Democratizing Marketing Automation: Act-On CEO Raghu Raghavan (Part 7)

Sramana: How have you been ramping in terms of customers and revenue?

Raghu Raghavan: We are tripling revenue year over year. When we closed our B round in November 2010, we had 70 customers. Today we have 480 customers. We closed 164 customers last quarter and we closed 130 the quarter before. The quality of customer is getting better. More of our customers are finding us, and 60% of them use Salesforce. We are at a $6 million revenue run rate for the year, and we will triple that rate next year. There has been no drop-off in our sales.

Sramana: What comes next for Act-On?

Raghu Raghavan: We have opportunity to develop more products. We are encroaching onto tools salespeople need, not just what marketing people need. We want the sales guy to see all of the marketing touch points that made somebody a customer. That had led us to start looking at things from a salesperson’s point of view. We sort prospects by marketing activity. We allow marketing teams to create templates that salespeople are able to access and view inside of Salesforce. The salesperson can use that template to send messages to groups of people they select themselves.

We are also doing interesting stuff in social media. We do not take the classic approach of building an app and waiting for followers. We use social media to find conversations that our clients should be a part of. Any link that they drop into a social media conversation can be tracked by the context of the conversation in which it was inserted.

Sramana: In terms of financing, what did you do after you raised your first $2 million from Cisco?

Raghu Raghavan: We made that $2 million last a long time. I did not want to raise money without a plan. In 2009 we had 20 customers and one sales guy. I felt I needed some money to grow the sales force, so we looked around at a few VCs. We had a term sheet, but it was a lousy term sheet. The valuation was so-so, but the terms were weird. It was a difficult term sheet for me to turn down because it was more money than I needed.

During that process, I realized there was a message I was not conveying in regards to the substance of my company. The term sheet reflected that. I realized that we did not have the metrics on the sales productivity. I then spent a lot of time building a model for on-boarding a salesforce and building quotas for them. I spent nine months doing that. We hired four salespeople, and I watched them through a microscope to determine how long it would take them to do a demo completely on their own.

When I went out and raised my B round in November of last year, I found that this time it went much faster and a lot smoother. We took $4 million from USVP and Voyager. I did not think I would need to raise any more money. Suddenly after Marketo raised all of their money, I started getting a lot of inbound calls from quality investors. Our sales team had started scaling nicely, so I sat down with the board and we decided to accept meetings with a few firms in March. Three and a half weeks later I had three completed term sheets. I could have taken $25 million if I wanted to, but we scaled back to $10 million. That round was led by Trinity.

The most difficult decision was which term sheet to accept. We also had term sheets from Norwest Venture Partners and Crosslink Capital. Crosslink invests in public and private companies, and they made a very strong term sheet. I went there and they brought 40 partners in the room. How do you deal with a firm like that? At Trinity we all left knowing that all of the partners were engaged, and we loved the feel of the firm.

Sramana: Trinity is a very good firm, and I believe you made the right choice.

Raghu Raghavan: One of my board members was pulling for Crosslink because he had some friends there. Today we are sitting in a great place. It is a lot of fun right now.

Sramana: Great! Thank you for sharing your journey with us, and I look forward to following your continued success.

This segment is part 7 in the series : Democratizing Marketing Automation: Act-On CEO Raghu Raghavan
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