Venminder: Managing Growth and Racing Through Checkpoints While Scaling a Mountain
Congratulations to Venminder on raising their $33 million growth round. MissionOG initially invested in the company in 2018, and is excited to continue our financial support of the leader in third-party risk management. The company has made significant progress over the past two years: broadening their team, increasing their customer base, and evolving their solution to meet the market’s need. With any partner company, MissionOG performs an honest assessment when determining participation in follow-on investment rounds. Below is a recount of how we assess progress of an existing portfolio company and why we are so bullish on Venminder’s future.
When we started MissionOG in 2013, we believed a significant investment opportunity existed with companies that had the following characteristics:
- Teams with uncommon insights, typically informed from deep experience in their target market
- At an inflection point in their growth (post commercialization)
- Chasing big TAMs (total addressable market) where they could be eventual leaders
- Within the market segments mentioned above where we had a unique perspective, experience, and network
As we matured over the past seven years, we have been fortunate to work with many companies that not only clear that initial bar, but have been able to scale up the mountain of growth in front of them. It is generally a hard journey and one that has numerous variables for success. To ensure that our portfolio companies continue to evolve, we have built checkpoints to assess their progress.
When we invested in Venminder in July of 2018, the founder, Dana Bowers, and existing team had built a fast-growing business that was helping banks and credit unions remain compliant by understanding their vendor’s potential vulnerabilities, specifically related to payment processing, cybersecurity, and financial stability. Unlike other firms that offered third-party compliance through a pure service model, Venminder provided software, data, and services to help their customers manage their vendors and have proper oversight.
At the time, Venminder hit on key items we sought to make our investment:
- Team with highly relevant insights: Dana had brought back members from a prior successful company, iPay, to form a well-functioning team, well versed in achieving significant scale. While at iPay, they experienced the pain with third-party risk management first-hand and knew a market opportunity existed to solve for it
- Strong metrics that support an inflection point or sustained growth: Venminder had commercialized to the point where they had strong, predictable metrics, including CAC to LTV (cost of customer acquisition vs. lifetime value), churn (customer turnover), and net retention (measure of customer retention and upsell)
- Pointing to a large TAM: Third-party risk management for financial services firms chased an estimated TAM of $500M, but the market was extremely fragmented with no single leader
- Promise of efficiency through technology/IP: with the uniqueness and stickiness of their emerging platform, we believed Venminder was building a defensible moat
For more regarding our initial thinking with Venminder, please take a look at our post from 2018.
Fast forward nine quarters and Venminder continues its rapid growth. Over the past three years, the business has nearly tripled revenue and its solutions are utilized by more than 800 customers. Most importantly, the company has added foundational elements to become the market leader, while increasing the size of the opportunity. Similar to the characteristics MissionOG looks for when we make an initial investment, there are key considerations we need to assess when we make follow-on investments. When we evaluated the checkpoints that we assess to judge a company’s readiness for scale, Venminder provided us great confidence to follow-on in their current round.
Checkpoints for Greater Growth
Has the team evolved and is it ready for scale?
Dana, and now CEO James Hyde, have prioritized adding executive talent to an already high functioning team. This process began when Dana recruited James to become the CEO in September of 2018. In addition, over the last year, Venminder has recruited Jim Ciortan, VP of sales, Jennifer Busenbark, VP of product, and Ramin Zacharia, CFO. With these additions to the executive team, along with key hires across the departments, Venminder is well positioned to manage planned scale.
Do the metrics support growth and future strength?
Yes. In addition to the customer and sales growth, Venminder continues to demonstrate strong metrics around customer retention, upsell, and lifetime value, which all point to high satisfaction and further expansion of their solution.
Has the solution become adopted as a part of client’s workflow?
This is an exciting part of the story. Prior to Venminder, third-party risk was a manual-driven process primarily provided by large services firms. Venminder changed that with their market-leading software that allows customers to efficiently and effectively manage their vendor’s lifecycle. By providing a SaaS that gives a 360 view of vendors- assessment, tracking, and reporting – their solution has become necessary for their clients.
Has the brand advanced to a challenger or leadership position?
Venminder has committed significant investment to build the leading community for third-party risk management. This peer-driven community supports procurement professionals through open dialog and exchange. Venminder has a learning center with hundreds of webinars, interviews, and podcasts to provide insights on the market. In 2019, Venminder was recognized by Gartner as a challenger for its Magic Quadrant for IT Vendor Management Tools. Together, these efforts have enhanced their leadership position in the market.
Has the solution evolved to open new markets?
With their product enhancements, success with clients, and their thought leadership, demand for Venminder has pulled the company into new markets. Beyond supporting banks and credit unions, new markets such as insurance, healthcare, retail, fintech, and technology are quickly expanding and have increased the company’s total addressable market by 3x. In addition, the company recently launched the Venminder Exchange, a marketplace providing professionals a fast and efficient way to search and preview vendor risk assessments completed by qualified professionals.
Does the culture support growth?
A strong, positive culture is a critical component for scale and one that is often misread with young companies. We assessed two components of Venminder’s culture that were both highly positive and a credit to their leadership. The first was their employee satisfaction and retention. The second was how they sustained the business through the pandemic to date. Similar to how Venminder has been purposeful in building brand value with customers and the greater community, they have also invested in developing an admirable culture where employees are valued.
We are excited to watch Venminder take their next steps forward as they continue to scale a now larger mountain of opportunity within third-party risk management.