Monday, February 25, 2013
How Convercent Is Looking To Transform Compliance Software
Patrick Quinlan and his team were behind the rise and success of Rivet Software, and are now applying that to the compliance software market with a new Denver-based startup, Convercent. The firm recently raised $10.2M in a funding round, and we caught up with Patrick to learn about how he's looking to repeat that success with Convercent, and what the company is working on.
What is Convercent?
Patrick Quinlan: Convercent is a new company, launched on January 29th of this year. The company is a combination of three distinct entities. First, was an existing business, which has been here in Colorado for the last fifteen years, Business Controls. The President was Steve Foster, and was a hotline service and technology provider with three hundred existing customer. They had been founded in 1996. We took that entity, and combined it with the executive leadership of Nebbiolo Ventures. That organization had three partners, with myself as CEO, Philip Winterburn as COO, and Barclay Friesen as CFO. The three individuals held roles at Rivet Software, and grew it from 1M to 60M in annual revenues with 427 global employees. We were joined at Nebbiolo by Chuck Boyle, who was most recently at Cherokee Capital. We took that existing business, those four executives, and 10.2M in a funding round, which came from multiple sources. The largest firm was Azure Capital, out of San Francisco. Mantucket Capital out of Denver took the rest of the funding. The new entity is Convercent. The purpose of Convercent is to provide companies with the ability to create an employee engagement score, which allows them to look at their organization from the standpoint of compliance, governance, ethics, and values. No tool in the world today allows you to take learning management, your hotline system, case management system, and put it into an all-in-one integrated tool for your business, whether you have 50 employees or 45,000 employees.
After the success at Rivet, what did you see in this business that attracted you here?
Patrick Quinlan: If you look at the success at Rivet, it was an existing business, which was there for eight years prior to my joining the organization. What we were able to do, is build that existing platform, and existing engagement with clients. The revenue at Business Controls was not much that different from what we found at Rivet. There is a big different between starting from a dead stop at zero miles per hour, and starting at 60 miles per hour. What we saw in Business Controls, is it already had 300 customers with a 95 percent customer retention rate over the last eight years. Their customers were extremely loyal, and the staff had great industry knowledge. What we saw was the opportunity, because the regulatory space is changing dramatically. It's not that there are more laws, but the laws there are being enforced in a way they haven't been before.
If you look at JPMorgan and Jamie Dimon, they saw their income drop by 20M year-over-year, specifically because of compliance issues. The executives at HSBC had their pay clawed back because of compliance issues. CEOs and leadership are focused on compliance like they never had before, because it's personally impacting those leaders. When something personally impacts leaders, it becomes a top-of-mind issue. That's the huge chant in the market for companies.
If you look in the existing technology space, there's no integrated, technology platform to solve this. You have to go out and buy the individual components. We saw this being proven out when a private equity group in California, the Riverside Company, spent over $150M buying six companies with disparate technology. Instead of building what they needed, they bought all of these companies to create an integrated solution. We believe it's much better to build that from the ground up. The product we are releasing is completely new code. We're not leveraging the software in Business Controls, we're leveraging the experience, team, and existing customer base.
What was it at Rivet that made it happen?
Patrick Quinlan: We have six values as an organization. One of those values, is our fanatical focus. We're just business guys. I say that very clearly and directly. We're business guys, and we know how to build and scale a business when the opportunity presents itself. What we see in many startups, is one of two things. One, is they're often so excited about the innovation of the technology, they build something for their dreams, rather than responding to the market opportunity. Second, it's easy to get off track. Most startups die of indigestion, not starvation. They see revenue opportunity here, another opportunity over there, and keep making exceptions, and end up chasing every little thing that comes along. To be successful, you've got to have fanatical focus. You have to know your buyer, know your pricing, know your product, and know your legal contracts, and don't deviate. That's the key to success for a startup. We know we can do anything we want to do, but we need to worry about what we should do.
Where are you in launching this to customers?
Patrick Quinlan: We've got the benefit of our existing base of customers. We have 300 customers with Convercent, and eight of those are now in full production on the new platform and are using all aspects of it. All three hundred are now Convercent customers.
What's next for you?
Patrick Quinlan: We will be launching Convercent 2.0 soon. 1.0 was launched January 29th. What we're focused on is the ability to provide compliance and governance management. Our compliance part is extremely well built, and the new launch will be around employee engagement. That ability will allow employees to directly interact with the system, and will help round out our employee engagement score.