Kustomer raises $40M more led by Tiger Global for its omnichannel approach to CRM

On the heels of customer service company Zendesk announcing an acquisition to expand its omnichannel offering, one of the upstarts nipping at its heels has announced a round of funding to continue growing its own platform.

Kustomer, a customer service startup that calls in data from multiple external channels and the software and apps that a company uses to manage its business internally and speak to customers externally, has raised a Series D of $40 million, led by Tiger Global, with participation from previous investor Battery Ventures. The plan will be to bring in more automation and AI processes to reduce more of the repetitive tasks around CRM — a move specifically aimed to help it target large enterprise customers — and to expand further into Europe, CEO Brad Birnbaum said in an interview.

The valuation is not being disclosed with this round, although Birnbaum noted that it is a “very significant uplift” on its previous valuation. PitchBook, as one data point, notes that in its Series B, it was valued at around $121 million post-money. Adding another $75 million to that (Series C and D together), it’s close to $200 million, although that’s likely lower than its actual valuation now, given that uplift. It has raised just under $114 million to date.

More tellingly, Kustomer has been on a fundraising tear in the last 12 months. It was just in January of this year that it announced a Series C of $35 million. Before that, in June 2018, it raised $26 million. (It was not on the hunt to raise another round so soon, and didn’t need the funding immediately, but it was approached by Tiger with an offer Kustomer did not want to pass up.)

In that time, Birnbaum — who co-founded the startup with Jeremy Suriel in 2015 — has told me multiple times about how Kustomer was increasingly winning more clients off Salesforce and Zendesk, with revenues growing by about 350% in the process, with customers including Ring, Rent the Runway, Glossier, Away, Glovo, Slice and UNTUCKit.

So you might guess that Kustomer’s traction, along with a general swing in terms of what enterprises are looking for in a customer service solution, has had something to do with Zendesk’s own turn toward a more omnichannel approach.

Birnbaum and Suriel know something about how the bigger incumbents work — a previous startup they had worked on together, Assistly (where Birnbaum had been a founder too), was acquired by Salesforce.

Birnbaum does not shy away from talking about how Kustomer is faring against competitors, or why its platform is better than theirs.

“We are most proud of the fact that we do omnichannel really well. On our platform you have a threaded conversation, whereas on others the same input might resolve in four separate tickets,” he said. “In many ways, from a product perspective, I think Zendesk is chasing us, but our product is about 10 years younger.”

Kustomer’s decision to use some of this latest investment to continue building out its automation and AI capabilities lines up with bigger developments that we have seen in enterprise software. Birnbaum, indeed, describes Kustomer’s automation of routine tasks as “a form of RPA” (robotic process automation, which has been one of the fastest-growing areas in enterprise software). “If you’re a retailer and someone ordered a shirt and it’s too small, through the Kustomer platform you can both take the order but also fix it if it’s not the right size, or take the return, rather than passing the customer on to another department,” he said. “You will start to see more and more of these developments as we continue building a system of record beyond a simple CRM tool.”

The next step, he said, will be building even more tools to understand the customer. “We are not a marketing platform today, but already people are using it that way, for example to find recently unhappy customers to send them offers, or do promotional outreach to those who have dropped off on their purchases.”

In addition to Tiger Global joining as an investor, Wendi Sturgis, the CEO of Yext Europe and chief client officer at Yext, has joined Kustomer’s board of directors.

“Kustomer is one of the fastest-growing startups in its space, and I am pleased to join them on their mission to redefine what it means to truly put the customer first, radically shift the approach to customer management and ultimately manifest this in state-of-the-art marketing automation,” she said in a statement. “Plus, when it comes to leadership teams, I am drawn most to disruptors — but only those with the highest integrity. I could not have chosen better, in coming to work with Brad Birnbaum and the incredible team he has assembled.”