Gainsight grows revenue 357% as customer success becomes a key focus across the enterprise

By Michael Carney , written on February 5, 2015

From The News Desk

With SaaS adoption exploding across the enterprise, it’s little surprise that the tools and platforms that support these businesses are seeing similar success. This is very much the case for Gainsight, the customer success company, which today announced that it grew revenue an astonishing 357 percent in 2014, while increasing its customer base to 150, up more than 1,200 percent in just 18 months,

Perhaps more important than its top line growth, Gainsight saw a net renewal rate of 134 percent over the year, meaning that its existing customers not only continued subscribing, but spent at a higher rate year-over-year. For a SaaS business, in which companies typical spend heavily up front to secure a recurring revenue stream, there is perhaps no better measure of health.

As part of this year of growth, Gainsight added a number of marquee customers, including AppNeta, Box, Glassdoor, and OpenDNS. These new adoptees join existing clients like Adobe, Angie’s List, Castlight Health, Citrix, Eloqua, EMC, GoToMeeting Informatica, Marketo, Rosetta Stone, and WorkDay among many others. With Wall Street finally wising up to the language of SaaS – something that was hardly the case a decade ago – it’s little surprise that Gainsight is now used by two dozen public companies and data from its platform is regularly cited on earnings calls. Mehta has pointed to research in the past that indicates an increase in retention rate of just 2 percent can increase the valuation of a public company by as much as 20 percent.

“Everything always flows downhill from boards which are driven by economic motivators,” says Gainsight CEO Nick Mehta. “Public companies are all talking about retention rates and interest in customer success is taking off. The role of Chief Customer Officer is becoming a key position in many companies. In fact, the number one thing CEOs reach out to me for these days is how to hire the perfect CCO.”

While there’s less need than ever before to educate the market as to the value of customer success, Gainsight’s focus on helping educate leaders of these organizations how to be most effective has been a major contributor to its recent success Mehta says. To do just this, the company created an online university, a job board, and a peer-to-peer coaching platform all focused on customer success. These are free services for members of its community. Looking ahead, the company is hosting a CCO summit later this year aimed at sharing benchmarks and best practices among leaders in its community.

Gainsight offers its customers what it describes as a full 360 view of a customer, including how they’re using a product or service, and how that’s changing over time. This is possible by bringing information together from across various data silos – CRM, helpdesk, sales, product engagement, and so on – and extracting insights that can then be used to drive decision-making in account management, as well as sales, marketing, and within the C-suite. The platform also automates many customer success best-practices that are unrealistic otherwise. One example is sponsor tracking – noting when a key decision maker is leaving an organization, meaning your company’s relationship is now vulnerable – which is automated by way of monitoring LinkedIn data.

The key value of Gainsight’s platform is its ability to distill this previously opaque data down into critical moments in each customer’s lifecycle and then make that information visible to a customer success team by way of an easy to digest newsfeed.

“For subscription-based companies, the duration of the customer relationship has an economic impact on the company's financial health, as the value of the purchase is realized over time,” writes Forrester Research VP & Principal Analyst Kate Leggett. “Companies must actively manage their customers to ensure their success in order to decrease churn and increase revenue and advocacy. … Customer success management is an emerging organizational role for companies that offer products and services as subscriptions.”

In support of this period of rapid growth, Gainsight has also added Silicon Valley veteran and Accel Partners* venture partner Kirk Bownan to its board of directors. Bowman is a veteran of Equallogic, VMware, Inktomi, Model N, Object Design, and Parametric Technology Corporation, and currently sits on the boards of Atlassian, Code 42, Sookasa, Couchbase, Grovo, Semmle, and Delphix.

“I think we’ve been blessed to be on this virtuous cycle: we raise more money, which allows us to attract great people, and great people is what allows us to get great customers,” Mehta says. “Our high renewal rate means that it’s working, people are using and finding value in the product.”

Gainsight has raised $54.1 million to date, including a $25 million Series C round in October 2014. The company’s investors include Lightspeed Venture Partners, Bessemer Venture Partners, Salesforce Ventures, Summit Partners, Bain Capital Ventures, Battery Ventures, and Silicon Valley Bank. The Redwood City-based company has grown to more than 150 employees, up nearly threefold in the last year.

Another measure of Gainsight’s momentum is the growth of its community, which is evident in its signature conference, Pulse. In now its third year, the company is expecting more than 2,000 attendees at its May event, double what it saw last year and up nearly 600 percent from the inaugural edition.

Gainsight is in the enviable position of being the clear leader in its category, but that doesn’t mean it’s without competition. Upstarts like Bluenose Analytics, Framed, and even adjacent business intelligence (BI) platforms are seeking to solve many of the same problems. This fact begs a related question which is, does customer success make sense as a standalone product or should the category eventually be consolidated into a broader platform like sales and marketing automation?

“I think there’s two fundamental answers to that,” Mehta says. “The first is that sales and marketing automation are all about new customers – new, new, new. That’s entirely different than thinking about how to make existing customers successful and keep them happy. There’s even internal tension within organizations about how to allocate resources between these two focuses. Secondly, I think there’s an enormous advantage to being totally passionate and focused on solving a single problem as effectively as possible. We’re very focused on customer success.”

To Mehta’s point, Gainsight already integrates and plays nicely with Salesforce and popular marketing automation software. There is certainly a school of thought that would suggest SaaS enterprises would benefit from managing the full customer lifecycle, from prospect, to subscription, to renewal within a single platform, but the compromises and trade-offs required to do so might erase many of the gains. For now, Gainsight is thriving as an independent product, and until that ceases to be the case or until someone makes an acquisition offer it can’t refuse, this is unlikely to change any time soon.

Existing customers deliver tremendous value to a business including predictable revenue, upsell potential, referrals to new customers, and references. In this way, it’s  the lifeblood of any business, particularly one based on subscription model, in which there is a significant up front investment to acquire what one hopes will be long-term customers.

“We are super confident that the companies that are not prioritizing customer success today, will be doing so very, very soon,” Mehta says. “It’s inevitable.”

(*Disclosure: Accel Partners is an investor in Pando.)