Middle Market Company of the Month

Act-On: Marketing Automation for the Real World

Act-On was founded on the idea that marketers (in businesses of all sizes), particularly at midmarket companies, should be able to have access to technology to directly drive business. Prior to Act-On’s creation in 2008, marketing technology solutions were designed for large enterprises with well-resourced IT departments, not for the marketer. Act-On's fresh approach to marketing automation and email marketing provides full functionality without the complexity imposed by legacy systems. We spoke with CEO Raghu Raghavan to find out more about the rapidly growing business and the red-hot industry they operate in.

Could you start out by telling us a little bit about your own background and also how Act-On was started?

Prior to starting Act-On, I started a company in the late 90’s called Responsys. Responsys went on to become the biggest company in email marketing. It went public eventually and was bought by Oracle. The idea I was trying to push with Responsys was that you don’t need to install software to use these programs. The notion of on-demand software and SaaS didn’t even exist until the late 90s. Back then, we were the only company trying to do this. If you fast-forward to today, SaaS is the dominant way in which companies consume software. I think companies of all sizes have to be capable of using this stuff. So when I started Act-On, we wanted to see what midmarket companies were doing. These are companies that have and spend money, but don’t have the time and IT resources to endlessly fiddle with software. They didn’t have time to go for endless training, and they didn’t have an IT guy and a database guy to manage all this stuff. This poses some unique challenges in how you build software. It has to be powerful, but it can’t be difficult to use. It has to be simple, but there can be no compromises in power. I think these are the early days of adoption of complex technology. It’s a fantastic time to be supplying enterprise-caliber software to the midmarket. I remind my coworkers every day that these are the early days; we’re still in the first inning.

How large is Act-On? How many employees and locations do you have?

The company has around 400 employees and over 3,000 customers. We have 9 locations worldwide. We currently have locations in Beaverton, OR, San Mateo & Roseville, CA, Chicago, IL, Boston, MA, and Scottsdale, AZ. We also have international offices in London, UK and Bangalore, India, and we’re contemplating having locations in Australia and New Zealand because we’re starting to adopt customers over there.

How rapidly has Act-On grown its customer base and what do you think has contributed the most to that success?

We were voted one of the fastest growing companies on the 2013, 2014 & 2015 Inc. 500 list, with a most recent three-year growth rate of 932%. We’ve estimated that there’s well north of a million companies in North America alone that need marketing automation technology and only around 8% of them are actually using it. There are a lot of people out there who are ready for this.

Something we noticed at Act-On is the need for marketers to collect engagement data on their prospects and customers from all channels, whether it’s from social, the website, email, a blog, etc. With Act-On Marketing Automation, users can automate email campaigns based on demographic and behavioral data, so for instance, a marketer can trigger a campaign to a segment as granular as – all contacts who found us through search, engaged with us on social media, clicked on one of our last 20 emails, and then hit our pricing page in the last 5 days.

It sounds pretty simple when you put it like that, but when you think about what it takes to actually figure that out, you’ve got to look in a lot of different systems to try to make sense of it. And you really cannot. So what we did is we made that dead easy. When we find a prospect, we just have to show them what the system does in a live demo. Our typical sales cycle is on the order of 30-40 days. It doesn’t take much convincing.

Did Act-On make a decision to focus on middle market companies or was that something that just happened over time?

It was a focus of ours right from the beginning. Very small customers were actually difficult to deal with for a couple of reasons. One is the logistics of actually supporting them. We knew we couldn’t build a profitable business if every customer was going to call us three times a day. Micro businesses have their own little pains and they don’t really grow. There’s no point trying to sell something to someone that doesn’t have a need for it. With really large companies there was a different issue. They want to bend the vendors to their will a little bit, and we were just not willing to do that. In the beginning, there was a lot of skepticism about this ‘mystical midmarket.’ How are you supposed to reach these people? Where are you going to find them? And to be honest, we didn’t know back then. What was interesting was that we spent a lot of time optimizing the website and putting out webinars. But what’s amazing is the power of people searching on their own. People start to find you, and then it becomes easier.

What is the competition like for Act-On and how do you differentiate yourself?

