What they do: CapLinked is a deal management platform that enables clients to securely manage complex business transactions and projects in the cloud. Multiple parties can simultaneously manage and track complex deals like mergers and acquisitions in one place online. What it's a big deal: Most companies still rely on technology from the 1990s to manage deals: excel, email, and 20 year old file transfer systems. And cloud-based storage companies like DropBox aren’t optimized for the security and workflow needs of sharing sensitive information between multiple companies. This is the first cloud based deal management system that is secure enough for enterprise deals. No wonder they booked $2 Million last year.
$2 Million bookings (contractual commitments) in 2014
$150K+ customer life-time-value
$2,974 customer acquisition cost
Deal making technology hasn't changed in 20 years
Investors include Peter Thiel, David Sacks, Founders Fund.
Why investors us
$6,094,219 since our founding
The founders have started four companies, authored one bestseller, and rang the bell on an IPO - Eric and Chris have the touch. Enabling companies to securely close deals online is something that should’ve been done years ago, but entrenched industry leaders haven't innovated in 20 years! Everyone uses the cloud to store and exchange personal files, and now CapLinked is bringing the cloud to enterprise deals. Email and data rooms made USPS obsolete, and now CapLinked is ready disrupt again. DropBox and Box are too insecure to pose any sort of threat, and no one else brings the entire deal process into one online shared platform. It also helps that Peter Thiel is a believer.
Eric and Chris have been long time friends since college at Stanford. Both successful founders in their own right, they've come together to solve a problem they've seen firsthand many times over the years.
Ericran the marketing team at PayPal, where he oversaw the campaign to monetize the online payment service and spearheaded product marketing from 1999-2003. In 2004 he founded World Ahead, a media venture, which he grew to national prominence and profitability before being acquired. His book, The PayPal Wars, won the Writers Notes Book Award and was hailed by Tom Peters as "the best description of business strategy unfolding in a world changing at warp speed." He holds a degree from Stanford.
Chris was a senior executive in private equity, finance, and banking for 15 years and directly involved in the origination and management of billions of dollars of debt and equity investments. He founded two companies, Crestridge Investments (a private equity firm) and Third Wave Partners (which made debt and equity investments in distressed situations), and was managing director of a subsidiary of Emigrant Bank, the largest privately owned bank in the country. He studied at Stanford.
What is CapLinked?
CapLinked is a deal management platform that enables clients to securely manage complex business transactions and projects in the cloud.Enterprises previously had to rely on email, FTP, and outdated virtual data room systems from the 1990s to manage deals. And while services like Dropbox, Box, and Huddle provide firms with cloud-based file storage, they aren’t optimized for the security and workflow needs of sharing sensitive information between multiple companies. We’re specialized for huge deals with large amounts of unique document information that need to be exchanged between multiple parties. And we give the clients the ability to secure that workflow, speed up their deals, and have a powerful yet simple and easy to use collaborative environment to get business transactions closed.
What are some specific cases that you’re seeing with your customers right now?
Our customers manage complex transactions like mergers and acquisitions, complex financings and asset backed securities. Most scenarios include thousands of secure documents, and in the case of asset backed securities tens of thousands of sensitive documents.
What solution were available before CapLinked? How are you better?
Dealmakers have relied on the same technology since the 1990s. Most companies rely on software like: emails, spreadsheets, FTP (file transfer protocol), or even FedEx and flash drives to move files securely from one place to the other. Managers have pieced together a system from ancient technology that just isn’t sufficient. Today competitors like DropBox have solved cloud file sharing, but without any of the functionality or security that our enterprise clients need.
We’ve built a system to securely control all aspects of a deal, and manage the entire workflow in the cloud. CapLinked is easy to use and customized to each client’s needs individually. Customers plug our API into their old third-party software, and we migrate everything out of the inbox, the spreadsheet, and the data room, into a single unified platform that handles the entire process of closing the deal. Instead of multiple inboxes, spreadsheets, and encoded file transfers - clients now open one platform to control and monitor the entire deal in one place.
