Marketing Chatbot Firm Drift Grabs $60M Led By Sequoia, Sans HubSpot
David Cancel and Elias Torres built their last startup, a marketing automation company called Performable, with just $ 3 million from venture capitalists.
They raised that funding round in late 2009, and about 18 months later they sold the company to HubSpot (NYSE: HUBS)—a larger sales and marketing tech firm based in Cambridge, MA—for a reported $ 20 million.
This time around, Cancel (pictured above, right) and Torres (above, left) opted to raise a lot more capital to try and build a big, standalone company. Today, their latest venture, a “conversational” marketing and sales software startup called Drift, announced a $60 million Series C funding round led by return backer Sequoia Capital, alongside other earlier Drift investors CRV and General Catalyst Partners.
Boston-based Drift’s new funding round comes about seven months after its last one, and it brings the four-year-old startup’s total venture capital haul to $107 million. Cancel, the company’s CEO, and Torres, its chief technology officer, have grand ambitions to grow Drift into a multibillion-dollar business and eventually take the company public, Torres says.
It’s still early days though, and startups don’t often make good on such claims. Still, Drift certainly has enough capital—it says it currently has more than $90 million in cash in the bank—to make some noise.
“We made a decision that we’re going to go big or we’re going to go home,” Torres says in a phone interview.
Drift helps businesses across a variety of sectors—mostly companies that sell products and services to other businesses—improve their sales and marketing efforts. The startup’s products include chatbots that interact with visitors to a company’s website. If a human isn’t available to chat, the bot will attempt to answer the visitor’s questions. The idea is to help businesses more easily find promising inbound sales leads and close deals more quickly, while also improving the buying experience for customers. Drift says the bot can gather the lead’s contact information, attempt to assess the likelihood that lead will turn into a sale, and help schedule calls and meetings, among other capabilities.
Drift’s leaders argue that the way businesses communicate is starting to look like how people connect with friends and family—Torres cites the rise of messaging apps like WhatsApp and WeChat. And standard sales and marketing tools are no longer cutting it, especially because companies can’t effectively build global operations if they’re working (say) a 9 to 5, Monday through Friday, Eastern time zone schedule, Torres says.
“Companies struggle to have conversations with their customers,” Torres says. “We are helping them drive more conversations. … Because sometimes it’s really hard to be scheduling phone calls with everybody.”
Drift says more than 100,000 businesses worldwide use its products, including database software company MongoDB (NASDAQ: MDB), cybersecurity firm Rapid7 (NASDAQ: RPD), computer-aided design software company Onshape, and subscription management business Zuora (NYSE: ZUO). But Torres declined to say how many of them are paying customers. His company currently employs 130 people in Boston and San Francisco, and it plans to grow to more than 250 employees by the end of the year, Torres says.
HubSpot was an investor in Drift’s previous funding round, but it didn’t return for the latest investment. The two companies have been investing in products and services that would seem to put their businesses more in competition with each other, as Xconomy and others reported in September.
Torres says Drift has a good relationship with HubSpot, and he downplayed any competition between them. He says HubSpot didn’t invest in Drift’s latest funding round because the fundraising process moved quickly and there was a lot of interest from potential investors.
“We couldn’t make room for everybody,” Torres says.
Torres says Drift’s sizable war chest is a function of the current venture capital environment—investors are placing much bigger bets on tech companies now than when Performable was raising money—as well as the founders’ reputation.
One of the lessons Torres says he learned with Performable was how hard it was “having a limited budget to hire and to grow.” After Performable became part of HubSpot, a much larger company, he got a taste of what could be accomplished with more resources.
Some entrepreneurs and early-stage tech investors argue that raising less capital—even when more is offered—can work out better in the long run. But “it was very hard to say no” to the money on the table in Drift’s latest funding round, Torres says.
“If you can pull forward the investment that you were going to make and not have to worry where you’re going to end up at the end of the year, and [you can] achieve the same goals you have planned, why wouldn’t we do it?” Torres says. “We want to make sure we don’t fail.”
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