VTEX, an e-commerce platform used by Walmart, raises $140M led by SoftBank’s LatAm fund

E-commerce now accounts for 14% of all retail sales, and its growth has led to a rise in the fortunes of startups that build tools to enable businesses to sell online. In the latest development, a company called VTEX — which originally got its start in Latin America helping companies like Walmart expand their business to new markets with an end-to-end e-commerce service covering things like order and inventory management; front-end customer experience and customer service — has raised $140 million in funding, money that it will be using to continue taking its business deeper into more international markets.

The investment is being led by SoftBank, specifically via its Latin American fund, with participation also from Gávea Investimentos and Constellation Asset Management. Previous investors include Riverwood and Naspers, and Riverwood continues to be a backer, too, the company said.

Mariano Gomide, the CEO who co-founded VTEX with Geraldo Thomaz, said the valuation is not being disclosed, but he confirmed that the founders and founding team continue to hold more than 50% of the company. In addition to Walmart, VTEX customers include Levi’s, Sony, L’Oréal and Motorola . Annually, it processes some $2.4 billion in gross merchandise value across some 2,500 stores, growing 43% per year in the last five years.

VTEX is in that category of tech businesses that has been around for some time — it was founded in 1999 — but has largely been able to operate and grow off its own balance sheet. Before now, it had raised less than $13 million, according to PitchBook data.

This is one of the big rounds to come out of the relatively new SoftBank Innovation Fund, an effort dedicated to investing in tech companies focused on Latin America. The fund was announced earlier this year at $2 billion and has since expanded to $5 billion. Other Latin American companies that SoftBank has backed include online delivery business Rappi, lending platform Creditas, and proptech startup QuintoAndar.

The common theme among many SoftBank investments is a focus on e-commerce in its many forms (whether that’s transactions for loans or to get a pizza delivered) and VTEX is positioned as a platform player that enables a lot of that to happen in the wider marketplace, providing not just the tools to build a front end, but to manage the inventory, ordering and customer relations at the back end.

“VTEX has three attributes that we believe will fuel the company’s success: a strong team culture, a best-in-class product and entrepreneurs with profitability mindset,” said Paulo Passoni, managing investment partner at SoftBank’s Latin America fund, in a statement. “Brands and retailers want reliability and the ability to test their own innovations. VTEX offers both, filling a gap in the market. With VTEX, companies get access to a proven, cloud-native platform with the flexibility to test add-ons in the same data layer.”

Although VTEX has been expanding into markets like the US (where it acquired UniteU earlier this year), the company still makes some 80% of its revenues annually in Latin America, Gomide said in an interview.

There, it has been a key partner to retailers and brands interested in expanding into the region, providing integrations to localise storefronts, a platform to help brands manage customer and marketplace relations, and analytics, competing against the likes of SAP, Oracle, Adobe, and Salesforce (but not, he said in answer to my question, Commercetools, which builds Shopify -style API tools for mid- and large-sized enterprises and itself raised $145 million last month).

E-commerce, as we’ve pointed out before, is a business of economies of scale. Case in point, while VTEX processes some $2.5 billion in transactions annually, it makes a relative small return on that: $69 million, to be exact. This, plus the benefit of analytics on a wider set of big data (another economy of scale play), are two of the big reasons why VTEX is now doubling down on growth in newer markets like Europe and North America. The company now has 122 integrations with localised payment methods.

“At the end of the day, e-commerce software is a combination of knowledge. If you don’t have access to thousands of global cases you can’t imbue the software with knowledge,” Gomide said. “Companies that have been focused on one specific region and now realising that trade is a global thing. China has proven that, so a lot of companies are now coming to us because their existing providers of e-commerce tools can’t ‘do international.'” There are very few companies that can serve that global approach and that is why we are betting on being a global commerce platform, not just one focused on Latin America.”

Reimagine inside sales to ramp up B2B customer acquisition

Slack makes customer acquisition look easy.

The day we acquired our first Highspot customer, it was raining hard in Seattle. I was on my way to a startup event when I answered my cell phone and our prospect said, “We’re going with Highspot.” Relief, then excitement, hit me harder than the downpour outside. It was a milestone moment – one that came after a long journey of establishing product-market fit, developing a sustainable competitive advantage, and iterating repeatedly based on prospect feedback. In other words, it was anything but easy.

