Personal blog of Yzmir Ramirez

Despite a recent history of uneven cash flow and moderate growth, SaaS customer experience management platform Sprinklr has filed to go public.

In today’s edition of The Exchange, Alex Wilhelm pores over the New York-based unicorn’s S-1 to better understand exactly what Sprinklr offers: “Marketing and comms software, with some machine learning built in.”

Despite 19% growth in revenue over the last fiscal year, its deficits increased during the same period. But with more than $250 million in cash available, “Sprinklr is not going public because it needs the money,” says Alex.

Since we were off yesterday for Memorial Day, today’s roundup is brief, but we’ll have much more to recap on Friday. Thanks very much for reading Extra Crunch!

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

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Once a buzzword, digital transformation is reshaping markets

Image Credits: metamorworks / Getty Images

The changes brought by a global shift to remote work and schooling are myriad, but in the business realm, they have yielded a change in corporate behavior and consumer expectations — changes that showed up in a bushel of earnings reports last week.

Startups have told us for several quarters that their markets are picking up momentum as customers shake up buying behavior with a distinct advantage for companies helping users move into the digital realm.

Public company results are now confirming the startups’ perspective. The accelerating digital transformation is real, and we have the data to prove it.

3 views on the future of meetings

Image Credits: Yann Maignan (opens in a new window) / Unsplash (opens in a new window)

In a recent episode of TechCrunch Equity, hosts Danny Crichton, Natasha Mascarenhas and Alex Wilhelm connected the dots between multiple funding rounds to sketch out three perspectives on the future of workplace meetings.

Each agreed that the traditional meeting is broken, so we gathered their perspectives about where the industry is heading and which aspects are ripe for disruption:

• Alex Wilhelm: Faster information throughput, please.
• Natasha Mascarenhas: Meetings should be ongoing, not in calendar invites.
• Danny Crichton: Redesign meetings for flow.

Customers have been “experiencing” business since the ancient Romans browsed the Forum for produce, pottery and leather goods. But digitization has radically recalibrated the buyer-seller dynamic, fueling the rise of one of the most talked-about industry acronyms: CX (customer experience).

Part paradigm, part category and part multibillion-dollar market, CX is a broad term used across a myriad of contexts. But great CX boils down to delighting every customer on an emotional level, anytime and anywhere a business interaction takes place.

Optimizing CX requires a sophisticated tool stack. Customer behavior should be tracked, their needs must be understood, and opportunities to engage proactively must be identified. Wall Street, for one, is taking note: Qualtrics, the creator of “XM” (experience management) as a category, was spun-out from SAP and IPO’d in January, and Sprinklr, a social media listening solution that has expanded into a “Digital CXM” platform, recently filed to go public.

Thinking critically about customer experience is hardly a new concept, but a few factors are spurring an inflection point in investment by enterprises and VCs.

Firstly, brands are now expected to create a consistent, cohesive experience across multiple channels, both online and offline, with an ever-increasing focus on the former. Customer experience and the digital customer experience are rapidly becoming synonymous.

The sheer volume of customer data has also reached new heights. As a McKinsey report put it, “Today, companies can regularly, lawfully, and seamlessly collect smartphone and interaction data from across their customer, financial, and operations systems, yielding deep insights about their customers … These companies can better understand their interactions with customers and even preempt problems in customer journeys. Their customers are reaping benefits: Think quick compensation for a flight delay, or outreach from an insurance company when a patient is having trouble resolving a problem.”

Moreover, the app economy continues to raise the bar on user experience, and end users have less patience than ever before. Each time Netflix displays just the right movie, Instagram recommends just the right shoes, or TikTok plays just the right dog video, people are being trained to demand just a bit more magic.

Another week, another unicorn IPO. This time, Sprinklr is taking on the public markets.

The New York-based software company works in what it describes as the customer experience market. After attracting over $400 million in capital while private, its impending debut will not only provide key returns to a host of venture capitalists but also more evidence that New York’s startup scene has reached maturity. (More evidence here.)

The Exchange explores startups, markets and money. 

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.

