Why We Invested: Clari
Author: Rashmi Gopinath, General Partner, B Capital Group
The demand for technology to help optimize the revenue process existed long before COVID. Certainly, the pandemic accelerated the need for real-time visibility and revenue insights surfaced by artificial intelligence. But we anticipate this need will continue to grow, even as offices reopen.
Across B Capital Group’s more than 120 portfolio companies, driving revenue growth is the single most critical business process. Yet historically, it’s been overlooked in digital transformation and business modernization initiatives.
Revenue operations technologies, like Clari, are reshaping the way teams run revenue by turning oceans of data into actionable insights with machine learning and AI.
Bringing an antiquated process into the 21st century is no small feat, but Clari continually proves to be required equipment for the best-run companies, like DataRobot, Informatica, Pendo, and Synack.
This is one of the many reasons why B Capital Group invested in Clari’s Series E in March 2021, and why we’re excited to double down in its latest round of funding: a $225 million Series F, an investment that more than quadruples the company’s valuation to $2.6 billion in two years.
The metrics that matter
The revenue operations movement continues to gain momentum as companies around the world embrace a more connected, transparent, and collaborative revenue process.
As investors, we’re not only looking for visionary founders and transformative startups, but also the critical business metrics that determine the health and growth trajectory of the company.
This shouldn’t come as a surprise. Understanding a company’s top-line growth, average sales cycle, or customer ROI are all part of our due diligence.
However, there are three key metrics that have become increasingly important as we assess our investment portfolio: net dollar retention, revenue predictability, and sales efficiency.
Clari not only helps surface these key metrics in real time, it helps customers take action to improve them.
Net dollar retention. Increasingly, businesses are measured not only by the deals they sign, but by the customers they renew and upsell. Net dollar retention (NDR) rate is calculated by taking an annual recurring revenue number, adding new recurring revenue, subtracting churn, and dividing the resulting number by the original annual recurring revenue.
A high NDR rate indicates high levels of customer satisfaction, ensuring retention and creating opportunities to expand within accounts. According to an analysis of 73 SaaS companies, the average NDR at the time of IPO was 114%.
6sense is a testament to the tremendous value of boosting net dollar retention. The leading account engagement platform and hyper-growth startup originally partnered with Clari to optimize its sales processes. After seeing their investment pay off, 6sense brought their customer success team into Clari, firmly establishing their post-sales motion as a revenue driver.
This move not only streamlined 6sense’s strategic go-to-market motion, but also crystallized its commitment to customer happiness, resulting in better approaches to ensuring customer retention and lowering revenue churn for the company.
Clari’s platform provides a range of key retention metrics, including account health, activity data, net promoter score, and customer satisfaction scores. With Clari, cross-functional revenue teams, like 6sense’s, can better forecast churn and identify risk across accounts, so that post-sales teams proactively intervene to reduce customer turnover.
Revenue predictability. The ability to predict where you’ll land at the end of each quarter informs key business decisions, like how to invest and where to place strategic bets. Quarterly forecast accuracy is one of the most elusive and misunderstood business metrics.
Of course, no company wants to miss their forecast. But outperforming your forecast has its own pitfalls.
Undershooting your target could mean layoffs, while overshooting means you’ve missed an opportunity to invest and pull forward your growth plan. In both cases, you lose the trust of the board and business stakeholders, and we’ve all seen what happens when companies report missed guidance to The Street.
Missing the mark isn’t a concern for Carbon Black. The top cybersecurity firm achieved a staggering 95% forecast accuracy rate by week two of the quarter on its road to IPO. With such predictable performance, the cybersecurity company continually improves sales execution and takes calculated risks with confidence.
What’s their secret weapon? You guessed it.
Harnessing opportunity-level revenue insights and predictive analytics via Clari’s Revenue Operations Platform, Carbon Black’s revenue leadership can confidently call their number, pressure-testing human intuition with machine-based analysis.
Sales efficiency. Vital signs like rep ramp time, quota attainment, pipeline coverage, sales stage conversion rates, and win rates are all key metrics we pay attention to as indicators of whether the revenue team as a whole is operating with high efficiency and effectiveness.
Because Clari’s Revenue Operations Platform automatically captures data from disconnected systems like CRMs, marketing automation tools, email, calendars, files sent, and more, we can even see activity in aggregate on an opportunity and account level to understand how active reps are for key deals and whether or not those same accounts are being responsive in return.
Not only does this give us insight into a company’s sales team activity within key accounts, it also illuminates where prospects and customers may have gone silent, giving us the opportunity to open the door with an introduction to someone in our network.
Companies that embrace revenue operations technology across their sales team unlock success for reps, and in turn, the broader company. Take Nutanix (Nasdaq: NTNX) for example. The cloud-computing software company’s sellers embraced Clari technology with a 99% adoption rate across more than 700 reps. Today, the company’s revenue leaders estimate a 20-25 times return on their investment in Clari.
These factors expose the inner machinery of the revenue team’s discipline, rigor, and, ultimately, its ability to scale.
Remarkable for revenue teams, remarkable for investors
Not only does a revenue operations platform drive visibility and process rigor across the entire revenue team, helping them achieve unmatched performance and predictable growth, it also surfaces meaningful revenue metrics to investors, like me.
With access to any portfolio company’s Clari instance, I can easily see how the company is tracking with respect to plan, where they may need support, and what actions we can put in place next.
More importantly, I can feel confident in the health of our investments knowing all of the key metrics are tracking as expected—or even outperforming. That helps investors make their own calls on how and when to invest.
I encourage you to learn more about Clari, and read CEO Andy Byrne’s blog on how they will use the funding to invest in the future of revenue operations.