User-first products are driving rapid company growth in an era where individuals discover, adopt, and share software they like throughout their organizations. This is great if you’re a Slack, Shopify, or Dropbox, but what if your company doesn’t fit that profile?

Product-led growth is a strategy that works for the right technologies, but it’s not the end-all, be-all for B2B customer acquisition. For sophisticated enterprise software platforms designed to drive company-wide value, such as Marketo, ServiceNow and Workday, that value is realized when the product is adopted en masse by one or more large segments.

If you’re selling broad account value, rather than individual user or team value, acquisition boils down to two things: elevating account based-selling and revolutionizing the inside sales model. Done correctly, you lay a foundation capable of doubling revenue growth year-over-year, 95 percent company-wide retention, and more than 100 percent growth in new customer logos annually. Here are the steps you can take to build a model that realizes on-par results.

Work the account, not the deal

Account-based selling is not a new concept, but the availability of data today changes the game. Advanced analytics enable teams to develop comprehensive and personalized approaches that meet modern customers’ heightened expectations. And when 77 percent of business buyers feel that technology has significantly changed how companies should interact with them, you have no choice but to deliver.

Despite the multitude of products created to help sellers be more productive and personal, billions of cookie-cutter emails are still flooding the inboxes of a few decision makers. The market is loud. Competition is cut throat. It’s no wonder 40 percent of sales reps say getting a response from a prospect is more difficult than ever before. Even pioneers of sales engagement are recognizing the need for evolution – yesterday’s one-size-fits-all approach to outreach only widens the gap between today’s sellers and buyers.

Companies must radically change their approach to account-based selling by building trusted relationships over time from the first-touch onward. This requires that your entire sales force – from account development representatives to your head of sales – adds tailored, tangible value at every stage of the journey. Modern buyers don’t want to be sold. They want to be advised. But the majority of companies are still missing the mark, favoring spray-and-pray tactics over personalized guidance.

One reason spamming remains prevalent, despite growing awareness of the need for quality over quantity, is that implementing a tailored approach is hard work. However, companies can make great strides by doing just three things:

  • Invest in personalization: Sales reps have quota, and sales leaders carry revenue targets. The pressure is as real as the numbers. But high velocity outreach tactics simply don’t work consistently. New research from Monetate and WBR Research found that 93% of businesses with advanced personalization strategies increased their revenue last year. And while scaling personalization may sound like an oxymoron, we now have artificial intelligence (AI) technology capable of doing just that. Of course, not all AI is created equal, so take the time to discern AI-powered platforms that deliver real value from the imposters. With a little research, you’ll find sales tools that discard  rinse-and-repeat prospecting methods in favor of intelligent guidance and actionable analytics.

18 months after acquisition, MuleSoft is integrating more deeply into Salesforce

A year and a half after getting acquired by Salesforce for $6.5 billion, MuleSoft is beginning to resemble a Salesforce company — using its language and its methodologies to describe new products and services. This week at Dreamforce, as the company’s mega customer conference begins in San Francisco, MuleSoft announced a slew of new services as it integrates more deeply into the Salesforce family of products.

MuleSoft creates APIs to connect different systems together. This could be quite useful for Salesforce as a bridge between older software that may be on-prem or in the cloud. It allows Salesforce and its customers to access data wherever it lives, even from different parts of the Salesforce ecosystem itself.

MuleSoft made a number of announcements designed to simplify that process and put it in the hands of more customers. For starters, it’s announcing Accelerators, which are pre-defined integrations that let companies connect more easily to other systems. Not surprisingly, two of the first ones connect data from external products and services to Salesforce Service Cloud and Salesforce Commerce Cloud.

“What we’ve done is we’ve pre-built integrations to common back-end systems like ServiceNow and JIRA in Service Cloud, and we prebuilt those integrations, and then automatically connected that data and services through a Salesforce Lightning component directly in the Service console,” Lindsey Irvine, chief marketing officer at MuleSoft, explained.