Sprinklr last raised a $200 million round at a $2.7 billion valuation in September 2020. That round, as TechCrunch reported, also included a host of secondary shares and $150 million in convertible notes. Inclusive of the latter instrument, Sprinklr’s total capital raised to date soars above the $500 million mark.

Temasek Holdings, Battery Ventures, ICONIQ Capital, Intel Capital and others have plugged funds into Sprinklr during its startup days.

Sure, Robinhood didn’t file last week as many folks hoped, but the Sprinklr IPO ensures that we’ll have more than just SPACs to chat about in the coming days. But one thing at a time. Let’s discuss what Sprinklr does for a living.

Sprinklr’s business

Sprinklr’s IPO filing and corporate website suffer from a slight case of corporate speak, so we have some work to do this morning to determine what the company does. Here’s what the company says about itself in its filing:

Sprinklr empowers the world’s largest and most loved brands to make their customers happier.

We do this with a new category of enterprise software — Unified Customer Experience Management, or Unified-CXM — that enables every customer-facing function across the front office, from Customer Care to Marketing, to collaborate across internal silos, communicate across digital channels, and leverage a complete suite of modern capabilities to deliver better, more human customer experiences at scale — all on one unified, AI-powered platform.

Not very clear, yeah? Don’t worry, I’ve got you. Here’s what the company actually does:

Sprinklr, a New York-based customer experience company, announced today it has filed a confidential S-1 ahead of a possible IPO.

“Sprinklr today announced that it has confidentially submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission (the ‘SEC”) relating to the proposed initial public offering of its common stock,” the company said in a statement.

It also indicated that it will determine the exact number of shares and the price range at a later point after it receives approval from the SEC to go public.

The company most recently raised $200 million on a $2.7 billion valuation last year. It was its first fundraise in 4 years. At the time, founder and CEO Ragy Thomas said his company expected to end 2020 with $400 million in ARR, certainly a healthy number on which to embark as a public company.

He also said that Sprinklr’s next fundraise would be an IPO, making him true to his word. “I’ve been public about the pathway around this, and the path is that the next financial milestone will be an IPO,” he told me at the time of the $200 million round. He said that with COVID, it probably was a year or so away, but the timing appears to have sped up.

Sprinklr sees customer experience management as a natural extension of CRM, and as such a huge market potentially worth $100 billion, according to Thomas. But he also admitted that he was up against some big competitors like Salesforce and Adobe, helping explain why he fundraised last year.

Sprinklr was founded in 2009 with a focus on social media listening, but it announced a hard push into customer experience in 2017 when it added marketing, advertising, research, customer and e-commerce to its social efforts.

The company has raised $585 million to date, and has also been highly acquisitive, buying 11 companies along the way as it added functionality to the base platform, according to Crunchbase data.

Sprinklr has been busy the last few years acquiring a dozen companies, then rewriting their code base and incorporating them into the company’s customer experience platform. Today, the late-stage startup went back to the fundraising well for the first time in four years, and it was a doozy, raising $200 million on a $2.7 billion valuation.

The money came from private equity firm Hellman & Friedman, which also invested $300 million in buying back secondary shares. Meanwhile the company also announced $150 million in convertible securities from Sixth Street Growth. That’s a lot of action for a company that’s been quiet on the fundraising front for years.

Company founder and CEO Ragy Thomas says he sought the investment now because after building a customer experience platform, he was ready to accelerate and he needed the money to do it. He expects the company to hit $400 million in annual recurring revenue by year’s end and he says that he sees a much bigger opportunity on the horizon.

“We think it’s a $100 billion opportunity and our large public competitors have validated that and continue to do so in the customer experience management space,” he said. Those large competitors include Salesforce and Adobe.

He sees customer experience management as having the kind of growth that CRM has had in the past, and this money gives him more options to grow faster, while working with a big private equity firm.

“So what was appealing in this market for us was not just putting some more money in the bank and being a little more aggressive in growth, innovation, go to market and potential M&A, but what was also appealing is the opportunity to bring someone like a Hellman & Friedman to the table,” Thomas said.

The company has 1,000 clients, some spending millions of dollars a year. They currently have 1,900 employees in 25 offices around the world, and Thomas wants to add another 500 over the next 12 months — and he believes that $1 billion in ARR is a realistic goal for the company.

