E-mail marketing provider ExactTarget has in a short span landed what may be a record amount of venture funding for a private
company here—$75 million since October.
And that’s on top of the $69.9 million it received in May
from three venture firms on the coasts, in what was the third-largest venture deal in the nation during the second quarter,
according to the National Venture Capital Association.
That’s a total of $145 million in a mere six months,
and from venture-capital firms on the coasts who’d otherwise struggle to find Indianapolis on a map.
a private institution” locally, “that’s got to be a record. It validates their business model in a huge
way, especially in this economy,” said Bruce Kidd, an Indianapolis venture veteran.
heck of a testament for the Indianapolis tech community. It really shows it’s not ‘about location,’”
said Scott Dorsey, co-founder and CEO of ExactTarget, a 9-year-old company that now employs about 500.
isn’t boasting: ExactTarget didn’t even bother to announce the latest two rounds: $5 million in October and a
$70 million round Nov. 20, according to U.S. Securities and Exchange Commission records.
The closest the company
came was an announcement last month that David Yuan, a principal of Silicon Valley venture firm Technology Crossover Ventures,
had joined ExactTarget’s board “following an investment” in the Indianapolis company.
year ExactTarget put on hold plans for an $86 million initial public stock offering as the stock market tumbled.
Even with the massive new infusion, “we really feel that we can better execute our plan in the short-term as a private
company,” Dorsey said.
“If you can raise that amount of money and stay private—all the better,”
Still, it’s interesting to note the pedigree of Technology Crossover Ventures, which Dorsey said
is the source of the latest $70 million investment.
“Since its inception in 1995, TCV has guided more than
40 companies through initial public offerings and currently has more than $7.7 billion under management,” ExactTarget
said Nov. 20 in its brief announcement that Yuan joined its board.
For example, TCV in 1999 made its first of what
would be a $55 million investment in the early years of Netflix, a veritable unknown at the time but which later grew to become
the nation’s largest online DVD rental service.
Netflix completed an initial public stock offering in 2002.
TCV made additional investments, including $75 million in open-market stock purchases of Netflix in 2006.
Alto, Calif.-based TCV also has invested in such companies as Expedia.com, Orbitz.com parent Travelport Ltd. and RiskMetrics
Group, a New York company that owns Institutional Shareholder Services.
An earlier, $69.9 million round
of investment in ExactTarget last May involved three venture firms: Foster City, Calif.-based Scale Venture Partners, Owings
Mills, Md.-based Montagu Newhall Associates and Battery Ventures, which operates chiefly out of Waltham, Mass. and Menlo Park,
Calif. Principals of Battery and Scale also joined ExactTarget’s board.
It’s a long, long way
from 2000, when Dorsey, Chris Baggott, Peter McCormick and Bob Compton tried to explain their concept of e-mail marketing
to potential investors.
“They couldn’t even raise $1 million,” recalled Kidd, now a senior vice
president at Indianapolis-based Walker Research, who admits to scratching his head at just what the entrepreneurs were proposing
to do back then.
ExactTarget’s software as a service model provides a cost-effective way for companies
to market their products to customers who consent to being contacted via e-mail. It may be ExactTarget client Papa John’s
e-mailing a coupon to loyal customers frequently ordering a pizza from the chain’s Web site, for example.
a recent application of ExactTarget’s technology, passengers of the Orange County (Calif.) Transportation Authority
can send text messages to the agency to receive e-mails of arrival times for the next three buses for a particular bus stop.
But one of the areas ExactTarget is most zeroing in on is the red-hot social-networking market.
ExactTarget’s clients can send their customers e-mails embedded with social-networking icons, such as Facebook. The
recipient’s friends on Facebook can share the coupon. That friend then becomes another potential candidate for ExactTarget’s
So far, the Indianapolis company has more than 3,200 clients. Most pay between $10,000 and $150,000 in
subscription fees. The client portfolio is diverse, with the largest representing only 3 percent of its business. The
large client base and recurring revenue steam is like some reliable annuity to some investors, explaining some of ExactTarget’s
allure. The company also boasts of more than 30 quarters of successive revenue growth and three straight years of profitability.
Between 2004 and 2008, revenue soared 524 percent from $11.6 million to $72.3 million, according to Deloitte’s
“Technology Fast 500” ranking, which listed ExactTarget as the nation’s 254th-fastest-growing company.
Dorsey said the venture proceeds will go toward developing new services, hiring additional sales staff and making
acquisitions. In September it entered Europe by acquiring London-based Keymail Marketing.
ExactTarget, with headquarters
at 20 N. Meridian St., started the year with 375 employees but should end the year north of 550 on the payroll, said Dorsey,
a native of Chicago.
Indianapolis tech firms often never make a blip on the radar of venture firms on the coasts
if only because often investors “just don’t know about this market,” said Kidd, former director of entrepreneurship
and small business at the Indiana Economic Development Corp.
The success of ExactTarget in drawing widespread attention
from the coasts “is one of the several tipping points we need to have,” said Kidd, who just returned from a trip
to the Silicon Valley for Walker.
“We can build these kinds of companies here.”