What this does is allow the agent to get a more complete view of the customer by getting not just the data that’s stored in Salesforce, but in other systems as well.

The company also wants to put these kinds of integration skills in the hands of more Salesforce customers, so they have designed a set of courses in Trailhead, the company’s training platform, with the goal of helping 100,000 Salesforce admins, developers, integration architects and line of business users develop expertise around creating and managing these kinds of integrations.

The company is also putting resources into creating the API Community Manager, a place where people involved in building and managing these integrations can get help from a community of users, all built on Salesforce products and services, says Mark Dao, chief product officer at MuleSoft.

“We’re leveraging Community Cloud, Service Cloud and Marketing Cloud to create a true developer experience platform. And what’s interesting is that it’s targeting both the business users — in other words, business development teams and marketing teams — as well as external developers,” he said. He added that the fact this is working with business users as well as the integration experts is something new, and the goal is to drive increased usage of APIs using MuleSoft inside Salesforce customer organizations.

Finally, the company announced Flow Designer, a new tool fueled by Einstein AI, which helps automate the creation of workflows and integrations between systems in a more automated fashion without requiring coding skills.

MuleSoft Flow Designer requires no coding (Screenshot: MuleSoft)

Dao says this is about putting MuleSoft in reach of more users. “It’s about enabling use cases for less technical users in the context of the MuleSoft Anypoint Platform. This really requires a new way of thinking around creating integrations, and we’ve been making Flow Designer simpler and simpler, and removing that technical layer from those users,” he said.

API Community Manager is available now. Accelerators will be available by the end of the year and Flow Designer updates will be available Q2 2020, according to the company.

These and other features are all designed to take some of the complexity out of using MuleSoft to help connect various systems across the organization, including both Salesforce and external programs, to make use of data wherever it lives. MuleSoft does requires a fair bit of technical skill, so if the company is able to simplify integration tasks, it could help put it in the hands of more users.

Why Salesforce is moving Marketing Cloud to Microsoft Azure

When Salesforce announced this week that it was moving Marketing Cloud to Microsoft Azure, it was easy to see this as another case of wacky enterprise partnerships. But there had to be sound business reasons why the partnership came together, rather than going with AWS or Google Cloud Platform, both of which are also Salesforce partners in other contexts.

If you ask Salesforce, it says it was ultimately because of compatibility with Microsoft SQL.

“Salesforce chose Azure because it is a trusted platform with a global footprint, multi-layered security approach, robust disaster recovery strategy with auto failover, automatic updates and more,” a Salesforce spokesperson told TechCrunch. “Marketing Cloud also has a long standing relationship with Microsoft SQL which makes the transition to SQL on Azure a natural decision.”

Except for the SQL part, Microsoft’s chief rivals at AWS and Google Cloud Platform also provide those benefits. In fact, each of those reasons cited by the spokesperson — with the exception of SQL — are all part of the general cloud infrastructure value proposition that all the major cloud vendors provide.

There’s probably more to it than simply compatibility. There is also a long-standing rivalry between the two companies, and why in spite of their competition, they continue to make deals like this in the spirit of co-opetition. We spoke to a few industry experts to get their take on the deal to find out why these two seeming rivals decided to come together.

Retailer’s dilemma

Tony Byrne, founder and principal analyst at Real Story Group, thinks it could be related to the fact it’s a marketing tool and some customers may be wary about hosting their businesses on AWS while competing with Amazon on the retail side. This is a common argument for why retail customers in particular are more likely to go with Microsoft or Google over AWS.

“Salesforce Marketing Cloud tends to target B2C enterprises, so the choice of Azure makes sense in one context where some B2C firms are wary of Amazon for competitive reasons. But I’d also imagine there’s more to the decision than that,” Byrne said.

Salesforce announces it’s moving Marketing Cloud to Microsoft Azure

In the world of enterprise software, there are often strange bedfellows. Just yesterday, Salesforce announced a significant partnership with AWS around the Cloud Information Model. This morning, it announced it was moving its Marketing Cloud to Microsoft Azure. That’s the way that enterprise partnerships shimmy and shake sometimes.

