Creating products aimed at smaller business users is a promising but challenging category in the area of enterprise software — they make up the vast majority of businesses today, but collectively are a fragmented customer base that is price sensitive and individually represents small ARPU. Today, a company that has found a way to tap the opportunity and capitalise on some of the challenges has raised a significant round of growth funding to tap into the opportunity.
Signpost, which has built a platform that today is used by thousands of local businesses to compete better against bigger companies — by letting them collect their own and subsequently use product reviews, construct and provide offers and manage contact lists of customers — has closed a round of $52 million, money that it will use to expand its technology and customer base.
The funding is described as “late-stage financing” (similar to the round it raised in 2016) and comes from HighBar Partners and BMO Bank of Montreal with previous investors Georgian Partners and Spark Capital also participating. Signpost has been around for about a decade, and its other backers have included OpenView Venture Parnters, Scout Ventures and GV (when it was still Google Ventures and Signpost was focusing on the viral marketing of local deals).
The Google connection is interesting: Signpost has gone through a few different iterations as a business and years ago was described as the “AdSense for local businesses.” It’s raised about $110 million to date, with its most recent funding (in 2016) at around $100 million, according to PitchBook data.
While Signpost is not disclosing valuation, I’m guessing it’s definitely higher than this now, judging by the size of this latest round, and some of the other metrics the company is disclosing: the company cash flow break-even as of early 2019, with 43% year-over-year growth in its core product and less than one percent customer churn. Its also hiring in its three locations, New York (its HQ), Austin, and Denver.
The problem that the company is tackling is one that local, independent and brick-and-mortar stores may know all too well: they have it hard when it comes to marketing.
Traditionally, they have relied on word-of-mouth and (among physical businesses) incidental foot traffic to maintain and grow trade. But in the age of shopping malls, the internet and the economy of scale that comes with it in e-commerce, many of those small businesses have found themselves caught out in figuring out how best to connect with existing customers and reach new ones.
Added to this is the issue of user reviews. These have become an important — some would say essential — cornerstone for how people discover and decide to buy one product or service over another online, in conjunction with other services like Google Maps and Yelp.
Signpost notes stats that say at least 82% of smartphone shoppers conduct ‘near me’ searches and 90% are likely to click on the first set of results, but that those without reviews conversely getting nary a glance or attentive nudge from the ever-powerful search algorithm.
On the other hand, the rise of user reviews has led to a pernicious counter theme: the proliferation of fake reviews and spam. This is something that small businesses struggle to get a handle on, and I’ve seen more than once a business bemoaning the presence of these on Google Maps without knowing how best to try to fix the issue.
This is where a company like Signpost comes in, proving a platform that is easy to use to help those businesses get a grip on providing their own review and feedback tools, and taking charge of other kinds of basic marketing and CRM features, such as mailing lists and creating offers that introduce new customers and reward loyal, repeat ones.
These are all table stakes for bigger businesses, and the idea is that small businesses should have them, too.
“While large corporations have used powerful marketing technology to drive extraordinary growth for years, local businesses — which make up 99.7% of all U.S. businesses and account for nearly half of GDP — have been left behind,” said Stuart Wall, founder and CEO of Signpost, in a statement. “Signpost puts the power of the world’s largest marketing departments in the hands of local business owners and empowers them to instantly capture their customer data, get better online reviews, and win new repeat business automatically and effortlessly.”
And in another feature that helps put small businesses on par with larger rivals, Signpost is also a big data powerhouse.
Signpost says that it has gathered behavioral data from over 70 million US consumers across all its local business customers, which it uses to feed its own algorithms to determine when and where to send personalised messages to a businesses’ contacts to help drum up more sales. Signpost claims that its tools have led to a 34% rise in and revenue lifts of 14%, on average.
Brian Peters, Managing Director at HighBar Partners, is joining Signpost’s Board of Directors with this round.
“HighBar’s investment is a vote of confidence in the right approach to applying technology to level the playing field for local businesses,” he said in a statement. “The turnkey setup and level of automation in Signpost’s platform, as well as their ability to follow through on reviews and engage the modern customer well beyond their first interaction is what really sets them apart.”
“We are excited to be working alongside Signpost – they have created an innovative solution to help small businesses compete and drive revenue growth,” said Devon Dayton, Managing Director, Technology & Innovation Banking, BMO Bank of Montreal, in a statement. “The company has experienced a lot of momentum and we are looking forward to continuing this journey with them through their next phase of growth.”