Just a week into the new year and 2021 has already begun crowning new unicorns.
With a $200 million Series B announced this morning, digital product management platform Quantum Metric has become one of the first startups to break the billion-dollar valuation barrier this year. The hefty financing, led by growth equity firm Insight Partners, reflects a nine-fold valuation step up from its Series A.Â
As for other software startups geared towards a digital economy, the pandemic boosted the need for Quantumâ€™s products. In fact, its year-over-year revenue doubled in 2020. Quantumâ€™s clients, primarily Global 2000 brands, now field about one billion unique online visitors per monthâ€”or about 20% of internet users in the worldâ€”compared to about 400 million visitors a year ago, according to founder Mario Ciabarra, a serial tech entrepreneur.
After the initial shock of the pandemic wore off, investors opened their pocketbooks and Zoom calendars in search of opportunities amid an unprecedented economic shutdown that forced companies to rethink their business models. Venture capital firms invested about $36.5 billion into U.S.-based startups in the third quarter of 2020, up 22% YoY, per private markets data provider CB Insights. While the funding spigot is flowing, unicorn valuations in early rounds have become less common: Nine startups scored a billion-dollar valuation in their Series B in 2020, down from 12 in 2019 and 18 in 2018, according to CB Insights.
â€œThere’s an incredible appetite for software. I’m not even sure we’ve hit the limit of possibilities,â€ says Nicholas Pappageorge, a senior intelligence analyst at CB Insights. He adds: â€œTechnology has never been in higher demand. So I don’t see valuations falling.â€
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The six-year-old Colorado Springs startup offers a suite of integrated products that essentially help clients manage the user experiences of their websites. For example, have you ever repeatedly clicked on a faulty add-to-cart button when shopping online, before giving up and going to another website? Quantumâ€™s software aggregates, quantifies and shares those signals of customer frustration with relevant teams.Â Â
Quantum Metricâ€™s â€œneo-bundleâ€ also allows clients to unplug niche productsâ€”like Datadog DDOG for the application performance management side of things and Amplitude for product analyticsâ€”according to Lonne Jaffe, a managing director at Insight who works closely with the startup. The firm also led Quantumâ€™s $25 million Series A round in late 2018. Â
â€œWe haven’t seen anything that’s the whole bundle that has the analytics layer on top of it,â€ Jaffe says. â€œThereâ€™s not an obvious substitute at their layer.â€
Customers, including the likes of Lululemon, Alaska Airlines ALK and Silicon Valley Bank, typically sign up for one to three year contracts. After the initial shock of Covid-19 wore off, Ciabarra says demand spiked â€œdramaticallyâ€ and customers in new verticals like healthcare began to inquire about the platform.Â According to Ciabarra and Jaffe, one unnamed client recently renewed a seven-figure contract with Quantum spanning two yearsâ€”all as the client underwent Chapter 11 bankruptcy.Â
Quantum plans to use the $200 million financing to advance machine learning intelligence in its product, increase distribution, marketing and sales and grow its staff. The startup doubled its headcount to 220 late last year, and it aims to hire roughly 400 more employees before 2022 rolls around.Â
The ultimate question for Quantum Metric and the slew of other startups that have enjoyed significant tailwinds during the pandemic: Will the momentum level off after widespread vaccination and an economic recovery?
Though limitations on in-person shopping and work forced many companies to upgrade their websites and ecommerce offerings more quickly than anticipated, Quantum and its investors remain confident that consumer habits wonâ€™t revert to pre-pandemic norms.
â€œI think that we’ve taken 10 steps forward, we might take one or two back, because we’re going to be nostalgic about visiting physical presences,â€ Ciabarra says.Â
But, he ultimately expects continued growth: â€œWith all the behaviors that have shifted during the pandemic, I think that we’re going to see very little attrition back to the way things were.â€