A local software startup with a mission to reduce customer churn is hitting the growth trail with its second major funding effort.
ChurnZero, a B2B customer success platform, has announced that it secured $7 million in Series A funding led by Baird Capital. Returning investors in the round, which brings its total funding to $10 million, include Grotech Ventures, Middleland Capital, Charlottesville Angel Network and Center for Innovative Technology.
The startup was founded in 2015 and entered 2016 with one client, but now has over 200 and is increasing revenue three-fold annually, co-founder and CEO You Mon Tsang said in an interview.
ChurnZero helps subscription businesses fight customer churn by analyzing customers’ uses for the product, likelihood to renew and user experience.
“We didn’t really need the money – we have most of our seed round still available, so there’s plenty in the bank,” Tsang said. “But we hit all the numbers on new sales, customer growth and retention, and felt like this was time to invest in the company and continue to be a growing player in the space.”
ChurnZero's clients include small or mid-market subscription businesses that sell to other enterprises, mostly comprising software, content and services companies.
Its co-founders, Tsang and Mark Heys, started the company after leaving Vocus, a publicly traded PR automation company in Beltsville, Md., where Tsang was CMO and Heys was CTO. Tsang said the fledgling market for customer success software made it a rare opportunity to be a first-mover in the industry – a perspective echoed by Baird Capital’s Joanna Arras, who will join the startup’s board.
“We are beginning to see the emergence of best practices to professionalize and scale customer success teams,” Arras said in a statement. “The market for customer success software is relatively nascent; as such we are excited to partner with ChurnZero to create the enterprise’s next great system of record.”
To create that footprint, Tsang said, the recent funding would be invested across the company, with about a third of marketing investments going toward educating potential customers and creating the market for customer success software.
ChurnZero also has an office in Raleigh, N.C., but plans to maintain about 75 percent of its hires in its Arlington headquarters – a crucial point for Tsang, who moved here from the Bay Area in 2011.
“We want to be one of the larger SaaS companies in the D.C. area and I think we’re on pace to do that. With the recent acquisitions of companies in this space, there are fewer growing SaaS companies in the area,” he said. “Acquisition is definitely not our focus. We want to build a great, independent D.C. company.”
