Sales and marketing has seen a huge boom in the last several years, fueled by developments in user experience and design, innovations around how companies can parse and leverage big data analytics to understand more about their target audiences and tech to connect with them effectively. That's also led to a profusion of startups and scaling-up mega-businesses in the space -- as well as the inevitable consolidation to bring those two groups closer together. In the latest development, two scaling startups in sales intelligence in Europe -- Germany's Echobot and Finland's Leadfeeder -- are merging and together have raised €180 million ($190 million at today's rates) to fuel their next steps.
Together the companies have some 8,500 customers, with an emphasis on working with companies in Europe. Leadfeeder focuses on providing tools to help companies understand who is coming to look at their tech on the web to provide better insights into who to target for sales and marketing opportunities. Echobot, meanwhile, is another company building tools to source B2B sales leads and better target teams' sales efforts. In a sea of other companies building sales intelligence tech, it claims to be the most GDPR-compliant of them on the market today.
The all-equity funding is coming from a single backer, Great Hill Partners, which is investing some primary and some secondary (buying out some shares from existing investors). It's also potentially offering a further €50 million ($52.7 million) to make acquisitions, since the trend that brought these two together is likely to continue.
"There is so much opportunity in consolidating the market and bringing together other pieces of the puzzle," Echobot CEO and founder Bastian Karweg told TechCrunch. He will become CEO of the combined company, with Leadfeeder CEO/founder Pekka Koskinen taking on a product role.
Initially the two companies will continue to be run separately with independent brands, but they expect to merge more of their operations and tech together. They are already doing some talent acquisition and finance functions together but software and sales integrations -- building out that bigger vision of a platform instead of selling point solutions -- is more complex and will take more time. They will potentially also take on a new name by next year, although one point to consider on the branding front is that Echobot is also the name of a Mirai malware variant.
Valuation is not being disclosed, but in a joint interview, Karweg and Leadfeeder CEO/founder Pekka Koskinen said that talks first kicked off last year "before the market decline." Karweg said that the valuation that was named initially in those discussions is the one that it stuck with in the end.
In other words, this is a way of saying that the number wasn't impacted by the big depression in valuations that's currently hitting so many other companies big and small in tech. (And turning that around, one could also say that it stayed flat and definitely did not ratchet up, either.)
Echobot is profitable and has been for some time. Leadfeeder was nearly profitable prior to this deal, Koskinen said.
Both companies note that they had double-digit millions ARR and Echobot's revenues in the last year grew 70%, while Leadfeeder's grew 50%.
Although the founders note that it was not current market pressure that brought them together; there was perhaps already writing on the wall for consolidating point solutions in the sales technology space.
Both had raised similarly raised modest amounts before this deal (we covered some of Leadfeeder's fundraising here), and they came together after both going out into the market looking to raise growth rounds to expand. GP Bullhound happened to be advising both of them, and not unlike how Simon Cowell brought together the members of One Direction from male soloist contestants on "X Factor," it suggested they might raise more money, and close the deal on it, if they came together for a more powerful message and product in the market.
Derek Schoettle led the deal for Great Hill Partners, and he's an interesting person to be involved with the company. One of his past roles was the CEO of ZoomInfo -- another big player in sales intelligence -- and he spent years as an executive at IBM after a previous company he ran, Cloudant, was acquired by it.
He said that one thing that attracted him to funding this merged entity is the trend hitting the European market to provide more end-to-end tools to address how sales teams work. He and the founders all noted that in fact both startups individually had road maps to build features that the other already had. "So this gives them an immediate start on creating a sales intelligence platform," he said, perhaps even to compete against Schoettle's old company.
The other important thing to note here is the geographic specialization, he said.
"Europe is not one country but many, and there are differences between them, whether it's to do with culture or data compliance," he said. "Having a platform that is unique and linguistic-specific, and serving its markets with high-quality data, is a differentiator."