Mobile messaging

Messaging was one of the hottest categories in 2013, with apps like Snapchat, WhatsApp, and Line grabbing headlines, users, and venture capital across the globe. But for all their utility in the consumer realm, each of these products holds almost no appeal within the enterprise. That category, although less sexy, represents an equally large opportunity and yet has attracted far less competition.

Today, Santa Monica-based secure, real-time messaging company TigerText announced $21 million in Series B funding with the goal of dominating the underserved enterprise messaging category. The round was led by Shasta Ventures with participation from healthcare investment giant OrbiMed, Reed Elsevier Ventures, and Canadian telecom TELUS Corporation, as well as returning Series A investors, Easton Capital, New Leaf Venture Partners, and New Science Ventures.

TigerText is coming off a year in which it more than quadrupled its revenue and more than doubled customer accounts, according to CEO Brad Brooks. The company is most widely used in the healthcare market today, where several dozen of the Top 100 US hospitals adopting its messaging platform. This is not surprising, given the industry’s tight regulations around information security and patient privacy. TigerText has created several industry-specific integrations targeting healthcare clients such as those with EHR (electronic health record) platform PointClickCare and on-call scheduling software platform AMiON.

TigerText has also onboarded seven percent of the Fortune 500 including financial services firms and companies within other regulated industries. Churn for the company was less than 5 percent in 2013, according to Brooks.

In a BYOD world, enterprise users are currently having non-compliant conversations over SMS and consumer messaging platforms. Gartner even called “mobile device diversity and management” the number one strategic technology trend in the 2014. TigerText offers a much needed solution where users can message securely between any smartphone, tablet, or computer, regardless of operating system. IT department can institute compliance-driven rules like archiving or even automatic message deletion.

“TigerText is one of the first companies that meets the critical needs of enterprises when it comes to providing a secure, easy-to-use vehicle for communicating in real-time,” Shasta Ventures partner Sean Flynn said in a statement today.

TigerText is in the midst of a business model shift that Brooks hopes will accelerate adoption beyond the healthcare market. In October of last year, the company moved from a limited free trial model to a new freemium model. Paid users get access to employee productivity tracking and analytics such as average message response times. Administrators can also remotely wipe data, de-provision network access, and dictate “self-cleansing” timelines under which messaging data is automatically deleted from all devices and server archives.

Brooks compares this new strategy to those that helped both Yammer and Dropbox grow tens of millions of users. As I wrote when first covering the new freemium model:

It’s a strategy that worked wonders for Yammer and other “consumerization of enterprise” success stories, the majority of which have what is known as a bottom-up customer acquisition model. Under this model, a single employee can sign up for TigerText for free, add their business, and start securely texting from their mobile device (iOS and Android) or the Web. Enterprise administrators can then decide if they want to pay for more advanced encryption, compliance, data archiving, and organizational management features available in the Pro version of the software.

In the time since launching Freemium, TigerText managed to sign up 10,000 new businesses and crossed the 3 million user mark.

“Over-the-top messaging is quickly replacing SMS as the most popular communication channel for consumers,” Brooks told PandoDaily previously. “Enterprises are now hopping on this trend and demanding secure, yet efficient OTT communication channels for their workers.”

Although not particularly relevant to TigerText’s enterprise customers, it’s worth noting that Brooks co-founded  breakout anonymous social network Whisper and incubated the company within TigerText before spinning out into a standalone service. The companies share a security and privacy-focused DNA and an emphasis on facilitating communication. The fact that Brooks has experience and active involvement on both the consumer enterprise sides of the market should only help TigerText.

Prior to its latest funding, TigerText raised a total of $11.9 million, including $10 million Series A round in February 2012. The company more than doubled its headcount in 2013, approaching 80 employees. Not surprisingly, much of this growth took place in the company’s sales and marketing departments, although Brooks notes that product and engineering will remain the focus as he puts the new funding to work.

TigerText is further evidence that Southern California is developing a respectable SaaS ecosystem. The company is also one of several messaging standouts in the region, including SnapChat, Whisper, TextPlus, Tinder, and Burner, among others.

Brooks recognized the opportunity to address enterprise messaging before almost anyone else and has certainly taken advantage of that head start. But his company has demonstrated its product development mettle that goes beyond good timing and now offers arguably the best product enterprise secure messaging on the market today.

The next challenge is for TigerTex to prove that it can build a large sales force capable of closing the other 93 percent of the Fortune 500. Much of that challenge will come down to educating the non-healthcare market about the very existence of the product and the problems it solves. This next phase will demand an entirely different skill set than the one that got the company to this point.

On the low-end of the market TigerText will have to compete with other free solutions like newly launched off-the-record messaging app Confide. At the higher end, there is less purpose-built competition, but the company is likely to be evaluated against by enterprise social networks like Yammer, Chatter, and Hall which solve a different but adjacent problem. The more successful TigerText is in proving out market demand for dedicated enterprise messaging solutions, the more competition it is likely to receive.

With this new pile of cash and a cast of new institutional backers, the company certainly has the resources to summit this mountain. As always, the proof will be in the execution.

TigerText