There’s a lot of focus from B2B companies on acquiring customers and collecting their information using a CRM or customer data platform. But there’s perhaps less emphasis placed on keeping existing customers happy and continuing to sell to them. That’s where customer success software comes into play.
Two customer success companies, Totango and Catalyst, on Wednesday announced they are merging in an effort to take on the market leader, Gainsight.
One of the interesting aspects of this deal is that no money is changing hands; instead it’s about combining the two entities to take advantage of each company’s strengths. The goal is to build a stronger company together, one the parties involved believe could go public down the road if all goes right.
“Everyone feels very excited about the potential of these two companies,” Catalyst CEO and co-founder Edward Chiu told TechCrunch. “So everybody is rolling their stock into the new business and I think that’s actually why there’s so much belief and excitement as everyone believes this is going to be a big category creator.”
Chiu said that when Totango’s owners, private equity firm Great Hill Partners, approached him, he saw two companies that would fill in each other’s gaps. “We need more enterprise customers, and they need our ability to drive innovation and ingest data very quickly,” he said. “Part of this is that we are in a unique position to cherry pick the best features of both companies and merge those together in a singular platform,” Chiu said.
The combined companies will come together under Great Hill, and Chiu and Totango’s Alistair Rennie will stay on board as co-CEOs to run the new organization. Rennie sees the current market uncertainty as an opportunity for the new company to help their customers preserve revenue through retention, renewals and expansion by combining Totango’s enterprise-grade features with Catalyst’s more modern interface and AI capabilities.
Great Hill managing director Christopher Gaffney says the category is intriguing, and bringing the two companies together creates a chance to leapfrog the market. “The combination of Catalyst and Totango is a move to capture a critical market opportunity and set a new standard in maximizing post-sale revenue,” Gaffney told TechCrunch. “The deep customer success expertise and enterprise capabilities of Totango combined with the intuitive design and forward-thinking vision of Catalyst create a powerhouse to redefine customer success and how businesses maximize customer lifetime value.”
Jessica Lin, co-founder and general partner at Work-Bench, whose firm invested in Catalyst early on, sees a similar opportunity. “Our goal is for this combined entity to own the customer success market and have an even bigger outcome than Gainsight (which exited in late 2020 for $1.1 billion). That’s why we don’t want a cash payout now, but would rather see continued upside from our stock in this new joint entity,” Lin said.
Chiu pointed out that both companies had conversations with their customers prior to the merger, and they got a lot of positive feedback on both sides. Over the next couple of months, the companies will continue to operate separately, but they are already in the process of merging and working out the technical and operational details that entails.
Totango launched in 2010 and raised $146 million along the way, per Crunchbase. The majority of that, however, was the $100 million Great Hill invested in the company in 2021. Catalyst was founded in 2016 and raised over $66 million, per Crunchbase data.
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