Outreach nabs $50M at a $1.33B valuation for its sales engagement tools
CRM software has become a critical piece of IT when it comes to getting business done, and today a startup focusing on one specific aspect of that stack — sales automation — is announcing a growth round of funding underscoring its own momentum. Outreach, which has built a popular suite of tools used by salespeople to help identify and reach out to prospects and improve their relationships en route to closing deals, has raised $50 million in a Series F round of funding that values the company at $1.33 billion.
The funding will be used to continue expanding geographically — headquartered in Seattle, Outreach also has an office in London and wants to do more in Europe and eventually Asia — as well as to invest in product development.
The platform today essentially integrates with a company’s existing CRM, be it Salesforce, or Microsoft’s, or Kustomer, or something else — and provides an SaaS-based set of tools for helping to source and track meetings, have to-hand information on sales targets, and a communications manager that helps with outreach calls and other communication in real-time. It will be investing in more AI around the product, such as its newest product Kaia (an acronym for “knowledge AI assistant”), and it has also hired a new CFO, Melissa Fisher, from Qualys, possibly a sign of where it hopes to go next as a business.
Sands Capital is leading the round, Outreach noted, with “strong participation” also Salesforce Ventures. Other investors include Operator Collective and repeat backers Lone Pine Capital, Spark Capital, Meritech Capital Partners, Trinity Ventures, Mayfield, and Sapphire Ventures. The company has raised $289 million to date, and for some more context, this is definitely an upround: Outreach was last valued at $1.1 billion in its previous round in April 2019.
The funding comes on the heels of strong growth for the company: more than 4,000 businesses now use its tools, including Adobe, Tableau, DoorDash, Splunk, DocuSign, and SAP, making Outreach the biggest player in a field that also includes Salesloft (which also raised a significant round last year on the heels of Outreach’s), Clari, Chorus.ai, Gong, Conversica, and Afiniti. Its sweet spot has been working with technology-led businesses and that is a market that is continuing to expand, even as so much more of the economy has contracted in recent months.
“You are seeing a cambric explosion of B2B startups happening everywhere,” Manny Medina, CEO and co-founder of Outreach, said in a phone interview this week. “It means that sales roles are being created as we speak.” And that translates to a growing pool of potential customers for Outreach.
It wasn’t always this way.
When Outreach was first founded in 2011 in Seattle, it wasn’t a sales automation company. It was a recruitment startup called GroupTalent working on software to help source and hire talent, aimed at tech companies. That business was rolling along, until it wasn’t: it hit a wall in 2015 and the startup saw it had only two months of runway left, with little hope of raising more.
“We were not hitting our stride, and growth was hard. We didn’t make the numbers in 2014 and then had two months of cash left and no prospects of raising more,” Medina recalled. “So I sat down with my co-founders,” — Gordon Hempton, Andrew Kinzer and Wes Hather, none of whom are at the company anymore — “and we decided to sell our way out of it. We thought that if we generated more meetings we could gain more opportunities to try to sell our recruitment software.
“So we built the engine to do that, and we saw that we were getting 40% reply rates to our own outreaching emails. It was so successful we had a 10x increase in productivity. But we ran out of sales capacity, so we started selling the meetings we had managed to secure with potential talent directly to the tech companies themselves, who would have become their employers.”
That quickly tipped over into a business opportunity of its own. “Companies were saying to us, ‘I don’t want to buy the recruitment software. I need that sales engine!” The company never looked back, and changed its name to work for the pivot.
Fast forward to 2020, and times are challenging in a completely different way, defined as we are by a global health pandemic that affects what we do every day, where we go, how we work, how we interact with people, and much more.
Medina says that impact of the novel coronavirus has been a significant one for the company and its customers, in part because it fits well with two main types of usage cases that have emerged in the world of sales in the time of COVID-19.
“Older sellers now working from home are accomplished and don’t need to be babysat,” he said, but added but they can’t rely on their traditional touchpoints “like meetings, dinners, and bar mitzvahs” anymore to seal deals. “They don’t have the tools to get over the line. So our product is being called in to help them.”
Another group is at the other end of the spectrum, he said, are “younger and less experienced salespeople who don’t have the physical environment [many live in smaller places with roommates] nor experience to sell well alone. For them it’s been challenging not to come into an office because especially in smaller companies, they rely on each other to train, to listen to others on calls to learn how to sell.” That’s the other scenario where Outreach is finding up for a job and come into office.
Although a lot of sales tools are essentially taking on some of the more mundane jobs of salespeople, Medina doesn’t believe that we’re anywhere close to replacing the humans, even at this time when we’re seeing so many layoffs.
“We are at the early innings,” he said. “There are 6.8 million sales people and we only have north of 100,000 users, not even 2% of the market. There may be a redefinition of the role, but not a reduction.”