Indianapolis might seem like flyover country for many venture capitalists. But not the heavyweight tech VC firm Battery Ventures, which is making another bet on a local company after scoring three big wins.
Battery has invested more than $100 million in Indianapolis companies, starting with the 2003 purchase of Made2Manage Systems Inc., a maker of software for manufacturers that grew rapidly before Battery sold it in 2012. Other successes were Angie’s List Inc., which went public in 2011, and ExactTarget Inc., which went public in 2012 then sold to Salesforce.com for $2.5 billion last year.
“There are some firms who think, ‘Hey, if it’s not in Silicon Valley or Boston or New York, it can’t be successful,’” Battery General Partner Neeraj Agrawal said. “We have very much a geographic-agnostic approach. To be honest, markets like Indianapolis have a positive work ethic and high integrity. People get things done.”
Agrawal is leading Battery’s latest Indianapolis investment—the $7 million recently plowed into the marketing technology firm Smarter Remarketer Inc. Smarter, based at 9102 N. Meridian St., today has just 35 employees, but Battery and company officials believe it’s on the precipice of explosive growth.
The firm, founded in 2010, helps retailers better understand their customers, allowing them to customize their digital messages, and when they send them, to maximize sales. Clients range from Eddie Bauer and The Finish Line to WetSeal and Zoro Tools.
Retailers historically blasted out the same emails to all customers. But with Smarter’s software, which combines predictive analytics and data modeling, they can deliver only relevant messages to customers, building brand loyalty in the process. The Finish Line, for instance, could send workout enthusiasts an email highlighting a sale on Nike cross-training running shoes while delivering an entirely different message to customers interested only in apparel.
Getting Battery’s money in the door was no small feat. The venture firm, which has offices in Boston, Silicon Valley and Israel, logs about 6,000 potential investments into its database each year. About 80 will reach the due-diligence phase, and 20 actually will get funded.
For Smarter Remarketer, that due-diligence process was exhaustive. Battery put Smarter Remarketer’s small staff to the test, scrutinizing assumptions and measuring the progress of the business with a litany of metrics.
“You know, it was great we got our stamp of approval from Battery, which has proved to be very beneficial,” CEO Howard Bates said. “But getting that stamp of approval was painful.”
The first serious conversation with Battery occurred in July 2013, just before Agrawal began an extended vacation, Matt Tyner, Smarter Remarketer’s director of finance, said this month at TechPoint’s “New Economy New Rules” breakfast.
“We knew we had to keep our momentum through August to be relevant when he returned,” Tyner said.
Throughout that process, Battery was assessing management credibility.
“There is no casual conversation when you are talking to a mid- or top-tier venture group,” Angel Morales, Smarter Remarketer’s co-founder and chief innovation officer, said at the TechPoint breakfast.
“Even when you are throwing numbers out casually, there is nothing casual about it.”
The due diligence process included calling lots of Smarter Remarketer’s customers, Agrawal said, and they raved about the company’s services.
“I think one customer said, ‘I generate $10 in revenue for every dollar I give to Smarter Remarketer,’” said Agrawal, who has joined the company’s board.
“The calls really hooked us in. That was the thing that ultimately got us really excited. What Angel and his team have built is an incredible customer-intelligence platform.”
Now that it’s armed with Battery’s money, as well as its expertise and connections, Smarter Remarketer is shifting from bootstrapping mode to aggressive expansion.
Bates predicted that, by the end of the year, employment will top 50, with many of the new jobs in sales and marketing. By then, he expects annualized recurring revenue—a key metric for subscription-driven marketing firms like Smarter—to reach $7 million to $10 million.
That’s just the start. One day, Bates hopes Smarter Remarketer will be mentioned in the same breath as the other local digital marketing firms that hit it big—Angie’s List, ExactTarget and Aprimo, which was acquired by Ohio-based Teradata in 2011 for $525 million.
“Hopefully, we can do something as meaningful as those guys,” he said.•