Infusionsoft, an eight-year-old software company founded by Clate Mask (CEO) and his two brothers, Scott and Eric Martineau, has just been given $54M in expansion funding from the investment firm Goldman Sachs.
Infusionsoft plans to use the money to further develop and expand its product: software that integrates online marketing, a customer relationship management (CRM) database, social media tools, tracking statistics, and e-commerce. "We hope to continue to make our software easier and easier and more enjoyable for our customers (small businesses with fewer than 25 employees) to use," says Mask.
The CEO says that his product, for example, solves the problem of making those dreaded follow-up calls that business owners tend to put on the back burner.
So, how does one go about acquiring this amount of money from a company like Goldman Sachs? In Infusionsoft's case, Mask says there were three main criteria:
1) Prove that this is a real opportunity.
"Five years ago when we first raised capital, most venture capitalists looked at us with a jaundiced eye. Their position was, 'I've never really seen companies that serve true small businesses make a lot of money for their investors, so we're going to pass.' That was the familiar refrain for us five years ago. And then we raised a second round of capital 15 months later and were still confronted with that sentiment from many investors."
"However," Mask continued, "a couple of years ago, we noticed that things started to turn and small business became more in vogue. It's hard to argue with 50,000 users on the system and 12,000 small businesses using the software. And it's hard to argue with $39M in revenue and 53% growth."
2) Demonstrate efficient customer acquisition and retention.
"We're debunking the long-held myth that small business is a dangerous place where the customers are too needy, the margins are too thin, and you can never make any real money. We're think that's not true."
3) Find an investor that aligns with your company's mission and values.
Goldman Sachs, according to Mask, had an "appetite for small business," and he was attracted by recent incentive programs the investment firm had implemented.
Finally, Mask spoke about what this round of financing means for Infusionsoft: "This is an opportunity for us to really go for it. A lot of times, software companies that serve small business will either move 'upstream' or 'sell out.' We don't want to do either of those things. We want to continue serving small businesses and we want to build a big, enduring company. We found a partner that believes in that, and wants to help us serve small businesses for many, many years into the future."