The competition is interesting. There are actually a lot of companies doing marketing automation, but when it comes down to it, there are only four companies we really compete with. Two of them only target enterprises. There’s one company that we compete with head-on all the time. They target a customer that’s slightly smaller than us, but they’re actually a bigger company. I would say that we’re the new kids on the block in marketing automation. We started 2 or 3 years after everyone else did. We’re the only private company still in marketing automation that’s of any size and scale. The company that we find ourselves competing with a lot is called HubSpot. One way to differentiate our product from theirs is to look at it like a funnel. The top of the funnel is just trying to attract people to your website, and that area is where HubSpot is pretty strong at. We take a slightly different approach than HubSpot does in that our product addresses top, middle and bottom of the funnel - from attracting and capturing new leads, to nurturing and converting opportunities, and expanding on those customer relationships. When it comes to the middle of the funnel, now you’ve started to collect data and you’re running automated engagement workflows. That’s an area where we’re extremely strong. Midmarket companies are trying to get their suppliers, customers, and prospects to respond. They have to keep trying in all channels to reach them, and they can’t do this manually. You can set up some pretty sophisticated workflows with our programming, and that’s proving to be one of the differentiators for us.  Act-On will also help you use the tools you already have in place – we have adopted an open marketing ecosystem and our platform integrates with all major CRMs and many third-party applications. If you happen to be using WordPress to build your website or a blog, we’ll make it easier for you to do so, or if you use a BI tool like Tableau or Domo, we make it easy for you to leverage your marketing data inside those systems.   

You said that your competition is all public, and we saw that you had mentioned the possibility of taking your company public in the next few years. What would be the advantage of doing that?

You know, there’s no real advantage to going public. It’s about access to capital. The public markets provide capital, and with that capital comes the need for a lot of disclosure. Investors and employees need an opportunity for liquidity, and that is one of the driving reasons for any company to go public, at least in technology. To me, as a leader of the company, this is a funding event. As long as private capital is available I think it behooves the company to look at that pretty strongly. Going public means there are a lot of rules and regulations that you have to live by. Having said that, we are revamping the company processes to be compliant long before we actually go public. We brought a new CFO on board earlier this year who has a lot of experience with public markets and regulations. Processes in the company are being tightened up. We follow many of the same principles and guidelines that we would as a public company in the way we report data back to our investors. It’s all part of the maturing of a company.

What’s it like being a middle market company that deals with customers globally?

Actually, if you look at the ROI we’ve seen, our returns are actually higher in Europe than they are in the United States at the moment. There are a ton of midmarket companies in Europe. We didn’t know that when we entered those markets.  However, the web being what it is, people find you. They come from all over the world to your website and listen to your demos. We actually had a bunch of customers in Europe before we set up an office there. The only challenge is that you want to respond to them in real time. Doing it all from the United States was becoming a burden, so having an office in the UK has helped us quite a bit in that regard. Whenever you create an office someplace else, the issue is how to preserve your culture and corporate identity. We try to seed offices with people that have been with the company for a long time and know what success looks like for us. We try to make sure that our culture manifests in each office. It’s never going to be the same, but at least we have the elements of what makes us who we are. Having an office in Bangalore has allowed us to reach parts of the world that we could not otherwise reach. As long as you’re willing to make that commitment, I think it’s something that’s definitely worth doing.

What skills and qualities do you look for when hiring talent across the world?

We look for people with passion and drive, people who are willing to step outside the bounds of what their initial job appears to be. In a company like ours, which is always growing, the ability to jump in and manage more is a very important trait to have. People who have a ‘not my job’ kind of an attitude probably would not be a good fit for us. A lot of people who come here are looking to further their careers. I’m mindful of the fact that we want this to be a great stop on their resume. In the journey of their career, we want this to be a memorable one. We look for people who have that certain glint in their eye, who want to grab things and run with them and make a difference.

What are the next steps for Act-On and where do you see the company a couple years down the line?

You know, there is no magical next step; it’s a journey for us. I’m constantly challenging our product teams. If our underlying technology is no longer cutting-edge, we need to stop and think about why it’s not. There’s an ongoing process of removing the debris under the hood. You’d be amazed how long software can survive sometimes. Philosophically we don’t believe in that. For me, it’s always about driving and improving things. So I don’t see a distinct next-step. I see “how are we going to be better next month or next quarter?” Where will we be two years from now? I think bigger, and more of a household name. We haven’t done the greatest job to drive our brand through the market and spread awareness. We know that. In some ways it’s a conscious choice because of where we choose to deploy our money. But I think we will hope to be a bigger and more widely recognized brand than we are. I also expect the mix of business to skew more towards international. Change and improvement everywhere, that’s how I see it.

 


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