This morning FloQast, an LA-area startup, announced that it closed a $40 million Series C led by Norwest Venture Partners. The company also told TechCrunch in an interview that it raised a $20 million inside round between today’s investment and its 2017 Series B. Including today’s infusion, the firm has raised a little over $90 million.
The small inside round, however, wasn’t executed because the firm was low on options at the time. Instead, FloQast chose it over larger term sheets, using the cash to help launch a new product. It then raised the round we’re discussing today at a higher valuation. What did FloQast launch, and what impact did that choice have on its business? Let’s talk about what FloQast sells to help us answer both questions.
FloQast sells what it calls “close management software,” which might not mean much if you aren’t read-up on accounting. So, TechCrunch got FloQast CEO Mike Whitmire on the phone to explain it in more detail. According to the technology executive, his company helps “teams collaborate around the month-end close — we help them communicate [and] stay on the same page with this process that occurs at the end of every month. And then we provide some light automation around [the] tie-out and reconciliation process, which is one of the steps of actually closing the books.”
Why does all that matter? Because a company can’t report its financial results until its books (accounts) are closed (finalized). So, Whitmire explained, you can’t get to a 10-Q or other bedrock financial report without this sort of work. And given that every company in the world has books that need closing, you can see where FloQast fits into the business landscape.
FloQast doesn’t target every business, however. According to Whitmire, when a company reaches “five people in the corporate accounting department” is “where the pain starts to present itself” that FloQast wants to help with. And, in his view, the more complex a business becomes, the larger the need for the sort of help that his company’s software can provide.
You can see where we’re going with this by now. If not, here’s some help: If FloQast’s product works for larger companies, how quickly is its revenue (measured in annual recurring revenue, or ARR) growing, and, more precisely, how quickly is its average annual contract value (ACV) expanding?
Earlier we noted that FloQast decided to raise a small round before its Series C, using that money to launch a new product before raising its later, larger investment. That product, something called “AutoRec,” uses what the company calls “AI” to help reconcile accounts more quickly than would otherwise be possible.
The wager, launching that product before its Series C, paid off. Last year FloQast’s annual contract value (ACV) rose 60%. That gain was driven, according to the CEO, by the “new AutoRec product [helping add] more value” to contracts, and his company focusing more on upper-market customers. Its ACV growth helped FloQast’s growth stay consistent in percentage terms, with the CEO telling TechCrunch that his firm grows like “clockwork,” doubling its ARR on average every year. And the company’s SaaS metrics look good: Including customer churn, Floqast has a net retention of 115%, which is solid.
Summarizing his company’s last year or so, Whitmire said that FloQast “cut [its] cash burn, became very efficient, grew at a similar clip to what we’ve grown historically, maintained our net revenue retention number, and had this massive ACV kick.” It’s not hard to see, then, how FloQast put together its latest round.
So, the L.A. area really is more than Snap and Bird. You can build big SaaS companies there, too.