitalization of $17 billion, it has become the new industry heavyweight.

Despite the last 15 years of automation of sales functions, marketing functions have been underserved and underpenetrated in terms of enterprise software. While the other corporate functions have all created multibillion-dollar software companies, the marketing function has had only one exit north of one billion (Omniture). [See exhibit below]

Note: Oracle value represents an estimate of only the value of their financial software application business. SAP represents estimate of the value of only their manufacturing suite. Siebel, Peoplesoft, and Taleo values are based on the prices at which those businesses were sold to Oracle. SuccessFactors value is based on sale price to SAP. Baan’s value is their peak market cap. Omniture’s value is based on sale price to Adobe. Intuit, Netsuite, and Salesforce.com values are based on public market values as of 2/27/12. Disclosure:  Bain Capital Ventures was an early investor in Taleo.

Data versus Process

Historically, the challenge with marketing automation is that it has always been about “process” not about “data.” Back in the 90s, marketing apps were tools used to manage campaigns. More recent categories, such as email marketing or marketing automation, are focused on process automation — how to take a set of manual tasks and streamline them, track them or automate them.

However, marketing-focused software solutions have never been about strategic data. Unlike financial software, which serves as the system of record for the general ledger; or manufacturing resource planning software, which “owns” the bill of materials; or salesforce automation, which is the system of record for the pipeline and the funnel, there is no equivalent for marketing. Until recently, it has been difficult or impossible to collect structured data on marketing prospects who were not customers — folks who had not yet decided to buy and were still somewhere upstream in the purchase funnel. Absent this data, the best marketing technology could do was improve the process of decision making as opposed to delivering real insights.

The web changes everything

As more and more businesses across all sectors of the economy move to the web, this kind of data — and a massive amount of it — is finally available.

  • A web business can mine thousands of signals from its prospects based on the hundreds of actions a consumer might take on a website (checking a price, looking at an image, reading a review, typing in a detailed search query, etc).
  • The holy grail of closed loop marketing is finally here. With sophisticated technology and analytics, marketers can link customer acquisition spend directly to a set of downstream customer actions — whether those actions take place on the web, on a mobile device or in a physical location.
  • Consumers with smart phones are conveying their intent while scanning QR codes, downloading mobile coupons, or simply walking into a store with their location-aware device.
  • Social networks are providing a new source of demographic data that, combined with Facebook’s Open Graph, offer marketers a new treasure trove of information.

I am excited about this next wave in enterprise technology. Marketing will finally emerge from the backwater and will give rise to several multi-billion dollar companies.

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