You’ve recently pivoted, why did you pivot and how did you transition?
We launched a beta version of our product back in 2011. People could sign-up and use the basic product for free, kick the tires a little bit, and choose to upgrade to a more robust solution. And what we realized was that in order to really service these complex use cases where clients had large amounts of very sensitive data and complex workflows, we needed a new price structure. The old model of freemium and premium wasn’t flexible enough for our client needs so we’ve since shifted to custom subscriptions for individual clients based on their specific need and budget.
We now focus solely on enterprise subscription. Because of this smaller, higher dollar client pool we’re able to provide a really high touch experience for our clients and focus on their specific large scale needs. We’re no longer just looking at data or sending out surveys to assess customer needs, we’re actually talking to clients on a regular basis. We’re talking with them when they are prospects, we’re qualifying them and giving them pricing proposals, and we’re talking with through the entire onboarding process. This frequent in-depth conversation enables us to really understand what their needs are and informs every new product feature.
Since pivoting we’ve realized just how valuable our customer relationships and feedback are, and that has resulted in much more powerful and useful software. It’s now a more simple, clean, and intuitive product that it was before. As the product has evolved since pivoting, we seldom have to worry about customer support and we’re in a better position to fine tune the software and give our clients exactly the kind of solution they need.
How involved is the customer onboarding process?
Caplinked is definitely intuitive enough for customers to set up on their own. Once in a while we have clients that will have some sort of custom technology and use our API to plug into some sort of third party software. But the vast majority of all our clients just use the off-the-shelf software and it works quite well for them. We make a point to provide white glove treatment for training and onboarding to ensure they all get off to a good start and then we find it's very low maintenance after a client is up and running.
For example, a large multinational mining corporation started using CapLinked a couple of months ago. They’re in a different time zone and we opened up their account around midnight our time, and scheduled an 8:00am training session. 8 hours later, just before our appointment they emailed us back to cancel the training. They had just started using software 8 hours earlier and it was so easy, they felt they didn't need any more training and just began to upload files and send out invitations.
What are the alternatives and competitors in the space?
The entrenched solutions we're displacing are the biggest threat. Intralinks and Merrill DataSite are the two best known data rooms in the industry, but they’re now 18, 19 years old. They were built with a specific workflow in mind, to store data. But they aren’t optimized for user experience, they’re not easy to customize, and they’re also very expensive. They charge clients by the number of pages that customers upload, which makes it hard for customers to understand how much they’re going to pay. These old solutions are like going to Kinko’s, getting photocopies, and paying by the page.
Both Intralinks and Merrill DataSite were the early innovators but they haven’t had to innovate much since then because they’ve had a lead in the market place. We’re in a position to disrupt the status quo with an all-in-one solution that can be configured and customized to the client’s needs. Not only that, we’re also the first to have completely transparent pricing. Instead of one price for every client and every need like our competitors, we tailor prices to each client individually so they only pay for what they need.
Finally, all this legacy technology relies on tons of outside plugins to function: Java, Flash, Silverlight, etc, that frequently lead to browser compatibility problems, and don’t work with iOS. So a plug-in free, modern, streamlined and easy to use solution is definitely a pretty compelling alternative to bring to market. Caplinked really helps companies get big deals done faster than any sort of legacy 1990 data technology.
How easy is it for clients to move their data over to CapLinked?
Data migration isn’t really a problem. Our system is able to do massive uploads, thousands of files at a time - we’ve stress-tested hundreds of thousands of files on a single workspace on CapLinked. There aren’t any technological barriers to migration. But every new client is nervous about moving their data from an old system. So we carefully onboard every new client individually and ensure that all their data is securely transferred for them.
How easy is it for clients to track deal history in your system vs. the old solution?
