Chicago-based startup G2 Crowd announced that it raised a $55 million Series C round, which it will use to increase its headcount by 500% and further disrupt the $3.7 trillion enterprise technology market. The round was led by IVP, with participation from Accel and Emergence Capital, and brings the company’s total funding raised to $100 million.
This is one of the largest rounds in Chicago this year, which led me to consider: What are some of the factors driving investor confidence in G2 Crowd?
Market Opportunity & Success
As I mentioned above, G2 Crowd is tackling a $3.7 trillion market opportunity, and they’ve established strong traction in that market. Enterprises are digitizing their operations, and with that comes wasteful spending on underused software as well as lost productivity due to unreliable or underperforming software.
Enter G2 Crowd, which built a trust framework for businesses to discover and vet software solutions, similarly to how Amazon helps consumers vet products. With over 500,000 verified customer reviews about nearly 60,000 products, the company’s proprietary algorithm captures real-time qualitative data about product user satisfaction and usability (among other factors). The result for G2 Crowd is that traffic to their enterprise technology marketplace has more than doubled year over year. This up-and-to-the-right growth is sure to get the attention of any investor, and G2 Crowd has earned that.
While G2 Crowd certainly seems to have found a great market opportunity, investors look for the right team to meet that market need, and they’ve found that at G2 Crowd. G2 Crowd’s founding team — Godard Abel, Tim Handorf, Mark Myers, Mike Wheeler, and Matt Gorniak — certainly understand their market. They were co-founders and entrepreneurs together at BigMachines, which Oracle acquired in 2013. Abel and Gorniak then went on to co-found Steelbrick, which Salesforce acquired in 2015.
These founders’ deep understanding of the products that G2 Crowd now evaluates (including the founders’ very own software from previous companies) — as well as their expertise in serving their enterprise customer market — is key to their ability to grow the business successfully. Moreover, the fact that G2 Crowd isn’t the founding team’s first time together at the helm of growing a successful startup gives investors good cause to be confident in their ability to see a successful outcome again.
Perhaps the least-apparent factor working in G2 Crowd’s favor with investors is the fact that the company has two headquarters: one in Chicago and the other in San Francisco, allowing them to capture the best of both worlds. Home to successful startups like Grubhub, Groupon, and Raise, Chicago’s strongest sector is online marketplaces. Having an office in Chicago puts G2 Crowd in the epicenter of experienced marketplace talent. Additionally, given that the Great Lakes Region is home to a huge swath of Fortune 500 companies, G2 Crowd’s Chicago office puts the team close to its target customers and a talent pool that has sold to them at companies like Salesforce, LinkedIn, and others that have a significant presence in Chicago.
Meanwhile, having a major presence in San Francisco is not to be diminished. With a headquarters in the Bay Area, G2 Crowd is able to tap into a wealth of tech talent. However, it also puts the company close to the major investors that have helped it scale as it’s matured. IVP, Accel, and Emergence Capital are all in the Bay Area. With offices in both cities, G2 Crowd is able to build both the depth and breadth of talent and resources to fuel and support the company’s success. The strength of that network is powerful, particularly when an investor evaluates a team’s ability to scale a business through its later stages.
While investors can never fully predict the outcome of a startup, to the G2 Crowd team’s credit, their strategy thus far has worked in their favor. Those of us in the Chicago ecosystem are looking forward to what the company does next and how it leverages this new round of funding. After all, every startup success in the ecosystem further fuels the success of the ecosystem itself.