After two false starts, it seems data analytics startup Segment has finally found its sweet spot.
Going up against industry behemoth Salesforce, Segment offers what it sees as a more complete approach to customer data management and analysis. Its core service, Connections, takes data collected from each interaction from customers, and promises to delivers a consolidated view of customer behavior — going beyond the customer relationship management (CRM) tools that are such a big business in the industry today.
The company, which is currently around 350 employees, announced today that it raised $175 million in Series D funding. Existing investors Accel and GV (formerly Google Ventures) co-led the round with new investor Meritech Capital. Other existing returning investors include Thrive Capital, Y Combinator Continuity, and eVentures. Its valuation, according to a Bloomberg report, is estimated at $1.5 billion.
After two years of struggling to find product-market fit, Cofounders Peter Reinhardt, Calvin French-Owen, and Ilya Volodarsky submitted an open source library they were working on to popular engineering forum Hacker News. According to Reinhardt, “it just took off” from there. Now with over 19,000 customers, Segment has set its sights on some of the most recognizable names in tech: Salesforce and Oracle.
“The cloud suite providers have gone and gobbled up the leader or number two or number three player in every app category and are generating revenue by selling like crazy,” said Reinhardt. “When we talk to customers, their biggest issue is not in making it easier to buy apps, the biggest problem is the unified holistic [customer] persona and good data to act on."
Segment's strength lies in its foundation, Reinhardt says—by building in support for multiple data inputs from many outside sources, it can compete with the deeply-integrated offerings from its much larger rivals. Indeed, Reinhardt says, the larger companies can actually trip customers up with the sheer amounts of varied data they can provide across multiple products, making it hard to get one, unified picture of the business's situation.
"The cloud suites were built first around offline CRMs, and then acquired their way into a fragmented suite of marketing channels," Reinhardt explained.
Without naming names, Reinhardt points to the influx of acquisitions in the space as proof that entrenched players have it all wrong. In an example, he explains how a customer would interact with a bank 20 years ago. The teller knows the customer, he explains, because that customer interacts with the teller face-to-face, the bank's CRM system has a record of the customer's previous business with the bank.
Now, Reinhardt explains, this interaction is splintered across several points of contact. Between ATMs, mobile banking apps, and traditional branches, that customer is interacting with the business differently at each step. The teller can’t provide the same personalized customer experience because his or her preferences are scattered across all these different channels.
“In a world where the CRM is only a small slice of the customer experience, it’s much more strategic for the customer to have a better experience in the first place,” said Reinhardt.
To his point, in January, Salesforce acquired griddable.io, an enterprise data analytics platform, for an undisclosed amount. The deal came on the heels of Salesforce’s $6.5 billion acquisition of MuleSoft, the largest deal in company history, which was a play to bring more data together into its platform.
“The legacy players are trying to glue together acquisitions to make [their offerings] look like customer data infrastructure,” said Reinhardt.
Among Segment’s 19,000 customers, Glossier stands out as a particular success to Reinhardt. The online-first beauty brand has a cult following among customers across social media and offline activations. The company opened its first retail location in late 2018, adding yet another channel from which it could learn about its devoted customers. Segment has unified customer data across “dozens” of Glossier’s owned channels to provide simple measurements and analysis without the complexity that typically comes with juggling dozens of tools.
After this “large but proportional” amount of funding, as Reinhardt called it, Segment is looking to grow internationally as well as expand its suite of services to include improved privacy and security offerings, in addition to entering new markets across the globe.
“We’re making huge investments in those markets that have been completely un-served, and the cloud suites' legacy tools are struggling to close those holes. People are realizing the CRM is not enough.”
