With little fanfare, San Antonio-based Promoter.io, a customer analytics and insights software as a service (SaaS) platform for small and medium-sized businesses, was acquired in September 2019 by Medallia, the global leader in customer experience management. In that same month, Medallia underwent an IPO four days before buying two other companies along with Promoter.io.
Founders Chad Keck and Ricardo Reyna (who left the company in 2018) launched Promoter.io in 2013, working out of Geekdom, San Antonio’s first co-working space. The startup raised $1.6 million in funding over five pre-seed and seed funding rounds. Their latest round was in January 2018 for $150,000.
Startups San Antonio caught up with Keck to reflect on why he built Promoter, the significance of being the first startup launched at Geekdom to exit, building a sustainable company, and acquisition advice for founders.
Build your startup to solve a problem you know well
“Promoter was born out of a problem I experienced when I was VP of customer experience at AppFog,” Keck said. “We were looking for a tool to measure customer behavior at a more accurate level.”
The Net Promoter Score, or NPS, measures customer experience (and loyalty) to help predict business growth. This metric now provides the core measurement for customer experience management programs at companies across the globe.
Keck wanted to automate the NPS process for many thousands of AppFog customers, but “nothing existed in the market at the time that wouldn’t cost $25K a month,” Keck said. “There were only a few enterprise players like Medalia offering tools for bigger companies.”
During serial entrepreneur Pat Matthew’s time running his startup, Webmail, and later when he joined Rackspace, “those were early days before there were any software systems to help manage NPS, so we had to create our own.
“When Chad branched out to start Promoter, the concept immediately resonated with me,” Matthews said.
That recognition of Promoter’s potential value is what led Matthews, now founder and CEO of Active Capital, to invest in Keck’s company.
“The lesson I’d share is that the most successful startups are started by founders who personally experienced a problem and know that pain point well,” Keck said. “You are motivated to solve it and discover your solution has potential customers who will pay for it.”
First Geekdom startup to exit
After AppFog was acquired in early 2013, the small team started building Promoter out of Geekdom. The startup was one of the first recipients of $25,000 from the Geekdom Fund. Keck, Reyna (Promoter’s chief technology officer), and Andrew Velis, a software engineer who moved from San Francisco to join Keck in San Antonio, used that money to develop their automated version of NPS for smaller companies.
“We created the Community Fund to give small amounts to early-stage founders to address the gap in seed funding, much like how the Geekdom Fund helped Promoter get started,” said Geekdom CEO Charles Woodin.
When Promoter first moved into Geekdom, there was low startup activity in San Antonio, Velis said. He moved here after his first startup was acquired in the Bay area.
“I arrived in San Antonio in 2014 when there was little startup culture,” Velis said. “I realized how hard it might be to create a startup that would exit under those conditions—but we did just that.”
Now that Medallia owns Promoter, the company has agreed to keep the core team in San Antonio. Having Promoter on the 6th floor of Geekdom helps remind local founders that building a successful company is possible in the city’s evolving startup ecosystem.
“The big undertaking of building Promoter as a sustainable company helps set an example to show founders here there are models to follow,” Velis said.
Building a profitable company takes time and focus
While many founders strive for their companies to be the next “unicorn,” that type of seemingly overnight success is rare. Most acquisitions are of startups in which teams are heads-down focused on building a sustainable business, according to Promoter’s founder.
“Think of your company as a small- to medium-sized business that you’re building, one that is good for your community,” Keck said.
Promoter was in business for almost seven years before its acquisition. Keck started talking to potential buyers like Medallia once he realized his child’s health issues required his fully dedicated attention.
“Some of our best years were from 2017 to 2019 when we were working hard in our offices in Geekdom,” Keck said. “Ideally, you want to stay in the game as long as possible so you can grow and have more value as a company.”
Advice to founders when dealing with an acquisition
Keck has experienced both sides of the acquisition process, both during his time at Rackspace when they bought companies and in his previous startup. However, Promoter’s sale was Keck’s first-time acquisition as a founder and CEO.
After first talking to Medalia in late 2018, it still took from April to July 2019 to hammer out a deal, as Medallia was also in the middle of its IPO.
His advice to founders?
- When you start as a small company, first-time founders don’t put lots of energy into keeping their paperwork organized. Do that from the very beginning, because it will pay off when you’re facing due diligence.
- Make sure that your core team knows what is going on because they’re going to be involved in the due diligence.
- Investors will ask for paperwork not only for valuation but for legal reasons. It can delay you in time-sensitive negotiations or cost you for legal help if your paperwork isn’t in good shape.
- The acquisition timeline will take longer than you might expect, especially when the buyer is also going through an IPO process.
- No matter what’s happening, stay focused on your day-to-day job. Any changes to your company’s bottom line can impact the deal.
Featured image is a screen capture of the Promoter.io website.