The companies also announced they were partnering around Microsoft Teams, integrating Teams with Salesforce Sales Cloud and Service Cloud.

Salesforce plans to move Marketing Cloud, which has been running in its own data centers, to Microsoft Azure in the coming months, although the exact migration plan timeline is not clear yet. This is a big deal for Microsoft, which competes fiercely with AWS for customers. AWS is the clear market leader in the space, but Microsoft has been a strong second for some time now, and bringing Salesforce on board as a customer is certainly a quality reference for the company.

Brent Leary, founder at CRM Essentials, who has been watching the market for many years, says the partnership says a lot about Microsoft’s approach to business today, and that it’s willing to partner broadly to achieve its goals. “I think the bigger news is that Salesforce chose to go deeper with Microsoft over Amazon, and that Microsoft doesn’t fear strengthening Salesforce at the potential expense of Dynamics 365 (its CRM tool), mainly because their biggest growth driver is Azure,” Leary told TechCrunch.

Microsoft and Salesforce have always had a complex relationship. In the Steve Ballmer era, they traded dueling lawsuits over their CRM products. Later, Satya Nadella kindled a friendship of sorts by appearing at Dreamforce in 2015. The relationship has ebbed and flowed since, but with this announcement, it appears the frenemies are closer to friends than enemies again.

Let’s not forget though, that it was just yesterday that Salesforce announced a partnership with AWS around the Cloud Information Model, one that competes directly with a different partnership between Adobe, Microsoft and SAP; or that just last year AWS announced a significant partnership with AWS around data integration.

These kinds of conflicting deals are confusing, but they show that in today’s connected cloud world, that companies who will compete hard with one another in one part of the market, may still be willing to partner in other parts when it makes sense for both parties and for customers. That appears to be the case with today’s announcement from these companies.

AWS, Salesforce join forces with Linux Foundation on Cloud Information Model

Last year, Adobe, SAP and Microsoft came together and formed the Open Data Initiative. Not to be outdone, this week, AWS, Salesforce and Genesys, in partnership with The Linux Foundation, announced the Cloud Information Model.

The two competing data models have a lot in common. They are both about bringing together data and applying a common open model to it. The idea is to allow for data interoperability across products in the partnership without a lot of heavy lifting, a common problem for users of these big companies’ software.

Jim Zemlin, executive director at The Linux Foundation, says this project provides a neutral home for the Cloud Information model, where a community can work on the problem. “This allows for anyone across the community to collaborate and provide contributions under a central governance model. It paves the way for full community-wide engagement in data interoperability efforts and standards development, while rapidly increasing adoption rate of the community,” Zemlin explained in a statement.

Each of the companies in the initial partnership is using the model in different ways. AWS will use it in conjunction with its AWS Lake Formation tool to help customers move, catalog, store and clean data from a variety of data sources, while Genesys customers can use its cloud and AI products to communicate across a variety of channels.

Patrick Stokes from Salesforce says his company is using the Cloud Information Model as the underlying data model for his company’s Customer 360 platform of products. “We’re super excited to announce that we’ve joined together with a few partners — AWS, Genesys and The Linux Foundation — to actually open-source that data model,” Stokes told TechCrunch.

Of course, now we have two competing “open” data models, and it’s going to create some friction until the two competing projects find a way to come together. The fact is that many companies use tools from each of these companies, and if there continues to be these competing approaches, it’s going to defeat the purpose of creating these initiatives in the first place.

As Satya Nadella said in 2015, “It is incumbent upon us, especially those of us who are platform vendors to partner broadly to solve real pain points our customers have.” If that’s the case, having competing models is not really achieving that.

Convoy raises $400 million to expand its on-demand trucking platform

Convoy, the digital freight network that connects truckers with shippers, has raised $400 million in a Series D funding round as it aims to scale its business amid an increasingly competitive market.

The funding round brings Convoy’s post-money valuation to $2.75 billion.

The round was co-led by Generation Investment Management and previous Convoy investor T. Rowe Price Associates. Asset management firm Baillie Gifford, which has fondness for pre-IPO tech companies, Fidelity and Durable Capital Partners as well as Series C investors CapitalG and Lone Pine Capital also participated in the round.

