Deal Radar 2008: InsideView’s Clever Maneuvering

InsideView — headquartered in San Bruno, California, USA and operations in Cincinnati, Ohio and Hyderabad, India—was founded in 2005 by Umberto Milletti and Richard Horn. The company has been featured here before and you can read my interview with Umberto here.

Sales Prospecting has traditionally been dependent on cold calls and personal relationships, without a repeatable process. InsideView introduced its Opportunity Solution in 2006. Opportunity Intelligence is aimed at making sales process-oriented, efficient and effective.

So how does the technology work? The technology personalizes the research to identify potential selling opportunities. The product— which can work in a web browser or atop salesforce.com— is a database of information about corporations collected from a variety of sources including blogs, social networks, etc. along with the data traditional sources to provide the salesperson with a clear picture of the prospect’s internal structure and dynamics.

In June 2007, the company raised $7.4 million in Series A funding led by Emergence Capital Partners, a firm that focuses on SaaS. Further, Brian Jacobs, Founder and General Partner of Emergence Capital Partners [read my interview with Brian here] and Jerry Casilli, General Partner of Rembrandt Venture Partners joined the Company’s Board of Directors. Rembrandt Venture Partners had provided the company with the initial seed capital.

The company has a subscription based business model, and targets the technology segment first and then concentrates on the business services sectors (outsourcing, HR recruiting and financial services). The companies targeted could have anywhere from 10 employees to 20,000 employees. Pricing starts at $100 /seat with volume discounts for larger accounts.

In January 2008, InsideView announced a 40% gain in Revenue and a 160% growth in its customer base. It added 56 new customers including companies like Yahoo!, Herman Miller and American Power Conversion to its existing customer base.

InsideView completed the TrueAdvantage’s acquisition for $20 million in November, 2007. It gives TrueAdvantage’s 2500 customers the technology to mine the web and other data services for sales leads in an efficient manner.

Potential acquirers for this company could come both from the traditional marketing intelligence providers like D&B, Reuters, InfoUSA, etc. as well as the CRM folks. Insideview can essentially populate a CRM system with actionable leads, and if that is not a complementary positioning, what is?

I asked Brian and Umberto for the financial engineering details of their TrueAdvantage deal, but Umberto says, “Unfortunately the deal we negotiated does not allow us to disclose terms.”

Hmmm … that means I have to speculate. Let’s see … Series A valuation for InsideView was probably in the $15-$25 Million range. InsideView has made progress since last summer, so conceivably, they may have added another $5-$10 Million to the valuation. If it’s an all-stock deal, then the TrueAdvantage shareholders now own a good 35%-50% of InsideView. I would say that’s a pretty fair deal, given that TrueAdvantage brought 2500 customers to the party.
The current valuation of InsideView, thus, comes to somewhere between $40-$55 Million based on those assumptions.

I like the thought process behind this deal, even if I may have gotten some of my numbers wrong. Other SaaS vendors should look into such opportunities. Instead of taking gobs of investment $$$ and the execution risk, InsideView basically “bought” customers for equity.

For TrueAdvantage investors, the challenge of scaling a manual services business must have become tedious, so “investing” their equity in a technology company gives them an opportunity for a much better multiple than the 1.5-3X for their service shop. InsideView would easily be able to command a 5-7X multiple if it continues to execute well, may be more.

This is the kind of business dealing that makes me smile!

This segment is a part in the series : Deal Radar 2008