As he builds the company, Thomas, who is a person of color, has codified diversity and inclusion into the company’s charter, what he calls the “Sprinklr Way.” “For us, diversity and inclusion is not impossible. It is not something that you do to check a box and market yourself. It’s deep in our DNA,” he said.

Tarim Wasim a partner at investor Hellman & Friedman, sees a company with tremendous potential to lead a growing market. “Sprinklr has a unique opportunity to lead a Customer Experience Management market that’s already massive — and growing — as enterprises continue to realize the urgent need to put CXM at the heart of their digital transformation strategy,” Wasim said in a statement.

Sprinklr was founded in 2009. Before today, it last raised $105 million in 2016 led by Temasek Holdings. Past investors include Battery Ventures, ICONIQ Capital and Intel Capital.

It’s been four years since TechCrunch published my blog post The SaaS Adventure, which introduced the concept of a “T2D3” roadmap to help SaaS companies scale — and, as an aside, explored how well my mom understood my job as an “adventure capitalist.” The piece detailed seven distinct stages that enterprise cloud startups must navigate to achieve $100 million in annualized revenue. Specifically, the post encouraged companies to “triple, triple, double, double, double” their revenue as they hit certain milestones.

I was blown away by the response to the piece and gratified that so many founders and investors found the T2D3 framework helpful. Looking back now, I think a lot of the advice has stood the test of time. But plenty has also changed in the broader tech and software markets since 2015, and I wanted to update this advice for founders of hyper-growth companies in light of the market shifts that have occurred.

Perhaps the most notable change in the last four years is that the number of playbooks for companies to follow as they sell software has expanded. Today, more companies are embracing product-led growth and a less-formal, bottoms-up model — employees are swiping credit cards to buy a product, and not necessarily interacting with a human salesperson.

Many of the most high-profile, recent software IPOs structure their go-to-market operations this way. T2D3’s stages, by contrast, focus quite a bit on scaling a company’s internal sales function to grow. Indeed, both a product-led and a sales-led approach are viable in today’s growing B2B-tech market.

What’s more, the revenue needed for a software company to go public has increased dramatically in the last four years. This means that software founders need to focus not only on building a scalable product and finding scalable go-to-market channels, but also building a scalable org chart. These days, what is scarce for software founders isn’t money from investors; it’s great human talent.

So in addition to T2D3, my firm and I are now focusing on another founder journey: F2C, or the transition from founder/CEO to CEO/founder. This journey can take many paths, but ideally it starts with the traditional hustle to find early product/market fit.

At last year’s Microsoft Ignite conference, the CEOs of Microsoft, Adobe and SAP took the stage to announce the launch of the Open Data Initiative. The idea behind this effort was to make it easier for their customers to move data between each others’ services by standardizing on a common data format and helping them move their data out of their respective silos and into a single customer-chosen data lake. At this week’s Adobe Summit, the three companies today announced how they plan to expand this program as they look to bring in additional partners.

“The intent of the companies joining forces was really to solve a common customer problem that we hear time and time again, which is that there are high-value business data tends to be very siloed in a variety of different applications,” Alysa Taylor, Microsoft’s corporate vice president, Business Applications & Global Industry, told me. “Being able to extract that data, reason over that data, garner intelligence from that data, is very cost-prohibitive and it’s very manual and time-consuming.”

The core principle of the alliance is that the customers own their data and they should be able to get as much value out of it as they can. Ideally, having this common data schema means that the customer doesn’t have to figure out ways to transform the data from these vendors and can simply flow all of it into a single data lake that then in turn feeds the various analytics services, machine learning systems and other tools that these companies offer.

At the Adobe Summit today, the three companies showed their first customer use case based on how Unilever is making use of this common data standard. More importantly, though, they also stressed that the Open Data Initiative is indeed open to others. As a first step, the three companies today announced the formation of a partner advisory council.

“What this basically means is that we’ve extended it out to key participants in the ecosystem to come and join us as part of this ODI effort,” Adobe’s VP of Ecosystem Development Amit Ahuja told me. “What we’re starting with is really a focus around two big groups of partners. Number one is, who are the other really interesting ISVs who have a lot of this core data that we want to make sure we can bring into this kind of single unified view. And the second piece is who are the major players out there that are trying to help these customers around their enterprise architecture.”

