A Republic Wireless spin-out tackling the talent shortage has closed on $4.2 million in capital as investors take a big bet on the resilience of outsourcing.
Raleigh-based ArenaCX is beefing up its coffers, thanks to investments from Eagle Ventures, Sovereign’s Capital, Beyond Capital and the Triangle Tweener Fund. Co-founder Aland Pendleton says the firm meets a major need – cutting costs while doubling down on customer service through outsourcing.
As of Oct. 30, there were 10.3 million job openings in the U.S. In the Triangle, tech CEOs say the competition for talent is stiff. Enter in ArenaCX, offering firms an alternative to the talent fight, Pendleton said. It deals in outsourcing, which, in a sense, is insulated from economic downturns, he said. Business that are restructuring or streamlining “tend to outsource more during a recession.”
And with economists saying a recession is likely in 2023, investors are buying in.
From Republic Wireless to ArenaCX
Republic Wireless spun out of Raleigh-based Bandwidth (Nasdaq: BAND) in 2016. The spin-out included the team that would become ArenaCX. Pendleton applied what he refers to as “supply chain thinking and B-school training” to rethinking customer service operations at Republic Wireless.
“We built an arena where multiple outsource service providers competed with each other to better serve Republic customers,” he said.
Republic Wireless was able to shrink its customer service cost to as low as 50 cents per customer, Pendleton said. The competition was ranging between $4 and $5 a month, he said.
“Republic was able to spend the least and deliver among the very best,” Pendleton said.
As the idea of a standalone ArenaCX materialized, Pendleton asked for recommendations for a venture coach – a “friendly venture capital firm to kind of listen to what we had built and help coach me into developing the proper pitch materials, just knowing what milestones we needed to hit in order to become ready to pursue capital.”
That “friendly venture capital firm” ended up being Sovereign’s Capital, a firm cofounded by Henry Kaestner, co-founder of Bandwidth. The advisor relationship shifted into a financial one – as the firm helped the company fund its transition outside of the Republic Wireless umbrella.
Pendeton and his co-founder, Doc Shufelt, former Republic Wireless general manager, officially spun out ArenaCX of RepublicWireless in 2020, just before Republic Wireless was acquired by DISH Network in 2021.
Within Republic, it was a private marketplace with multiple competing outsource providers. By spinning it out, the firm could go to market “with a public marketplace.”
Cautious growth
The firm has five employees – all of whom have equity stake in the company, albeit a minority position. Pendleton said that as a spin-out, the founding team never had a controlling interest and is beholden to a board of representatives from its stakeholders. Right now, the firm is not hiring. It’s utilizing its own outsourcing resources and operating efficiently so as to maximize the runway provided by the funding round, he said.
“We’re aiming to be as judicious as we can to preserve our runway through these economic conditions and we’re going to let revenue growth drive our hiring plans,” Pendleton said.
The firm is based at downtown Raleigh coworking space Raleigh Founded and plans to be there long term..
For Pendleton, ArenaCX’s location in the Triangle is a no brainer. The Jacksonville, North Carolina, native went to undergrad at nearby Campbell University and graduate school at Duke University. The Triangle is home. It’s where Pendleton raised his two daughters.
Pendleton didn’t detail his customers, though he said ArenaCX does have at least one Fortune 10 company in the mix. Customers featured on its website include Vilo Living, Surprise.com and Republic Wireless. It’s also started to develop “exciting” channel partnerships, Pendleton said, including one recently announced with Zendesk.