Our system is much more holistic than the old solutions. Even the old school term “data room” is telling because it’s sort of this isolated place to just store data. It’s very 1990s, Web 1.0 thinking. We’re have a very different perspective. We’re the first to appreciate the value of transaction history, analytics, and business intelligence for all deal activities, and that is a core part of the value proposition. Customers not only get information on how deals work, how deals happen, and who participated. Those are important operational insights. Customers also get an audit trail that mitigates risk by tracking how many clients they’ve worked with, when and how the data was shared, the system can fully disclose an entire deal history if need be. The audit trail is of course very useful through any sort of complex business deal so you can prove what has been disclosed, and shared with outside parties.
How have sales changed since your pivot?
In the two years since we made the pivot toward an enterprise subscription model, we’ve seen very steady growth in sales and revenue. The two most important numbers that we look at are revenue, of course, and sales bookings. Bookings are the value of all the contracts that can close in a given point in time, and an important leading indicator of the growth of the business. And revenue, which of course is derived from bookings, but revenue has to accrue over time because we’re selling subscriptions, so we can’t recognize the revenue of a sale right up front. So in some sense revenue is a lagging indicator of our progress.
In 2014 our bookings were $2M, and our revenue was approximately $620,000. Both of those numbers were between 3x-4x larger than in 2013. Bookings are up sharply so far in 2015, and revenue rate has climbed, we surpassed a $1 Million dollar annualized revenue rate and expect sharp growth throughout the remainder of the year.
What is the lifetime value and customer acquisition cost of new customers.
Lifetime value for the average enterprise client is in the low 6-figures. While customer acquisition costs are in the low 4-figures. We spend several thousand dollars on new customer acquisition but it only takes 3 months to re-coop those acquisition costs. As we scale up our business, these numbers will come down because the economics are tremendous. It’s a very capital efficient business, with high retention rates, and high dollar values. The average account has grown steadily from about $5,000 to about $25,000 per year over the last year and a half. We’ve had several contracts now in excess of a hundred thousand dollars a year, and plan to tailor our product even more for these large enterprise clients.
Who are specific customers, and how do you acquire them?
Our customers come from a couple different areas. The first are large corporations worried about their sensitive information. We go straight to the teams who actually use our software, not the IT department or the CTO, but rather the corporate development and finance teams. They understand the time relief our software provides, then they bring on the IT department to help integrate the API.
Various financial service firms are also big customers for us. Financial institutions like private equity firms, investment banks, boutique firms, and even firms specializing in asset backed securities all have multiple funds under management. These firms must keep track of fundraising, acquisitions, share allocation - all facets of numerous deals over time. CapLinked consolidates everything, securely, and integrates all funds in one place. Fund management teams are similar to the corporate development teams I mentioned above, and we market to them with a similar sales process.
Now how do we sell to them? We sell to them through an inside sales operation. Our lead generation efforts come through a combination of outbound and inbound lead generation. Outbound has worked out quite well for us. By outbound we mean cold calling, cold emails, reaching out to targeted buyers that fit our customer profile. We reach out to potential customers through cold emails, cold calls, get a conversation going which produces very high dollar value accounts. They close reasonably quickly, often 2 to 3 months is the buying cycle. Inbound leads come to us via our website, and are typically smaller and close even faster than the big guys - in just a week or two. Overall our closing time averages about 4 weeks. That’s a pretty quick cycle through the pipeline. It’s through the combination of the inbound and outbound that we generate our leads.
How big is the market?
In the U.S., data room sales already pull in $1.25 Billion annually. But we think the addressable market is bigger than this, and certainly going to be bigger over time just based on a bottom up analysis of all the different firms in the U.S. The global data room market alone is double the size of the domestic market, and we think that the total file sync and file sharing market to be about $100 Billion. The enterprise niche we're in constitutes 7-8% of that total. That’s why we think $7-8 Billion dollars globally, is our immediate addressable market. As SaaS continues to mature, and enterprise adoption of SaaS and cloud based solutions accelerates, and more and more companies depend on the cloud, that number will only rise.
