Raising capital in an ‘icy’ economic climate: With Mark Woodward, CEO of Invoca

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Mark Woodward is an experienced CEO that’s taken not one, but two companies public and had a great sales career before that including being VP of Sales at Live Picture and MacAfee.  Mark became CEO of Invoca around 11 months ago, as the companies Investors wanted someone with Mark’s pedigree of running a public company, as Invoca are surely headed down that route. Since becoming CEO, Woodward has been involved in a fundraising round for Invoca during a tough economic climate and was very successful, announcing the company’s Series D round funding of $30 million on March the 30th.

Mark joined me as a guest on The SaaS Revolution Show to share his insights into raising capital in an ‘icy’ economic climate. You can listen to or read the podcast transcript below and subscribe on iTunes to never miss an episode.

 

Alex Theuma:  Hi Mark.  Congrats in the awesome news.  This recent funding news is the inspiration for the angle of this podcast.  I’d like to discuss with you today raising capital in an icy economic climate.  Sound okay to you?

 

Mark Woodward:  Yeah, perfect.

 

AT:  Awesome.  Before we get into that topic, I always start the show with the opportunity for my guests to give the listeners a bit of background to yourself, to the company, to Invoca.

What’s Mark Woodward’s background?  How did you end up in the hot seat at Invoca?  You’ve only been there about 11 months, right?

 

MW:  Around 10 months.  I started out as a programmer actually working at an insurance company, Allianz Insurance.  I helped them build and open their first data centre in North America and so I was a very technical guy for the first 3 or 4 years of my career.

Then I got a phone call from a recruiter to move from L.A. up to Northern California to sell software.  Kind of the early days of packaged software back in the early 80s.  This company was looking for somebody who had a kind of technical background they thought they could teach to sell.  That began what has now been a 32-year career in sales.  Even though I’ve been running companies now for the last 15 years or 17 years, I still consider myself a sales guy at heart.

I moved up here and just had a lot of success early and was selling security software initially.  Then I went to work for Oracle in the mid-80s.  So kind of early in the Oracle story.  Then a number of successive promotions from sales rep to sales manager to director to vice president, etc.  As you mentioned, I was Vice President of Sales actually at computer associates at a company called Legent Corporation and at Live Picture, at MacAfee.  And then joined a company called Serena Softwares as Head of Sales and in less than a year I became the CEO of that company.  That was the first IPO I was involved in.

I ran that company for 8 years and then sold it for $1.2 billion.  Left the company, joined another company called E2open.  That was a SaaS-based supply chain managing company.  Took that company public.  I ran it for about 7 years and then sold that company.  That was just this past year ago, a year ago right now.  So a year ago March.

As I left the company, originally I was going to stay.  I decided afterwards I was going to do something else.  I stuck around long enough to basically replace myself, hired my replacement.  I stayed on the board for about a year.

As I was just exiting the company, I had a couple of recruiters call me and they said, they wondered if I was looking to do something else.  I said, “You know, I’m really not.”  I sat on a couple of other software company boards so I said maybe I’ll just sit on a few boards.  So if you hear of any boards let me know.  And as recruiters do, all they did was send me specifications for CEO jobs and one of them was for Invoca.

And this gentleman who I knew quite well said to me, “Listen, in about 3 weeks I’m going to get a specification for a search and you have to look at this company.  It’s the coolest company I’ve ever seen.”  And I said, okay, I will.  The very next day he sent me the specs.  He said, “Okay.  They’ve decided to move a little faster.  You need to look at this company.”  And 6 weeks later, I was CEO.  So that’s kind of how I got here.

 

AT: This coolest company that you obviously joined, who and what are they?  What does Invoca do?

 

MW:  Really what we do is we’re filling a multi-billion dollar hole in the marketing cloud.  We provide what we call a call intelligence platform that helps marketers tap into rich intelligence about conversations. If you think about companies that sell a product that we can call a considered purchase, so financial services and insurance and travel and education and a number of them, where there’s a phone call or a conversation involved in the sales process.  What we do is we allow companies to connect the dots from the campaign that drove the call to the call to the actual attribution of the campaign to revenue.