Convoy has managed to attract a slew of high-profile investors— and their capital — such as Jeff Bezos, Salesforce CEO Marc Benioff and even U2’s Bono and the Edge. In the four years since its founding, Convoy has raised a total of more than $668 million. Early investors include Greylock Partners, Y Combinator, Cascade Investment (the private investment vehicle of Bill Gates) and  Code.org founders Hadi and Ali Partovi.

And that money has been put to work. Convoy co-founders Dan Lewis and Grant Goodale set out in 2015 to modernize freight brokerage, a fragmented and oftentimes analog business that matches loads from shippers with truckers.

The company has gone from hundreds of loads per week in 2016 to tens of thousands per week across the U.S. Notably, Convoy’s platform handles 100% of the matching, as opposed having humans complete the task.

Convoy also has about 100 routes, many of them concentrated around economic hubs such as Chicago. Michigan and California, Lewis told TechCrunch.

The 850-person company wants to accelerate those efforts with capital raised in this latest round. Although it’s bound to face more competition. Uber Freight, Loadsmart and Flexport are just a few online marketplaces that are targeting freight.

Convoy has added new features to its platform as part of its scaling strategy. The company launched in 2019 an automated reloads feature that allows truckers book multiple loads at a time. It also added Convoy Go, which allows drivers to bring their truck cab and hook up to a trailer pre-filled with cargo.

Salesforce Ventures invested $300M in Automattic while Salesforce was building a CMS

In September, Salesforce Ventures, the venture of arm of Salesforce, announced a hefty $300 million investment in Automattic, the company behind WordPress, the ubiquitous content management system (CMS). At the same time, the company was putting the finishing touches on Salesforce CMS, an in-house project it released last week.

The question is, why did it choose to do both?

One reason could be that WordPress isn’t just well-liked; it’s also the world’s most popular content management system, running 34 percent of the world’s 10 billion websites — including this one — according to the company. With Automattic valued at $3 billion, that gives Salesforce Ventures a 10 percent stake.

Given the substantial investment, you wouldn’t have been irrational to at least consider the idea that Salesforce may have had its eye on this company as an acquisition target. In fact, at the time of the funding, Automattic CEO Matt Mullenweg told TechCrunch’s Romain Dillet that there could be some partnerships and integrations with Salesforce in the future.

Now we have a Salesforce CMS, and a potential partnership with one of the world’s largest web content management (WCM) tools, and it’s possible that the two aren’t necessarily mutually exclusive.

Optimizing customer retention will be a priority in 2020

We’ve seen our fair share of shocking headlines recently: tenuous IPOs, the “retailpocalypse” and a fickle market have reset the way we size up subscription businesses. Recurring revenue models have their pitfalls, and 2019 has certainly taught the industry a few lessons.

Next year, retention is set to be a top priority for companies looking to keep customers engaged and drive growth. From niche products to personalization, how companies deliver on and measure the success of their customer experience will separate successful subscription businesses from the next unflattering news story.

These seven trends will emerge to shape the way companies delight and retain customers in 2020.

1. To meet consumer demand, more mainstream brands will experiment with subscriptions

We’ve all seen articles detailing the financial fall of many brick-and-mortar stores. The retail crunch predicted years ago is coming to fruition as we’ve watched household names like Sears, Toys R Us and Barney’s consider bankruptcy or go up for sale.

Consumers aren’t letting up in their preference for convenience; they want easier ways to buy, and that means stores must develop better online experiences and offer subscription options or risk losing revenue. We’ll see big brands like Nike and Ikea continue to experiment and expand innovative subscription offerings.

For struggling brick-and-mortar businesses, subscription services could very well be a lifeline to retain a dwindling customer base. The shifting retail industry presents an opportunity for traditional companies to fully embrace recurring revenue models next year — smart organizations will do so.

2. The golden age of niche subscriptions is gone, so fatigue will settle in

We’ve experienced a rapid period of subscription adoption, with more options launching everyday. And that’s led us to a point of max fragmentation where companies and consumers alike are subscribed to so many niche products and services, they can no longer manage or afford new offerings.