How are you acquiring business overseas?
We’ve partnered with several companies overseas to help us sell internationally. They’ve all sold legacy software for years and just agreed to sell CapLinked instead. A South African company with 7 figure gross sales just agreed to pitch CapLinked as a better alternative. That relationship is exclusive throughout Sub-Saharan Africa which is not a place that we realistically would be able to work in any time soon, so having a partner that’s on the ground, with infrastructure both in sales as well as on-boarding and support of their own clients, is huge for us. Another partner is based in India, which is another place initially thought to be far from our immediate expansion horizon. But now we have a local partner selling CapLinked on the ground to a massive, growing market. We hope to continue to find partnerships like this overseas to bring CapLinked to dealmakers all over the place.
Will it be hard for competitors to enter this market?
There are huge barriers to entry in this market, which is part of the reason just two players have dominated for so long. You have to have credibility, reliability, and obvious security credentials to even be considered by enterprise clients. Building an app that has the ability to upload 50,000 files relatively easily, coupled with outside audit report stuff, security protocols, all in a highly regulated environment is not trivial. We’ve faced many barriers ourselves, and it took us several years to build out our technology and get it to the point where it’s sophisticated enough to manage the scenarios of our biggest clients.
Customers in this deal space use such specialized workflow, that it’s not something you can dabble in easily. The recent adoption of the cloud for storing and collaborating on content is perfect for CapLinked as the complementary feature that facilitates multi-company interaction around deals. We think there’s some pretty high walls preventing others jumping in and we’re now ready to take down the large incumbent competitors.
Why is this the right time for CapLinked?
5-10 years ago this wouldn’t have been possible, but there have been a couple paradigm shifts that made this the right time for CapLinked. Businesses have realized the cloud is actually safer and easier to deploy than internal systems. This understanding of the cloud, and a new willingness to embrace SaaS has been a huge part of our initial good fortune. Decision-making has become very decentralized in the age of SaaS. That's good because it allows us to communicate directly with our end users, not C-level executives who don’t understand the pain points. I think that those two factors are huge in doing what we're doing, and the reason why now, the time is right.
Why are you the team to make this happen?
We are a team of 17 people based here in California, 9 of which are engineering or product. We started as a tech company, and we’ve gradually built out the business to include sales, account management, and customer support. The client facing half of the team focuses on one goal, get lots of feedback on the product and inform the engineering team so we build a platform tailored to our client needs. We have our entire team under one roof, which results in an iterative, client-focused development cycle that makes sure our product is the best possible and one that's closest to the end users.
I started in financial services in the late 90s, then graduated from Stanford and went to work at Arthur Andersen back in 1998. Then Peter Thiel recruited me for the early PayPal team. I learned so much working for Peter, David Sacks and the rest of the team. I had the opportunity to lead U.S. marketing for PayPal and stayed there through the IPO, and then the acquisition by eBay. It was an amazing introduction to the tech industry, I saw firsthand the importance of rapid product development iteration, and how it impacted strategy and scaling up in the market place. After that I started and sold a media company and now I'm working on CapLinked.
My co-worker Christopher Grey, is also a Stanford guy. Chris has done private equity and investment banking for his 15 years out of Stanford, and has seen firsthand the problems that deal makers have managing the entire deal process. Chris is very excited about an alternative solution that can make that process better, having suffered through it so many times. The two of us together bridge a diversified background of software and finance that puts us in a position to make a much better solution to this complicated and overlooked use case.
How satisfied are your customers?
We see 90% renewal rate with our annual subscriptions. That's very high for any SaaS company. We've had users for our service in over 90 countries over the last few years. So CapLinked is truly a global phenomenon now. It’s because CapLinked is so easy to use, customers don't need special software or a native app. FinTech doesn't traditionally have a reputation for great ease of use. Making that a focus of ours, and it's something we think we're really good at. It's a core part of who we are and what we've been able to achieve.
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