Convercent launches with $10.2M in backing to disrupt compliance software
Human beings are inherently flawed. For corporations, this means that employees and representatives will inevitably make blunders of ethics and safety. Unless you work in the bowels of a medium or large enterprise, however, you are unlikely to have encountered the multi-billion dollar governance risk and compliance software (GRC) industry that has formed to manage these issues. Fortunately, the only thing you need to know to catch fully up to speed is that the category has hardly seen any innovation in the last 20 years.
Convercent, a startup launching today in Denver, Colorado, aims to change that with what its CEO Patrick Quinlan calls “the first, integrated, cloud-based culture and compliance software platform in the market.” To call Convercent a startup belies the fact that it is launching with 300 existing customers and more than 50 employees, not to mention $10.2 million in Seed funding from Azure Capital Partners, Mantucket Capital, and City National Bank.
So how did the company get to this point, and why is it likely to disrupt the status quo?
To answer this, one has to start with legacy GRC systems by well known brands like SAP, IBM, SoftwareAG, MetricStream, and others. These current offerings focus on managing the negative – think claims of sexual harassment and fraud – via glorified spreadsheets and a fear-based rhetoric. Like dozens of other enterprise software verticals, the GRC solutions of yesterday fall short in today’s social, mobile, data-driven, and cloud-hosted environment.
Covercent, on the other hand, links a company’s values, ethics, and compliance activities within a single SaaS software platform. The product does so by incorporating business intelligence, social collaboration, and by incorporating internal policies, federal regulations, and employee education. If the product has the impact its founders are predicting, it will be the first time a GRC solution not only manages the bad, but also accelerates the good within the global corporate ecosystem, thereby promoting “holistically healthy companies.”
“We empower companies to be proactive in their approach to communicating their values to employees, mitigating risks, saving costs and creating thriving environments," says Quinlan.
Through a modern and aesthetically pleasing dashboard, corporate compliance departments can track incidences of ethics violations, environmental issues, safety violations, and the like. Companies can also, manage and distribute corporate materials like employee handbooks, codes of conduct, and continuing education course materials. Also, through companion mobile apps for iOS and Android, employees and managers can access these resources on the go, referencing company literature or submitting incident reports as they occur. At launch, Convercent supports an impressive 40 languages.
“[With Convercent], we now have the intelligence and ability within a single application to not only engage our workforce around our values and important policies,” but coordinate activities, track evidence, securely communicate with others, and view audit trails – the complete continuum of a successful compliance program,” said Mike Benetti, chief compliance officer at Methode Electronics, a NYSE global manufacturing firm.
With Convercent’s current 50 person team unlikely to grow beyond 60 over the next year, according to its CEO, the company’s use of proceeds for the sizeable pre-launch financing is primarily marketing and advertising.
As with any company targeting large, geographically disparate enterprise customers, the cost of customer acquisition is a major concern. Unlike Yammer, Asana, and other viral enterprise products which can penetrate new organizations from the bottom up, Convercent must be sold directly to legal, audit, and compliance executives. As a result, the company's go-to-market strategy will be similar to that of Zendesk, according to the startup’s CEO.
The company will begin with SMBs between 200 to 1,000 employees and then escalate its focus to large enterprises. Companies with less than 1,000 employees will pay $15,000 per year in an anual recurring SaaS license, while prices for larger enterprises have yet to be published – although they are expected to be in the low six figures. Quinlan plans to stick to inside sales for the first six to 12 months, before eventually rolling out what he calls “belly-to-belly” salespeople. The company’s current clients include such well-known names as Cinemark Theaters and Cardinal Health, as well as others in the aerospace, education, energy, financial services, food and beverage, healthcare, manufacturing, and technology sectors.
One thing working in the company’s favor as it seeks to expand throughout the enterprise market is the network of its investors. Specifically, the man behind Mantucket Capital, TeleTech founder, CEO, and Chairman Kenneth Tuchman. As mentioned above, Convercent’s CEO plans to have his young company cut its teeth in the SMB market before dipping into the rolodex of his well-heeled backer.
Prior to launching Convercent, Patrick Quinlan, Philip Winterburn, and Barclay Friesen built Rivet Software, an accounting regulatory and compliance software product. (Sexy stuff, I know!) With a win under their belt and a vision for how the industry would need to evolve, the pair acquired an existing company which formed the foundation of Convercent. The idea at the time was to build on top of a cashflow-positive business with existing customers that could be converted to their future culture and compliance product.
In March 2012, Denver-based Business Controls, a bootstrapped profitable fraud investigation anonymous hotline company with 14 employees (10 of which remain) and 300 enterprise and small- and medium-sized business (SMB) customers, became that foundation. Quinlan and his team spent from June through January building the company’s next-generation product, which launched into private beta six weeks ago and rolls out to the general public today. Business Controls’ website will be turned off today, its legacy product “end of lifed” within 90 days, and those customers not participating in Convercent’s beta transitioned during this time.
Today, values-based companies, like Whole Foods, Patagonia, Lululemon, and even Google are some of the most powerful in the world. For the first time, organizaitons like B-Corporation are certifying those organizations that are committed to incorporating social good and considering the best interest of all their societal stakeholders when making business decisions. Given this, Convercent would appear to be launching at a time when the market needs culture and compliance software more than ever.
“The opportunity for Convercent to breathe new life into a somewhat broken and traditional software category is tremendous,” Azure Capital Partners founding General Partner Cameron Lester says.
[Image source: Pepperdine University]