Doubling Down On Our Investment In Gainsight.

Nick Mehta, CEO of Gainsight

Earlier this week, Gainsight announced its most recent financing — a $52m round led by Lightspeed. We first invested in Gainsight in their Series C and couldn’t be more excited to reaffirm our commitment to Nick Mehta and his team by leading this round.

My involvement in Gainsight dates back to early 2013, when I was part of the deal team at Battery Ventures that led the Series A in the company. Since then, I’ve had the privilege of having a front row seat to the intertwined story of customer success and Gainsight.

In the last 5 years, Nick and his team at Gainsight have taken customer success from a buzzword to a business imperative for companies of all shapes and sizes. As we were making the decision about leading this round, here are the thoughts that led us down the path of investing in the company (again!):

  • Why now. This is the most important question in any investment decision. In Gainsight’s case, the market opportunity is coming together because of two macro forces: (a) Companies increasingly have a ton of data in the form of online usage analytics, customer support tickets, NPS surveys etc. to be able to track and analyze whether a customer engagement is going well or not. For the first time in business history, companies across all industries can proactively understand whether their customers are happy or not; and (b) We live in the world of social media and short feedback loops. Every positive and negative customer experience has the potential to be amplified 100x within moments across the world. This is not just about Twitter or Facebook, but also discussion forums like LinkedIn/Quora/Medium, and vertical market communities across industries. Companies can no longer afford to think of customer success as a nice-to-have aspect of their businesses. It is THE thing that matters in business today.
  • Role of the product in its user’s life. Gainsight’s customers run their entire CSM practice on the platform. It’s mission critical for them, and is used on a daily basis. Once a customer success rep has been onboarded and trained on Gainsight, it is impossible to ask them to move back to their old ways of running customer success.
  • Market size. Sizing up a new category is a tricky exercise. It’s easy to be skeptical by saying that this new trend only applies to a certain type of customers. For a long time in Gainsight’s history, the big question was: is its solution applicable only to SaaS companies? When we first invested in Gainsight, we had the belief that customer success is a business imperative for every company that wants to have a repeatable relationship with their customers. We believe so now too. But in the last two years, Gainsight has answered this question in the affirmative in the best possible way — with customer wins that prove the point. Gainsight’s customers today include industry leaders such as Cisco, VMWare, ABC Financial, Resmed Brightree, Gigamon, MCG Health, and naviHealth. When I meet someone who’s still a skeptic on the market opportunity for customer success, I offer them a simple anecdote:

In 2013, Gainsight hosted their first annual customer success conference, Pulse. They had ~20 customers at the time. Customer Success wasn’t a big thing back then. They hosted the conference just two months after Nick Mehta and Anthony Kennada joined the company. 300 people showed up to the day-long event. We knew then that there was something here. This week, Gainsight hosted its 4th annual conference. The audience size has grown from 300 to 4,000 in these 4 years.

  • Leadership potential in the category. When we invest at this stage of a company’s life, we already know that there is a sales and marketing engine that is working and scaling. The question at this stage is: does this company have the potential to be the leader in its category? Will it be able to impose a winner-take-most, if not a winner-take-all dynamic in its industry? In Gainsight’s case, the answer couldn’t be clearer to us. Gainsight is THE category defining company in customer success. They’ve built the largest community (online and offline) around customer success. Their online certification for customer success is the most sought after in the field; they host the largest annual conference in the space; have the most revenue traction and some of the world’s best companies are standardizing their customer success practice on Gainsight’s platform.

When we find a team as talented as Gainsight’s leading the charge on a movement that is touching every business in the world, we like to double down. And that’s exactly what we did with Gainsight.

If you have customers, you need customer success!

Once every few years, the combination of a couple of macro trends allows for a new software category to emerge. At Lightspeed, we believe such a confluence of macro factors is coming together to create the next big software category: Customer Success Management. And today, I am thrilled to announce Lightspeed’s investment in the leading startup in the customer success management space, Gainsight.

Our investment thesis for Gainsight is pretty simple: As customers increasingly interact with products / businesses online, a wealth of data on the frequency and depth of product usage, customer-vendor interaction (webinars, support tickets, NPS surveys etc.) and background of the customer engagement (size of company, contract, is the primary buyer still at the company?) can be analyzed to identify which customer engagements are going well, and which ones are not. In recurring revenue businesses, these signals manifest themselves in the form of customers that are at risk of churning out, or opportunities ripe for upsell. In other businesses, these signals manifest themselves in terms of whether the customer came back to buy more product/services or not. Additionally, at a time when even a little bit of customer dissatisfaction can travel far and wide through social media and other online forums, companies just cannot afford to drop the ball once they’ve made the initial sale to the customer. In this new world, customer success and account management has gone from being a cost center to a revenue imperative.

As these twin trends of (a) more data to analyze customer engagement and (b) increasing need to keep the customer happy throughout the engagement come together, Gainsight is firmly positioned to be the defining company in the customer success category. Gainsight not only provides its customers the ability to analyze internal/external data to measure customer happiness, it also provides the workflow and collaboration tools to the customer success, customer support and sales teams to act upon the insights being generated by their platform.

When most people think of customer success, or what Gainsight does specifically, they associate it with renewals management in recurring revenue businesses. While that is definitely where Gainsight started, that is only the tip of the iceberg. Gainsight’s vision of customer success is much broader than just enabling annual renewals, and we’re already beginning to see an expansion beyond SaaS/tech companies in Gainsight’s customer base. Gainsight’s vision is to place customer success at the heart of every conversation a vendor has with their customer. In my mind, this is a very important part of our investment thesis here. Every company that intends to have a repeatable engagement with its customers needs customer success. We live in a world where regardless of business model, companies can measure customer satisfaction through social media, NPS surveys, support tickets, online usage of the product, whether the customer is attending your webinars and conferences or not, etc. We also live in a world where one bad customer experience gets amplified through social media and can damage a brand at a global scale within minutes. While social media and customer support solutions provide the tools to react to such scenarios, Gainsight offers the toolkit to be proactive about customer happiness, not just when someone is complaining online or when it’s time to renew a contract. In this day and age, any company that does not have a dedicated customer success team is sending out a clear message to its customers as well as prospects that it doesn’t care about them.

I’ve had the pleasure of getting to know Nick and his team well since early 2013, and have been blown away by their expansive vision for customer success. In the last two years, Gainsight has gone from being an early stage startup that focused on account management to starting a movement around customer success. Nick has put together a great management team around him, and Gainsight is leading this movement from the front. We’re thrilled to be backing Gainsight in this journey, and are looking forward to helping them build the next big software company.