Where Venture Capitalists and M&A Strategies Are Taking CRM

The buzz in enterprise software and M&A circles these days is how easy venture capital is, relatively speaking, to come by today. VentureWire, Venture Capital Journal and the many blogs from venture capitalists underscore this point. The buzz is so strong that rumors are surfacing from within larger ERP companies of senior managers and directors considering making a run at their own companies.

After hearing rumors of several start-ups percolating, it was time to check out what’s really going on in terms of funding specifically for CRM these days. While this analysis is not meant to be exhaustive, it is a good indication of where venture capitalists are steering CRM with their investments, and where M&A activity is transforming the marketplace. Trends emerging around applications quantify the pay-back of marketing efforts, specifically lead generation and escalation, social networking, and even digital avatars from France. I want to also be very clear that I am not on any of the companies mentioned payrolls, they are not clients of mine, and that includes the investment firms mentioned.

Here is a quick list of what’s happened recently from an M&A and venture capital perspective in CRM, and please forgive me if I left a funding round or M&A event out, thank you for that:

• Click Commerce acquires Requisite Technologies — On November 22nd, Click Commerce announced their acquisition of Requisite Technologies for 800,000 shares of Click Commerce common stock and US$1,000,000 in cash. Click gets a wealth of new technologies in this acquisition, including Requisites’ Master Data Management (MDM), Bugseye patented search engine, Content Workstation for completing cleansing, alignment and validation of content, and eMerge content aggregation tools. Requisite also had been working on technologies that can suggest multiple taxonomies based on the characteristics of the content, and had invested in RFID and has strength in Supplier Relationship Management. Click earlier this year acquired Xelus, whose analytical tools are used for extracting value from RFID programs and broadened Click’s portfolio in the Maintenance Repair and Overhaul (MRO) and Service Lifecycle Management markets. Look for Click’s CEO and Founder Michael Ferro to continue adding key technologies to bolster the MRO and SLM side of his company.

  In February of this year, Click Commerce acquired both ChannelWave, a competitor in the partner relationship and channel management space, and Optum, a warehouse management vendor. For an excellent analysis of Click’s acquisition moves this year check out Rob Bois’ Alert available from the AMR Research website. Rob is the Research Director of AMR’s Demand and Revenue Management practice.

• Radiate, a start-up focused on location-based social networking software gets $1.55 million Series A funding from New Enterprise Associates (NEA) and Sequoia Capital during November.
• Navio Systems of Cupertino, Calif., gets a $25.4 million Series B round from WK Technology Fund, Add Partners, and VantagePoint Venture Partners. Navio provides digital rights management (DRM) for marketing promotion, loyalty programs, digital lockers, and digital rights model.
• SAP acquires Khimetrics, or “you’re the one I’ve been waiting for all my life” acquisition — Retail is the next battleground where Oracle and SAP are already competing, and while the jury is out on RFID’s ROI on split-pallet shipments, it’s clear enterprise software is needed to get supply chains to the performance level they need to be to compete with the Wal-Marts of the world. I started tracking Khimetrics about two years ago and it was immediately apparent their exit strategy was an SAP acquisition.
• IBM acquires iPhrase — This is a great catch for IBM, completed on November 1. The specifics of the acquisition were not disclosed. I’ve been tracking iPhrase for over three years and their Interactive and Content Services offerings are impressive in that this company has natural language processing, dynamic result rendering, adaptive learning, linguistic analysis and several other key technologies that make it possible to parse through unstructured content and quickly analyze it for trending and insights.
• VirtuOz — This French software company received a $2 million Series A funding from Galileo Partners, and has an interesting approach to attracting, selling and serving customers online — they have virtual collaborators or avatars if you will — that greet visitors and customers to your site and have conversations with them. What is most intriguing about this company is one of the online sales modules called a Proposition Engine. No word yet on the reduction in services costs due to propositions being accepted by disgruntled customers of clients.
• Austin Logistics — This is a fascinating company to watch, and apparently others felt the same way, as Austin Logistics just received $8 million in Series B funding from Total Technology Ventures, Apex Venture Partners, Baird Venture Partners (BVP), North Hill Venture Partners, Svoboda, Collins. Austin has been doing some interesting work in Market Entry Management and Retention Management analytics.
• SugarCRM — The open-source developer of CRM solutions gets $18.77 million Series C round from Draper Fisher Jurvetson (DFJ), New Enterprise Associates (NEA), and Walden International.
• Socialtext gets Series B round from SAP Ventures — This is another interesting company to watch in the social networking arena, and their blog has some excellent writing too. SAP Ventures invested $850,000 in Series B funding.
• BlueRoads — When it comes to managing leads and escalating them through indirect channels, BlueRoads deserves a serious look. Their management has shown foresight in navigating the company through the maze of product opportunities a company with their core technologies has as options. BlueRoads received $9.1 million Series C funding from Cardinal Venture Capital, ArrowPath Venture Capital, and El Dorado Ventures. The funding round will be used for investing in the company’s Software-as-a-Service product development strategies.
• Rearden Commerce — This is a company that is a perfect acquisition for Google and its surprising they haven’t been acquired prior to getting a $25 million Series C round from Oak Investment Partners and Foundation Capital as Google likes to acquire companies before they get this far with funding. Rearden is worth getting acquainted with.
• Eptica — A French company that is a provider of hosted CRM solutions gets $2.47 million in Series C funding from XAnge Private Equity and Credit Agricole. Eptica has three dominant applications which include e-mail management, live interaction, and customer behavior analysis. This is the second company in sixty days to get funding for live interaction over the Web, interesting that personalized service is getting so much attention in the French software industry this year.
• Xactly — This company has a series of OnDemand-based sales compensation applications which are salesforce.com compatible. Xactly received $4 million Series A funding from Bay Partners and Rembrandt Venture Partners.

It’s been a busy last few months from the venture capital and M&A side, but what about the future? Chris Selland, CRM industry expert and former Principal Analyst with Covington Associates, has delivered his predictions recently on CRM M&A activity in 2006.