Goldman Sachs leads $51.5M round for business texting software maker Zipwhip

Zipwhip CEO John Lauer. (ZipWhip Photo)

In today’s technology world, there are a bevy of ways for businesses to communicate with customers. They can send emails; build their own apps; use social media tools; and more.

But it’s the ancient art form of text messaging that still reigns supreme, at least in the eyes of Seattle startup Zipwhip.

Some big-name investors tend to agree. Zipwhip today announced a $51.5 million Series D round led by Goldman Sachs Private Capital Investing group, with participation from existing investors including OpenView, M12, and Voyager Capital.

It’s the largest funding round for a Seattle startup this year and ranks among the top 15 deals over the past 12 months, according to PitchBook data. Total funding in Zipwhip is now $92.5 million.

Zipwhip sells software that lets businesses across various industries — from pro sports teams to large enterprise companies to small insurance shops — send and receive text messages with their customers using an existing business phone number.

“It’s ubiquitous; it’s simple; it’s easy; it’s everywhere,” Zipwhip CEO John Lauer said of business texting. “That is the value proposition. You just want total simplicity.”

Zipwhip has more than 10,000 customers and saw revenue increase over the last year by more than 80 percent.

“There is a huge market in front of us, and we don’t see any reason why this is going to slow down,” Lauer said.

Founded in 2007, Zipwhip originally targeted consumers and set out to be the “Facebook of text messaging.” But it pivoted around 2013, taking a different approach by working with wireless carriers to enable hundreds of millions of business landlines to receive and send text messages. This allowed companies to text with their customers from landline phones, VoIP services, and toll-free numbers.

Zipwhip has text-enabled 3.3 million business phone numbers. Lauer called the company, which makes money with a software-as-a-service model, a “10-year overnight success.”

“We always believed text messaging would be the future,” he said. “That was the thesis even 10 years ago.”

Popular apps such as WhatsApp and Facebook Messenger have rolled out their own solutions for business-to-consumer communication. But people don’t want to download another app to communicate with a business, Lauer noted. And for existing apps already on a smartphone, the barrage of notifications can affect how users perceive relevancy of those messages.

Texting, meanwhile, has remained somewhat of a sacred place. It’s also an “open ecosystem,” Lauer said. He believes texting software can become as widely-used as email software — maybe even more so.

“You’ve probably given up on your email inbox. I have 20,000 unread emails,” he said. “But in my texting inbox, I have zero unread texts. That’s because texting is a high priority medium; email is a low priority medium. If you really want to get ahold of your customer, texting is the medium to do it with.”

Much like spam has infiltrated email inboxes, you’ve probably seen an unwanted text message on your phone recently. But Lauer doesn’t see spam ruining the texting ecosystem. He cited a FCC ruling last month that classifies text messaging as an information service, not a telecom service.

“It lets us as an industry continue to stamp out spam,” said Lauer, who was recently featured as a Working Geek.

Zipwhip has some competition from others such as Textline; SimpleTexting; MessageBird; and OpenMarket, a company Lauer helped start back in 2002. But he said Zipwhip is the “leading and original provider of business texting software.”

As far as automation technology such as chatbots, Lauer said there are certain use cases where that is appropriate — texting a business about directions, hours, or parking information, for example. But most people are texting because they want a human touch, he said. “That’s our main use case,” Lauer said.

Other startups have also focused on using SMS to power their business model. Seattle-based companies such as ReplyYes (acquired by Nordstrom) and Peach (office lunch delivery) use texting to sell vinyl records and take meal orders. The Nudge, which just launched in Seattle, is a membership program that sends its members three text messages per week with ideas for things to do around a city.

David Beisel, partner at NextView Ventures and an investor in The Nudge, wrote about the advantages of texting in a blog post from July.

“Our experience at NextView with other our investments that utilize SMS as a communications channel to reach consumers has shown us that the intimacy and immediacy of text messages delivers unparalleled deliberate attention and a call to action,” Beisel wrote. “In contrast, email doesn’t catch consumers or invite response like a simple text message does.”

Zipwhip will use the fresh cash to invest in product and engineering resources, including building out enterprise-grade features that larger clients demand. Zipwhip employs 260 people and recently expanded its Seattle office, with plans to continue growing the team through 2019. The company’s last funding round was a $22.5 million raise in September 2017.

This past April, Zipwhip hired former SendGrid exec Scott Heimes as its new chief marketing officer. It also recently brought on longtime tech exec Bob Chamberlain as CFO and ex-Intel exec Kirsten Spoljaric as senior vice president of people.

Matthew Dorr, vice president in Goldman Sachs’ Private Capital Investing group, will join Zipwhip’s board of directors as a result of the funding. Goldman Sachs recently invested in funding founds for Seattle-area startups 98point6 and Qumulo.

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