INSUBCONTINENT EXCLUSIVE:
Search and personalization services continue to be a major area of investment among enterprises, both to make their products and services
more discoverable (and used) by customers, and to help their own workers get their jobs done, with the market estimated to be worth some
Today, one of the big startups building services in this area raised a large round of growth funding to continue tapping that
opportunity.Coveo, a Canadian company that builds search and personalization services powered by artificial intelligence — used by its
enterprise customers by way of cloud-based, software-as-a-service — has closed a C$227 million ($172 million in U.S
dollars) round, which CEO Louis Tetu tells me values the company at “well above” $1 billion, “Canadian or U.S
dollars.”Specifically, the equity stake of this round is 15.5%, equating to a valuation of $1.46 billion Canadian dollars, or $1.1 billion
dollars.The round is being led by Omers Capital Private Growth Equity Group, the investing arm of the Canadian pensions giant that makes
large, later-stage bets (the company has been stepping up the pace of investments lately), with participation also from Evergreen Coast
Capital, FSTQ and IQ Ventures
Evergreen led the company’s last round of $100 million in April 2018, and in total the company has now raised just over $402 million with
this round.The valuation appears to be a huge leap in the context of Coveo’s funding history: in that last round, it had a post-money
valuation of about $370 million, according to PitchBook data.Part of the reason for that is because of Coveo’s business trajectory, and
part is due to the heat of the overall market.Coveo’s round is coming about two weeks after another company that builds enterprise search
solutions, Algolia, raised $110 million
The two aim at slightly different ends of the market, Tetu tells me, not directly competing in terms of target customers, and even
services.“Algolia is in a different ZIP code,” he said
Good thing, too, if that’s the case: Salesforce — which is one of Coveo’s biggest partners and customers — was also a strategic
investor in the Algolia round
Even if these two do not compete, there are plenty of others vying for the same end of the enterprise search and personalization continuum
— they include Google, Microsoft, Elastic, IBM, Lucidworks and many more
That, again, underscores the size of the market opportunity.In terms of Coveo’s own business, the company works with some 500 customers
today and says SaaS subscription revenues grew more than 55% year-over-year this year
Five hundred may sound like a small number, but it covers a lot of very large enterprises spanning web-facing businesses, commerce-based
organizations, service-facing companies and enterprise solutions.In addition to Salesforce, it includes Visa, Tableau (also Salesforce
now!), Honeywell, a Fortune 50 healthcare company (whose name is not getting disclosed) and what Tetu described to me as an Amazon
competitor that does $21 billion in sales annually but doesn’t want to be named.Coveo’s basic selling point is that the better
discoverability and personalization that it provides helps its customers avoid as many call-center interactions (reducing operating
expenditures), improves sales (boosting conversions and reducing cart abandonment) and helps companies themselves just work
faster.Significantly, the area that Coveo works in is going through a noticeable shift these days.A swing toward stronger data protection
and consumers’ preference for having more control over how their data is used and for what — spurred by high-profile revelations
detailing how different organizations manipulated user data across social networking sites and other platforms to target people with sneaky
political content and advertising to influence voting, subsequently cracking open the wasp nest to reveal just how much of our data is
harvested and used all the time — has meant that there are at times fewer tools than there used to be to provide the kind of
“discoverability” and “personalization” that companies like Coveo build for their clients.Tetu believes there is a way to deliver
personalization without compromising how a person wants to exist in the digital world.“The whole notion is to be able to control data but
also have personalizaton in the future,” he said
But there are two dimensions to this, he added:“The continued and growing regulatory pressure around privacy [such as GDPR] is good,
it’s the will of the people and legislation will go that way
The world is going cookie-less,” he said
“But we can’t ignore the arbitrage between privacy and utility
If I understand what you will do with my data and use it to provide more relevance, that can be excellent, too.”He calls himself an
“Amazon addict” but points out that it highlights the two sides of the data coin: “Is it predatory or excellent in doing the job it
does? I can’t decide on an answer
I think they are both.”All the same, it’s working on ways around the “cookie-less” future
The company Coveo acquired in Milan earlier this year, Tetu said, “can do machine learning detection
In five clicks it can detect your propensity to buy and your interest
It means you can’t blame anyone for observing you.”So, while there are a lot of players out there chasing the same discoverability and
personalization market, the attraction here is not just about a company doing it well, but looking to skate to where the puck is going (see
what I did there, Canadian startup?).“We believe that Coveo is the market leader in leveraging data and AI to personalize at scale,”
said Mark Shulgan, managing director and head of Growth Equity at Omers, in a statement
“Coveo fits our investment thesis precisely: an A-plus leadership team with deep expertise in enterprise SaaS, a Fortune 1000 customer
base who deeply love the product, and a track record of high growth in a market worth over $100 billion
This makes Coveo a highly-coveted asset
We are glad to be partnering to scale this business.”Alongside business development on its own steam — the company now has around 500
employees — Coveo is going to be using this funding for acquisitions
Tetu notes that Coveo still has a lot of money in the bank from previous rounds.“We are a real company with real positive economics,” he
“This round is mostly to have dry powder to invest in a way that is commensurate in the AI space, and within commerce in particular.” To
get the ball rolling on that, this past July, Coveo acquired Tooso, a specialist in AI-based digital commerce technology.
