True Ventures got our attention by closing a Series A deal in the dark days just after the financial meltdown, funding Syncplicity. It has just announced that it is funding LoopFuse, a late entrant to the very crowded marketing automation space. Sean Dwyer, CEO of LoopFuse, confirms that the Series A investment is $1.4 million. This puts True Ventures into the very elite class of VCs that have sealed two Series A deals in web technology since the financial meltdown (the other VC is Emergence Capital).
Check out the True Ventures blog, which offers some interesting thoughts on whether the downturn will "re-invent venture capital."
Marketing Automation Is a Crowded Space
Marketing automation is nothing new. Vendors like Eloqua and Unica have been around for a while. Salesforce.com is in the game, too. If you Google "marketing automation," you'll see plenty of vendors making Google rich by buying those ad words.
If you're not familiar with the market, here are three good resources for understanding marketing automation:
- The first is a summary of five problems that marketing automation means to solve.
- The second is an analysis of vendors in the market. It is thorough, if a bit biased in favor of solutions that integrate with Salesforce.com.
- Finally, here are some tweets about marketing automation, which, as it happens, is how I discovered LoopFuse. I was investigating the marketing automation space in general and, augmenting my Google search with a Twitter search as I now do, came across this brash upstart calling its competitors names:
"To Marketo and their overpriced Toy for Marketing Tots, and Eloqua, with their Techological Torture Device, I say, Get some coffee and try to stay awake. If it was bad for you when it was two guys (and a dog), it's going to be an utter nightmare now."
Are these More Tornado Tactics?
That's tough talk! Kind of funny as well, which is the point of punk marketing. This is exactly what punk musicians did when they landed on a very established music scene. Stiff Records, of the late 1970s London punk scene, was a master of the game.
This is also the sort of tactics one sees in the high growth ("tornado") phase of markets, when a lot of vendors duke it out for market share. Marc Benioff, CEO of Salesforce.com, is a master of this and has spawned many imitators. The tactics are so common now that they are in danger of losing their effectiveness unless they carry real substance or are very, very funny. LoopFuse may not have scored on the first count, but it got at least a chuckle here.
Measuring Your CAC to ACV Ratio
Bruce Cleveland, Partner at Interwest Ventures, which funded another company in the marketing automation space (Marketo), has a great blog entry about how much money it takes to build a SaaS vendor. He focuses specifically on the cost of marketing:
"SaaS companies do need to aggressively monitor and manage their customer acquisition costs (CAC). If Annual Contract Value (ACV is the expected annual stream of cash flows expected from each subscriber) is relatively low against the cost to initially acquire the customer, then the SaaS company can quickly get into cash trouble.
This is why I like my portfolio companies to constantly monitor and manage their customer acquisition to ACV ratio. A good target ratio to strive for is 1 or less -- far less being the goal. That is, when you divide the total customer acquistion costs by the first year ACV, the resultant should be a number equal or less than 1. Customer acquisition costs should include: all direct and indirect marketing costs, commissions, and T&E."
Why Get into Such a Crowded Space?
Because SaaS may be re-invigorating marketing automation. Traditional enterprise software has been a face-to-face sales game. SaaS is a marketing game, with telephone sales thrown in the mix, but with mass-marketing analytics driving the funnel management.
Revenue growth is priority #1 for everyone. So, investing in productivity to drive revenue makes sense. This may explain why True Ventures has funded a late entrant to the crowded market.
When I asked Sean Dwyer, he suggested that user-friendly design was the key. Perhaps. Malcom Friedberg, of LeadDogs, asks on Twitter:
"I'm trying to get data points on how long it takes for a new user to become proficient on a marketing automation platform, any suggestions?"
SaaS vendors win one click at a time. So, this learning curve maybe the key differentiator.