It would allow companies that have a phone call as part of their sales process to do true omni-channel marketing.  So it’s all about providing the same kind of data and analytics they have today around clicks.  We provide that same level of data and analytics around phone calls.

 

AT:  Kind of a marketing automation for telephony.

 

MW:  Exactly.

 

AT:  Thanks for the background both to yourself and Invoca there.

I mentioned March the 30th, I saw an announcement that you raised $30 million dollars, Series D I think led by Morgan Stanley Alternative Investment Partners.  Also participating in the rounds were your existing top-tier investors, Accel partners, Upfront Ventures, Rincon Venture Partners, Salesforce Ventures and StepStone.  A bit of a mouthful there.

This round puts Invoca’s total funding raised today just north of $60 million.  You guys are certainly on fire there.

Now, the $30 million Series D, I understand that you started raising this since September 2015.  That’s roughly 7 months to raise this Series D. First question, is that unusually long?  Did the SaaS stocks tanking have something to do with this?

 

MW:   It was probably about 6 months actually from start to finish.  Originally, we had planned on that process taking about 3 months.  I joined the company in late June and we basically said, listen, we’re going to need to go out and raise a Series D.  We’ll start it right after Labor Day, so roughly September or into the first week of September.

At that time, deals were getting done kind of rapidly 2 months and maybe taking a little longer than 3 months and so we had planned that before Christmas we would have that round closed.  Just about the time that we started getting on the road and starting that fundraise, the environment was changing pretty rapidly.  You started to see a lot of things affect the price of stocks other than the performance of companies.  So the price of oil, just the plummeting of the price of a barrel of oil started to have an effect to the stock market.

As I’m out there marketing the company, every day the Dow is going down 300 points and it’s a difficult environment.  It pretty quickly went from companies who were good companies could go out and just pick the investors they want, now investors were taking a lot more time in making these decisions about which companies they’re going to invest in.  So it absolutely took about twice as long as we thought it was going to.

 

AT: You shared some of the insights into that 6-month fundraise but can you give us more in terms of the inside story of the fundraise from start to finish.  What were the major milestones for the other founders who are listening?

 

MW:   The company, since we’ve done this fundraising before and Accel led our last round, which is they’re a great name in venture and that kind of puts a stamp of approval on the company for Accel, a company like that to come in and fund it, Invoca, so there was certainly no lack of interest.  I think I probably had 60 different firms that expressed interest in talking to us.  And I initially took that top end of the funnel and whittled it down a bit, but I probably had meetings with 40 different firms to start with.  Fortunately, a large majority were right here in the bay area so it was simple to do but there were some very, very long days.

At first we had to put together the pitch deck, update the story.  The company had grown 50% in the last year and there were some really great stuff to tell.  As we kind of transitioned the company from selling to more in the SMB market to the enterprise space, we had a lot of great news to share.  So there were certainly no lack of reception, no lack of interest.

But as I kind of kept going and meeting with more and more of these potential investors, there’s a certain process you expect to happen which is you will have a first meeting and then maybe they request some follow-on information, and then you have some phone calls that maybe you pull in the CFO.  And possibly they want to see a product demo.  They want to talk to maybe other investors or maybe some customers.

So it’s kind of like a sales process.  So you go through this process and as you kind of come towards the end, instead of getting a contract signed you’re hoping to get a term sheet signed.  Just kind of what kept happening was we get close to the finish line there and companies which were investors just were taking a very long time to make decisions.  That’s really what elongated the process for us.

What I found I really needed to do was to start to better qualify some of these investors in advance of doing these meetings and not just meet with anybody who wanted to meet with me because it could be a very time-consuming process.  I probably got a bit more selective in the investors we met with.  I really started to lean on our existing investors for contacts they had or people that they knew and started to use their network.