Because the proliferation of subscriptions are so vast, specialized products and services will need to do prove their worth or risk being replaced. B2B (project management, martech, ecommerce) and B2C (clothing, streaming, meal delivery) companies alike must offer far better experiences in 2020 than in years past. For B2B organizations, products must be integrated with larger systems to justify their existence. One-off point solutions that silo information and create broken customer experiences will no longer be accepted. And for B2C companies, pricing will have to be spot on as more competition vies for the budgets of consumers who haven’t budgeted for increased spending.

Ultimately, not every company will be able to compete in the age of subscription fatigue, so we’ll see more consolidation, partnerships and mergers occur in the coming year.

3. Customer retention will become the new frontier for marketers

It’s impossible to ignore the IPO press around WeWork, Blue Apron, Uber, Peloton and others. If 2020’s tech and consumer unicorns have poor unit economics and aren’t turning a profit, they need to prepare to be the next ugly headline. Marketers can be a force for change by focusing on the long-term retention of the customers they acquire. And I believe they’ll do so happily. Why?

The SaaS gold rush will become the ‘Hunger Games’

SaaS has been the motherlode of enterprise software investing for two decades now. Venture investors, entrepreneurs, and Wall Street have all learned to pile on, leading to a shared consensus that cloud investing is “a sure thing.” Nothing is more destructive to investors over the long term than a sure thing, so I began to wonder, “what could cause the wonderful economics of cloud investing to unravel?”

My conclusion is that while the cloud is obviously here to stay, the next five years in cloud investing will neither be the same nor as easy as the last 10. My reason for writing this post is not to be a party pooper, but to provide a context for startups to navigate this potentially harsher environment. This post identifies three different startup strategies, all of which can work even in the more competitive cloud economy that I envisage. More on that below.

Big picture, the summary points are as follows:

First, cloud company valuations are at all-time highs which cannot be justified by improved company operating performance but can explained by 20 years of consistent 30% growth in the cloud software market. This has given investors the comfort to “pay up.”

Second, within the next two to three years, there will be a “growth crunch” as many cloud markets saturate. At that point the Gold Rush will become the Hunger Games, as cloud companies large and small compete against each other for survival.

Third, there will be three winning strategies for a startup when this happens: fight, or compete head on in an existing cloud market; focus, or find those parts of the cloud market where there is still low competition and good growth; fly, which is to build a company based on more than just the move to the cloud.

Fourth, “beyond the cloud” means “assume the cloud” and build on top of that stack using newer technologies and a design approach where instead of the user working for the software, the software works for (or instead of) the user. At Scale, we think of this as building the Intelligent Connected World (ICW).

Let’s walk through the details.

How did we get here?

We got here because the cloud model works. It works as a computer architecture, and there is no clear replacement architecture on the horizon. It works for customers by aligning incentives with vendors to keep their software working. And it works – brilliantly – as a financial model. In a world of low growth and low interest rates, SaaS looks like a perpetual motion machine and the valuations show it. Today the median SaaS multiple is 8.5x run rate versus an all-time average of 5.6x. Higher growth companies trade at even loftier multiples of 20x and 30x.

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Are cloud companies performing better than ever?

The short answer is no. The four charts below show growth rate, profitability, Sales Efficiency and the Rule of 40 (a combination of growth and profitability) for the entire public SaaS universe from 2004 to today. Each chart also shows separately the median for three sub-periods within this time period: pre-crash (2004 to 2008), the crash period (2009 to 2011), and post-crash (2011 to today).

The story is the same in every case. Pre-crash operating performance was stellar in what was then a new uncrowded market. The crash was brutal on growth and forced companies to get profitable fast. But since 2011, growth rates, EBITDA, Sales Efficiency and Rule of 40 measures have all been roughly flat and provide no justification for almost a doubling of valuations in the last two years.

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So why are these companies trading so richly?

It’s all about the growth

Sometimes the answer is in plain sight. The big picture in all the above numbers is that public companies in this sector have been growing at 30% plus for 15 years now, since the Salesforce IPO in 2004. Growth has not gone up but, far more importantly, it has not gone down.