John Sculley’s Zeta Interactive nabs $45M, gears up for more acquisitions, IPO

When it comes to funding for startups, marketing tech is seeing a boom at the moment, and one company that is reaping the fruits of that is Zeta Interactive. The marketing technology company — co-founded by the ex-CEO of Apple and Pepsi John Sculley and David Steinberg (who is the CEO) and valued at over $1 billion — today announced that it raised $45 million. In an interview, Steinberg said Zeta plans to use the funding to finance its $50 million acquisition of Axciom Impact as it gears up to raise a larger round and continue its consolidation spree in big data and analytics as it starts to eye up an IPO, potentially a year or two from now.

This latest fundraise — which comes from business development companies managed by FS Investments and sub-advised by GSO Capital Partners LP (the global credit investment platform of Blackstone), Cerberus PNC Senior Loan Fund, L.P. and PNC Bank, National Association — is a debt round, and Steinberg said the next round will be equity based.

The company is currently “very profitable” he said and “doing over $300 million a year in revenue”, growing 75 percent since its last equity round (the company has raised $195 million in total, with the last round at $125 million in July 2015, with investors including a number of private equity firms).

“We needed the money faster than we would have gotten if this were an equity round,” Steinberg told TechCrunch. “This was a timing issue. We have a large amount of cash but I think it’s a unique opportunity to raise in capital markets especially in our area of big data and analytics.”

We are at a high-water time for marketing tech startups: analytics firm PitchBook (via WSJ) recently noted that while overall funding for ad tech firms has seen a dip in the past two years, marketing tech startups have passed them, collectively raising $1 billion in the first eight months of this year alone.

This trend is important for Zeta in two ways.

First, Zeta itself, being a marketing tech company, is seeing its own fate reflecting that trend. PitchBook notes that one of the reasons for the recent interest in mar-tech is because they produce more predictable recurring revenue, and this is something that has been guiding Zeta, too. Of the Axciom Impact deal, which adds more marketing automation capabilities to Zeta’s big data platform, Steinberg notes that it will help “get Zeta’s recurring revenues into an even higher proportion.” He also notes that this is something that lays the groundwork for the company’s next phase, since the recurring revenues “will make it easier it is to operate as a public company.”

Second, the fact that a lot of marketing tech companies are getting funded now means that there will eventually be a consolidation among these as they continue to grow.

“We’re seeing a lot of capital flow in B and C rounds for marketing tech,” Steinberg noted. “But once you are past that, you are seeing a lot more negative tides. It’s hard to grow into the consolidator, so many of them will be consolidated.”

Steinberg says that Zeta’s guiding themes are based not just on what gaps need to be filled, but also how well a service can be integrated. This contrasts it from some of its bigger competitors — it counts Salesforce, IBM, Oracle and Adobe among them — which often acquire companies but continue to run them as separate businesses.

“One of the trends of bigger companies is that they buy and run companies as separate divisions, but we like to integrate. If we can’t, it’s highly unlikely that we will buy.”

As for what might come next, future targets include more machine learning capabilities, and some marketing display technologies alongside Zeta’s existing email and social tools.

“When David and I started this company in 2007, we began with a big idea,” said John Sculley, in a statement. “I’m proud of what we’ve accomplished so far and incredibly optimistic about what’s to come. It’s amazing to see how David and his team have taken Zeta to the next level by focusing on solving problems for the company’s blue-chip client base.”

Other acquisitions in the recent times have included the CRM division of eBay Enterprise, ClickSquared and a division of Adchemy that focuses on machine learning. The company has over 570 enterprise customers.