And in the process also you learn what parts of your story or pitch are resonating and which ones are not.  So in that, during the process you updated the presentation a couple of times and added some things and took things out and ultimately got to the point of the combination of investors that really understood the story, they understood the very large market that we’re in, that we’re very early in the market, that we’re revolutionizing the space.

And you need to find investors that fit kind of who you are as a company because not all investors invest in the same thing.  Some love transition stories, some love high-growth stories, some love new companies and small emerging markets.  Some would rather see established companies and established markets and so I think it’s important to make sure you align the investor going after with who you are as a company.

 

AT:  And how much time as a CEO are you spending on this fundraising round?  Is it 100%?  Is it 50%?  Is it 25%?  Can you share some insights into that?

 

MW:  I was probably at least 50%.  Some days it would be all I did, meeting from morning until night.  I would be doing meetings and phone calls and that’s all I did 100%.  It’s probably more like 60% of my time was fully devoted to fundraising and the rest of it were kind of the rest of the things you needed to do to run a company.

And also just to complicate things even more is that I live up in Northern California and Invoca is located in Southern California so I’m spending a fair amount of time travelling back and forth between Northern California and Southern California at the same time as well.

 

AT:  And did you ever feel that this raise was in jeopardy when the big SaaS bang happened in February?  LinkedIn, Tableau Software had their valuations were almost cut in half in one day.  How did you feel on that particular day with regards to this fundraise?

 

MW:  Well certainly that wasn’t a good day.  When you have days like that or days like I was saying before where the market was just sliding down day after day after day, sometimes it’s hard for people to get very focused and think about making new investments and they’re thinking more about circling the wagons and how they protect the investments they have.  But that being said, there was a lot of money out there looking for a home.  I never thought it was in jeopardy.

I do recall the day that’s called the SaaS Big Bang happen there in February.  Fortunately, we were fairly far down the path at that point.  Certainly I paid attention to whether or not the tenure of our conversations changed with the investor we were talking to.  Fortunately they did not.

I think even in a really difficult environment like this, great companies will get funded.  So I always had faith that the story was so strong, the technology we have, our leadership position, the growth that we’ve had, the growth we see accelerating that the company would get funded.  It was just a matter of time.  And really at the end of the day, what the effect of this kind of environment had on us was just the length of time it took to get the financing done.

 

AT:  And you mentioned just before that question about the investors having the right fit, finding the investors that have the right fit.  You’ve got some outstanding top-tier investors there.  How much does that help you to have Accel, Upfront Ventures with Mark Suster and Salesforce Ventures and all of the others, how much has it helped you to have these in your corner?

 

MW:  I think it helps a lot.  One thing, it gives you credibility.  We were the only company of our kind that has top-tier VCs and so I think it gives us this kind of anointed position of people who’ve come in and done a lot of work and put a lot of money down have kind of voted on Invoca as being the leader in this space so it helps in that way.

But additionally, at the end of the day, the two new investors that we brought in, StepStone who had been a secondary investor but then became a significant primary investor, and Morgan Stanley, both of those came from introductions through our investors.  So Morgan Stanley contact came from Upfront and the StepStone contact came from Rincon.  So ultimately they were very important because they all have their own networks and they all have their own credibility.  They reached out into their networks just to give us investors who they thought would be a good fit both ways, and it turned out that ultimately that’s how we got the funding from them.

 

AT: You said there was a lot of money out there right now.  Would you say that it’s a brutal fundraising market and only market leaders can raise this sort of capital that you raised?

 

MW:  Well, if you look at what’s happened in this past year, you’ve seen a number of these high flyers who have now gone and done pretty significant down rounds.  So yeah, I think that there are companies in this environment that will not get funded, I believe.  They’re going to have to find different ways, and I’m aware of some.  They can find different ways to run the companies by scaling back dramatically and taking down rounds just to weather the storm.

