Treehouse Interactive: Creating A New Enterprise Software Giant In Utah

Utah has both a long history and a recent successful track record of creating growing, enterprise software companies, including many in the software-as-a-service and cloud market. This week, Treehouse Interactive, based in Draper, received $17M in a combined acquisition/funding for a majority stake in the company, from investor Joe Wang and Kennett Partners. We spoke with Joe Wang, the new CEO and investor in the company, and Erich Flynn, who was previously CEO, and is now Chief Revenue Officer, and how the two have teamed up to help take the company to the next level, through its fast growing business in partnership management software for the channel.

What is Treehouse Interactive?

Erich Flynn: Treehouse Interactive is a provider of two major platforms. The first, is a marketing automation platform, which we've actually de-emphasized over the last couple of years, and the second is a partner relationship management platform. Usually, when I say that, people ask me what partnership relationship management is. To explain what our company does, is we provide software to companies who sell through the channel, using distributors, who sell to resellers, who then sell to end users. Essentially, we provide tools to allow those distributors and resellers to sell, service, and support products, all via a software-as-a-service model, through a password protected portal. That software integrates with a client's CRM system, and provides lots of powerful tools to them for automating relationships with their partners. Some of our clients have as many as fifty thousand partners on the platform in three different geographies. North America and the EMEA are veyr typical. Those powerful automation tools range from sales to marketing, and decrease the cost of managing those relationships, and dealing with menial tasks, and help those partners better sell themselves, market themselves, and become more confident with products, through training and certification. It's all about helping customers decrease their costs, through automation parts of the process and helping them increase sales by being better enabled partners.

Joe, talk about the acquisition and investment, and how you decided to get involved with the company?

Joe Wang: Honestly, a year ago I didn't even know that a partnership relationship management market even existed. Treehouse, however, has been working in this category for the last five years and longer. I didn't even know the industry existed, even though I've been in high tech for the past fifteen years, running technology companies that sell through channel partners. If you're familiar with the channel, most of the companies that sell their products through the channel have to deal with things like deal registration; that is, when you have multiple partners, they need to register that they are working on a deal, so another partner does not claim that the deal is theirs. So, you have to provide tools to your channel partners, so that when they engage with a new customer, they can come to your deal registration database so that there's no mistake on who started working with that customer first. Lead distribution is another example, that's an area where vendors spend millions of dollars in marketing to generate leads, which they need to distribute to different partners. These are all the kinds of things I had dealt with in my past companies, but I didn't know then that there were solutions available to help all of those companies do a much better job of managing their channel partners.

When I learned about Treehouse, it immediately registered with me. If I'd known about what they were doing, I certainly would have bought the solution, rather than trying to reinvent the wheel. Many technology companies who sell through channel partners try to put something together to deal with these items, but end up only being able to do a fraction of the capabilities that Treehouse offers. Plus, you end up spending a whole lot more money trying to develop this in house. So, it was both the market, and the technology which were the drivers for me to be interested in the company.

You were running a big company before this, what made you decide to try something new and make an investment here?

Joe Wang: If you look at the last three companies I ran, they were all much bigger businesses, other than LANDesk in the early days, where we had lots of fun. Watchguard was much more of a turnaround. There are people who are really excited about turning around companies, but for me, it's less fun, personally. That's why I decided to get involved with another, high growth company. This one just had all the right ingredients, it was in the right market, they had great technology--that was one of the main reasons I decided to get involved, in terms of investment. I actually was a co-investor in Watchguard and LANDesk. I do think this one is more interesting, in terms of the investment side, as I have a larger percentage overall here. Nonetheless, I've always been an investor in the companies I've been involved in.

You guys mention that many customers roll their own solutions in this area. What causes them to decide to use your product instead?

Erich Flynn: I think it's a couple of things. The primary driver is our technology, versus the rest of the folks in the market, in that we provide a complete solution. Joe touched on a couple of areas, around deal registration and deal distribution. But, we also handle the marketing enablement technology. Having been a marketing automation player, we have some pretty unique functionality helping our customer do outbound email campaigns, co-branding of collateral, and a partner marketplace--which is kind of a product locator on steroids. They're able to manage everything from their web portal to CRM integration.

We're the only PRM on the Salesforce App Exchange, and we're also the only PRM with out-of-the-box integration with Oracle and Microsoft. That complete approach lets us walk into a company, where people have been spending an enormous amount of money on their own solutions. A good example of this is SunGard, where their IT people had spent a lot of time and money developing their own PRM in house. The straw that broke the camel's back, was they just couldn't maintain their system anymore. They couldn't get all of the functionality their partners required, to successfully do business. Plus, they couldn't provide functionality which was competitive with the folks they were up against in the marketplace.

That forced them to look outside for a solution. When we came in, what we had was music to IT's ears. We were able to deploy in eight to 12 weeks, with very little ineraction from IT, and no maintenance from them on an ongoing basis. I think that complete approach is one of the things that defines us, plus our out-of-the-box integration with the major CRMs. I also think that success breeds success. When you have large customers like ADP, Xerox, and SunGard using your product, that feeds on yourself. We started in the hosting space with Peer 1 years ago, and so Hostway, Rackspace, Bit9 and others signed up. Success feeds on itself.

Joe Wang: I should also add, as we've talked a lot about the market, that technology was a big part of the due diligence in the process. If it's a good market, but you are number seven in the market in terms of your technology, that becomes less interesting. What we found, after a few months of due diligence, that they really did have the most complete PRM product on the market. I mentioned deal registration and lead distribution, but they also have a long list of channel partner specific capabilities, including MDF (marketing development fund), a partner portal, automated training, certifications. All of those things take a lots of time to develop, and they provide it as a standard solution. The other thing, is they developed the product 100 percent from the ground up. It's a single, multi-tenant platform, which is the benefit of having developed the technology right from the beginning. The benefit, to the customer, is the scalability and the security. Some other companies in this space just can't do that, because it wasn't designed that way. In our due diligence, Treehouse was by far the best technology in this market, and that was certainly a determining factor in our putting money into the company.

Joe, this is your second Utah company--why another company here?

Joe Wang: Honestly, I wasn't specifically looking for another company in Utah, although I was glad it is in Utah. I had other options in other places, and some of those places I wouldn't want to go. I like Utah for several reasons, including it's an employer friendly state, and there is lots of talent. Plus, in just in recent years, I think it's become a hotbed for SaaS companies. In my opinion, that's very good. Although I wasn't looking for another company in Utah, I was glad it happened.