Vital Insights, an enterprise startup focused on providing a cloud-based customer experience management solution to the automotive industry, has announced a $20 million growth round from a single investor, private equity firm Bregal Sagemount. This is a first round of funding for the company, which has actually been cash-flow positive since 2008, seeing revenue growth of 30% in the first half of 2012. The company’s flagship product, ForesightTM, is already in use across 4,000 dealerships with 125,000 enterprise users, covering such brands as Mercedes-Benz, Maserati, Jaguar Land Rover, Volkswagen, BMW, Audi and Infiniti. Jason Tryfon, CEO and founder of Vital Insights, tells TechCrunch the funding will be used to expand the Canada-based business further internationally.
The success of Vital Insights, growing on its own revenue steam, is another example of how enterprise startups are finding a groove right now, building on the new vogue for cloud services and an increasing receptiveness among enterprises for more disruptive, immediate solutions to their pain points, a trend we covered in more depth a few days ago. “We disrupted a segment where the processes and technology to manage customer experience hadn’t changed for years. We’d built a technology where data workflow and process worked much faster, and really have helped with customer satisfaction. The market was ready,” he told TechCrunch.
As other enterprise startups have noted, getting a foot in the door is easier once you have a proven product.
“It was difficult because we were the small player, but we proved ourselves with the first implementation with Mercedes Benz USA,” he noted, growing from that to cover most of the luxury automotive segment, and now moving into the mass market segment. “We’re now the big company that all little companies wish they could be, and the small company that all the big companies wish they could be.” The company competes with the likes of J.D. Power, he tells me.
Regarding the choice to wait so long for funding, and for choosing a private equity rather than VC firm, Tryfon said this route was the better one for his company:
“Usually a startup hires an investment bank, and taps 14 or 15 select firms. We were going to do that but I realized when we started interviewing banks that a lot of PE firms didn’t want to deal with the banks. I knew that running the process on my own would require a lot of calories on my part but I had this feeling that from where we were it would be better to do it on our own.” He also noted that given Vital Insights already had a decent customer base, the kind of development usually gained through a VC backer wasn’t as necessary for his company.
He said it was a nine-month process selecting Bregal, because he wanted to make sure he found the “right partner.” (Remember, cash hasn’t been an issue for the company for years already.)
And what is the right partner?
“A firm with experience with tech companies of our size going to IPO or exiting,” he said. It also helped that managing partner Gene Yoon, who had come from Goldman Sachs and now joins Vital Insights’ board, “was a great match in terms of our business model.” He says that Bregal has already started suggesting potential customers, as well as tuck-in acquisitions that Vital Insights might make with the new funds.
The company is currently at 61 employees and plans to hire up to 30 more people, as well as expand into Asia in early 2013.