As I did say, I think that truly strong, successful, great companies can get funded in virtually any environment.  It just may take longer.

 

AT:  I think most of the listeners to the SaaS Revolution Show are kind of typically earlier stage than Series D.  So what is your advice to these founders listening that are looking to raise seed and Series A in the current climate?

 

MW:  I think you look for investors that can help you to grow and build your company and not just money in the company.  You get guys like I mentioned Mark Suster from Upfront who’s a tremendous investor.  They do early-stage stuff and he makes a career out of helping entrepreneurs and early-stage entrepreneurs build great companies.

I think it’s find somebody who is truly interested in the success of your company and believes in it that is going to devote time to you and your company and not just give you money.

 

AT: Something I read a lot and I’m sure you do as well, that growth over profitability is kind of the goal of many SaaS companies.  I believe that this is the same for Invoca.  Correct me if I’m wrong, but why is this?

 

MW:  Well, part of it is just the way the SaaS business model works.  So in a perpetual license model, you sign a million dollar contract in the last day of the quarter and you recognize a million dollars of revenue.  In a SaaS environment for a business model, you close a million dollar deal at the end of the last day of the quarter, you recognize no revenue that quarter and you recognize a twelfth of it each… assuming it’s a one-year contract, a twelfth of it each month after that.

So it takes longer for companies to get profitable but you have so much better visibility and a much more sustainable revenue model because you have this massive backlog of business that just continues to get recognized every quarter.  Part of it is the business model that causes it longer for SaaS companies to get profitable.

As far as Invoca goes, growth is obviously very important to us.  We are burning cash right now.  But half the profitability I think it’s important as well and one of the reasons that you saw before the Tableau-LinkedIn debacle, you saw a lot of other companies in the SaaS space get hit pretty hard last year and these are mostly companies that were very fast growth but burning a lot of cash because just the sentiment with investors has changed.  And while they will permit companies to grow and become profitable they’re going to want to know at what point you reach profitability.

With Invoca, next year, our plan is to be profitable.  So while we’re burning cash growing rapidly, we’re growing the top line much faster than we’re growing our expense line and so we see what that transition is and how we get the profitability.  And this Series D we just raised gives us more than enough money to get to the point of where we are sustainable.

 

AT:  Talking of growth, that your year-over-year revenue growth was I think 51% year-over-year.  What’s the secret there?  Why are Invoca killing it right now?

 

MW:  You know, I think it’s a very interesting product, fairly unique in the market at a time when marketers understand the value of technology for helping them just improve, get a better Return on Investment on their marketing dollars.

Chief Marketing Officers, according to Gartner Group, this year will spend more money in technologies than CIOs will.  So we’re in a space where marketers are spending a lot of money on technology.  We have a product that fits well that’s in the right time in the market.  Although it’s early, there’s a lot of desire and need for our product.  And we’ve built a good sales infrastructure around going and capturing that opportunity.

 

AT:   Last question now, Mark, so you’ve taken two companies public.  It would be remiss of me not to ask you is it a goal to make it a hat trick with Invoca?  And if so, when do you foresee an IPO?

 

MW:  Well, so as I said just a minute ago, it’s really great that we have enough money now to take us through to profitability with some buffers.  So I feel like we are in control of our own destiny.

How I would answer that question is it’s my goal by next year to have the company ready to go public if that’s what we would choose to do.  Because whatever the outcome is, it’s only good that it’s about all the things you do to have a company where the business model is repeatable and you can forecast it with a lot of accuracy and you are profitable or you have that path to profitability.  So all the things you do to get a company ready to go public is what we’re going to do.

And then at the time we’re ready to make that decision, we’ll make that decision because a lot of the times there are things, there are factors that affect your decision that have nothing to do with the growth of the company.  Things like market conditions and other things.  So we’ll get the company ready and then we’ll make the decision as to what we want to do sometime next year.

 

AT:  Well, I’ll be keeping an eye out in 2017.  But you guys are doing great stuff at the moment.

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