In the growing market of "customer success," Nick Mehta believes he's finally breaking through the noise–and has a lot more money now to go prove it.
Mehta's startup Gainsight has raised a new $50 million Series D funding round led by Insight Venture Partners, with investors valuing it at about $400 million, according to Forbes estimates, roughly double its valuation at its Series C in 2014. And with a round larger than the total amounts raised by three of its closest competitors combined, Mehta's set to grow the gap on them in leading his new category.
"Customer success" has become a buzzword in the two years since Mehta renamed his six-year-old startup originally known as JBara as Gainsight in 2013 and ramped upspreading its gospel for long-term sales growth. Gainsight wasn't the only game in town, as startups including Bluenose, Preact and Totango raised their own millions and joined the chorus. Sales-driven big tech players started to adopt the term, too: Marc Benioff's Salesforce made it a focal point of the new products announced at Dreamforce back in 2014. The opportunity Gainsight, Salesforce ( a small investor in Gainsight) and the others recognized wasn't rocket science. With increasingly-sophisticated software helping salespeople sell more and sell efficiently, they'd probably want to use technology to then maintain those accounts better (and not lose them), too.
"Customers are trying to figure out what's driving results," says Mehta. What they couldn't have predicted in 2013, however, was that B2B customers outside the subscription software sector would also see that need. While SaaS companies are a key part of Gainsight's business–it works with Box, DocuSign and Workday among others–you'll find its software now in ad tech shops such as AppNexus, tech unicorns with different business models like Okta and Twilio, and less tech-centric companies such as Angie's List and Bright Horizons Family Solutions, a multi-billion dollar child-care company. "Our value proposition isn't just about technology anymore," says Mehta. "Any company with a decent size of customers needs to manage them," says Mehta.
At AppNexus, Pablo Dominguez spent the past year building out better support for the large ad tech startup's customer base. The company had Salesforce and other tools for its new business reps, what Dominguez calls its big-game hunters, but not for its account managers to then drive sustained business from each kill. AppNexus piloted Gainsight for nearly a year before signing on officially in October. "Now we can see that entire ecosystem," the operations executive says.
Customers are paying meaningful sums for that visibility. Gainsight has more than 260 customers, dozens of which pay more than $100,000 annually and the rest not far off, its CEO says, up 250% from a year ago. (By those numbers, Gainsight's revenue would likely be somewhere around or north of $20 million today). Gainsight retains its own customers at a mid-90% success rate, with net retention (that number also factoring in customers who pay more) of consistently more than 110%.
It was the consistent use of Gainsight at Insight Venture Partners' own portfolio companies that helped convince managing director Jeff Lieberman to lead the startup's new funding round. "These are reasonably sized companies that were using it," Lieberman says. "At the biggest companies, a lot have built their own systems. But Nick built a best of breed version for everyone else."
Investors are betting that Gainsight can continue to bring in customers like Bright Horizons, big companies with high-touch accounts that can't be managed primarily through automated tools. While 130 of Gainsight's 250 employees are in research and development and Mehta plans to hire 100 more, many of its key roles are increasingly in services, working directly with customers to manage their own. If "customer success" becomes a key phrase at non-subscription B2B companies, Lieberman at Insight says Gainsight will be have pole position in a multi-billion dollar market.
As Gainsight also plans to open its first European office in 2016, after finding a warm response for its first customer event in London despite not having any employees there full-time, Mehta's challenge will be to keep his product ahead of the pack without losing its focus. Customers like Dominguez at AppNexus would welcome more predictive analytics to proactively suggest to users what customers to focus on each day, and Gainsight may make acquihires to speed up those types of product extensions.
"With a business of our size and revenue, you can no longer scrutinize if there's something here," says Mehta. "But the natural question is, how big can this market get?"
