News just broke on Techcrunch that DFJ Esprit has invested £1.5m in Conversocial, whose social media management software helps companies increase engagement and manage interactions with their customers on Twitter and Facebook. The screen grab below from their home page shows the central dashboard which allows for efficient handling of social media including posting comments, replying to comments, delegation, and tagging, and on the right you get a glimpse of some of the analytics they provide.
Penetration of social media into enterprise processes and the transition from bought media to earned media have been investment themes of ours for some time now and were initially interested in Conversocial because it plays nicely to both these trends.
We have known and liked the founder and CEO Josh March for some time now and have met every six months or so for the last couple of years to check in. Our interest picked up recently after he and I were on an entrepreneurs ski trip together in February and the way he was talking about his recent wins made me think he was close to nailing a good product-market fit. We got together pretty quickly after that back in London and over the subsequent series of meetings we got increasingly excited about the team, the product and the market.
I’ll say a little about each of team, product and market, but I’ll start with the team which is probably the most important of the three for a business at this stage. We were keen to invest in Josh and Dan (Dan Lester is the other founder) because they are ambitious, super smart, know social media backwards, work hard, are great listeners and all round nice people to work with. They have bootstrapped the company up to this point and have a great culture inside the business which values hard work, integrity, capital efficiency and only recruiting the very best (Dan is famous for his five hour interviews). As you can imagine, we have spoken with a lot of people about Conversocial and without exception they have only had nice things to say about Josh and Dan.
The product has also had rave reviews. It demos well, and when one of our interns used it himself for a couple of his ecommerce sites and gave it a strong thumbs up for ease of use, speed to process comments and the feature set generally, and these sentiments were echoed by the customers we talked with. It takes a lot of work to make a complex system simple to use and the Conversocial team have done a great job in this regard. The other features that customers like are the analytics which help them measure the effectiveness of their social media activity and benchmark it against competitors, and the integration with their other customer databases. Both of these features are early in their evolution and I’m looking forward to seeing them develop so enterprises can embed social media (and Conversocial) more deeply into their existing processes.
Finally, the market is also exciting – at heart this investment is a bet that people will increasingly insist on engaging with companies on social media and that the companies will see the benefits they can get by agreeing to engage on Facebook and Twitter, and by doing it well. We see that as a pretty safe bet.
At the next level of detail, we have come to view software for managing social media as splitting into three segments with different customers and use cases. The first and most developed is social media monitoring software, and you might have seen that Salesforce recently acquired the market leader in that space. The second most developed is Facebook apps and other brand management tools where the leading companies have maybe $10-20m in revenues, and the third is using social media to promote engagement to achieve a blend of marketing and customer service objectives. It is in this third emergent area that Conversocial plays and in our assessment has a leadership position. I used the qualifier ‘in our assessment’ because social media software is still a young and immature market and most of the players still claim to be able to play in all the sub-sectors. However, we think that the use cases and feature requirements are too different for a single company to dominate and that there will be valuable companies created in all three.
Investing is, of course, the easy bit. The next phase of being there to help grow the company and for the founders and investors to actually make some money is both more challenging and more fun.