The first 12 partners that are joining this new council include Accenture, Amadeus, Capgemini, Change Healthcare, Cognizant, EY, Finastra, Genesys, Hootsuite, Inmobi, Sprinklr and WPP . This is very much a first step, though. Over time, the group expects to expand far beyond this first set of partners and include a much larger group of stakeholders.

“We really want to make this really broad in a way that we can quickly make progress and demonstrate that what we’re talking about from a conceptual process has really hard customer benefits attached to it,” Abhay Kumar, SAP’s global vice president, Global Business Development & Ecosystem, noted. The use cases the alliance has identified focus on market intelligence, sales intelligence and services intelligence, he added.

Today, as enterprises often pull in data from dozens of disparate systems, making sense of all that information is hard enough, but to even get to this point, enterprises first have to transform it and make it usable. To do so, they then have to deploy another set of applications that massages the data. “I don’t want to go and buy another 15 or 20 applications to make that work,” Ahuja said. “I want to realize the investment and the ROI of the applications that I’ve already bought.”

All three stressed that this is very much a collaborative effort that spans the engineering, sales and product marketing groups.

Sprinklr, the unicorn startup best known for helping customers interpret social signals has been moving into the broader customer experience market in the last year. Today it announced is was hiring a heavy hitter as Chief Operating Officer, bringing in former federal CIO and Salesforce executive Vivek Kundra. He began working at his new position just this week.

Kundra says that he sees a company that is in a good position and poised for growth. It will be part of his job to work with CEO Ragy Thomas to make sure that happens. “When I look at the 1200 customers we have today, I see a massive opportunity to provide technology to change the way [our users] interact with customers,” Kundra told TechCrunch.

He says that, with his background, whether working under President Obama or with Salesforce CEO Marc Benioff, the focus has always been on the customer, however you defined that, whether in the context of delivering government services or selling cloud software.

He said that to achieve that you have to be ruthlessly focused on execution. “Ideas are cheap, but how do you bring them to life in a way that inspires and motivates? I think that’s really important,” he said.

It’s worth noting that Kundra is not the first COO, however. The company hired Tim Page, who was a founder and COO at VCE before joining Sprinklr in 2016. That was apparently not a good fit.

Thomas says that landing Kundra was part of an extensive 9-month executive search where they looked at people who had worked at SaaS companies that had scaled over a billion dollars in revenue, concentrating on Salesforce, Workday and ServiceNow. “If you look at people in the driver’s seat at those companies, there is a finite number of people. Salesforce is a great company and a great partner. That experience is relevant and unique,” Thomas said.

Kundra pointed out that as part of his responsibilities at Salesforce he built a business unit from scratch that included driving adoption for the company’s Government Cloud and other verticals. “Now I have ability to draw on those experiences,” he said.

Firming up the COO position, much like the CFO, is crucial ahead of going public. With the company valued at $1.8 billion in 2016, they would seem to be of sufficient size to make that move, but Thomas wasn’t ready to commit to anything definitive (much as you would expect).

Instead, he talked of building a strong foundation as preparation to become a public company at some point. “It’s a question of when, not if [we go public], but for a company of our size and scale, it’s logical for us to go public. We aren’t talking about when and how, and we are trying to pour a strong foundation [before we do]” he said. Bringing in Kundra appears to be part of that.

 New York marketing tech firm Sprinklr has acquired Portland-based Little Bird, according to Sprinklr founder and CEO Ragy Thomas. Little Bird was founded in 2011 to help researchers quickly find the top experts and influencers on any given subject via Twitter. It raised from Mark Cuban, Jason Calacanis, Oregon Angel Fund and other individual investors $4.8 million in venture capital to build… Read More

 Sprinklr, the social media management company that vaulted into the “unicorn club” last month after it raised $46m on a $1b+ valuation, is making an acquisition to expand into a new area, customer feedback. It is buying Get Satisfaction, makers of a platform that lets businesses connect with customers online and get feedback on their sites. Terms of the deal have not been… Read More