Thinking About Thinking

Why Volition Capital Invested In Ensighten

Posted in Founder-Owned Businesses, Growth Equity, Technology, Volition Capital by larrycheng on September 20, 2012

Following up on my prior post, “What Is Tag Management”, this second post will be specifically about why Volition Capital invested in enterprise tag management leader, Ensighten.  Often when we announce a new investment, like we did with Ensighten last week, people ask me why we invested.  Hopefully this post will serve to help answer that question.  Let me emphasize that for any investment, the management team and the people behind the company is the most important factor.  That being said, I will start with some other key factors on why we invested and end with the most important one, the team.

#1: Clear Competitive Separation and Market Leadership

When a new market emerges that we think will be a high growth and strategic market, like tag management, we want to invest in the market leader.  While the term “market leader” is easily thrown around in marketing collateral, we use it sparingly when it comes to our investment decisions.  Our analysis on whether Ensighten is the market leader in tag management rests on a number of objective measures.

The first sets of measures are financially oriented.  Is Ensighten the largest and fastest growing tag management vendor?  Yes and yes.  We are very confident that Ensighten is the largest independent tag management vendor in the market based on revenue.  The revenue difference between Ensighten and the next largest player in the market is quite substantial.  We also believe that Ensighten is the fastest growing company in the market in terms of revenue growth.  These size and growth characteristics combined suggests that Ensighten is scaling aggressively and expanding its lead over the competition.

A second key measure of leadership is competitive win-rate.  When Ensighten goes up against its competitors in a sale process, they win 90%+ of the time.  This is an astonishingly high win-rate.  After talking to dozens of blue-chip, brand name customers who tested Ensighten against its competitors in proof-of-concepts (POC), we think Ensighten is winning because of superior technology.  I will expand on the technology later, but a 90%+ win rate is a clear indicator of competitive separation.

A third important measure of market leadership is customer retention.  Ensighten has a near 100% customer retention rate.  This means that once Ensighten wins a customer, they almost always keep the customer.  This level of retention indicates that the value the customer receives is extremely high.  When you combine these attributes: largest company, fastest growing, 90%+ win rate, and near 100% customer retention – we think Ensighten has both established and is extending its leadership position in the tag management market.  That’s a great dynamic to invest behind.

#2:  High Customer Value – Must-Have Product

We talked to dozens of Ensighten’s blue-chip enterprise customers including Microsoft, Sony, Seagate, Symantec, United, Dell, and many others.  Typically, Ensighten’s buyer comes from the marketing organization of these companies.  The customers communicated to us, both with their words and their tone, that in no uncertain terms, the value they are receiving from Ensighten is exceptionally high.  We think of value as the differential between how much pain the customer experiences from a problem and the delight of the customer when that problem is remediated.  On both measures, Ensighten’s customers measured exceptionally high.

In their own words, the key problem marketing organizations have before deploying Ensighten is a fundamental inability to do their job.  As I discussed in greater detail in my prior post, “What is Tag Management”, if adding, changing, fixing, or deleting a tag requires dependencies on IT release cycles that can run in intervals of many months – marketing is completely hamstrung.  They can’t modify website analytics with ease.  They can’t test different ad networks or tailor their website with ease.  They can’t deploy and customize important customer centric apps like chat, voice of the customer, and recommendation engines without substantial dependencies on IT.  They just can’t do their job.  When marketers describe this pain point – it’s very clear in their tone that the problem is debilitating.

On the flipside, when customers describe what life is like after deploying Ensighten’s tag management system (TMS), the joy in their tone is obvious.  It was clear to me that the dozens of customers we spoke with were smiling ear-to-ear on the other end of the phone when they talked about Ensighten’s value.  That’s rare in customer references.  Often times customers will say nice things to be polite to their vendors, but their tone will be more muted.  In Ensighten’s case, the customers were raving fans.  The reason is that Ensighten’s TMS gave these marketers unprecedented agility and control not to just do their job, but importantly, to do their job well.

#3: World-Class Technology

We spent an extraordinary amount of time evaluating Ensighten’s technology because the tag management space is noisy.  Our conclusion is that tag management is one market where the distinction between complexity in servicing basic tag management needs and enterprise-scale tag management needs is dramatic.  This market will evolve to be the tale of two worlds.  We believe that low-end tag management is a relatively easy technical proposition and will be commoditized quickly.  Conversely, we also believe that supporting the complexity and scale of large enterprise tag management deployments is one of the hardest engineering problems we have seen.

From inception, Ensighten has had four philosophical pillars underpinning all technology development.  1.  All Ensighten products must be able to be delivered through a single line of code.  2.  The platform must support all tag-based applications.  3.  The platform must support any device (e.g. PC, smartphone, tablet, kiosk, ATM, etc.).  4.  Everything must enhance page performance.  First of all, this is an outlandish vision in many respects.  Many would have said at the outset that it couldn’t be done. To those who would try, there would have been hundreds, if not thousands, of engineering decisions along the way where it would have been simpler to relax these constraints to get to market more easily and quickly.  But, Ensighten pulled together a team with both the technical genius and discipline to architect the solution that stayed true to these principles.

Adherence to these principles is why Ensighten now stands in the position of having the only tag management solution that can truly meet the needs of any and every enterprise-scale customer.  This is why Ensighten wins over 90%+ of the time against its competitors.  Ensighten’s entire platform was designed from the ground up with rigid adherence to principles that would ultimately prove to be critical to servicing enterprise-scale deployments.  After the conclusion of an exhaustive technical diligence process, we sat back and just said, “Wow.”  It became clear that Ensighten has a brilliant technical team that cares deeply about their engineering – and the biggest beneficiary of that is their customers.

#4: Large Strategic Market Whose Time Is Now

A year ago, not many people knew much about tag management.  We believe that a year from now, tag management will be known as one of the most strategic and important enabling technologies in digital marketing.  While Ensighten aims to be the enterprise leader in this market, we believe that thousands of companies large and small will be deploying some form of tag management in the years to come.  Large enterprises in particular will have to deploy an enterprise scale tag management system (TMS) like Ensighten just to be competitive.  Not having a TMS will soon be an unacceptable position for any enterprise whose web and digital properties are mission critical.

Tag management will become a critical part of web infrastructure as it sits between a company’s digital properties and potentially every third party application that interacts with those properties.  This position will be very strategic as the TMS will have potentially unparalleled visibility into the activity and data of a company’s digital properties.   Therefore, we expect the tag management market to evolve as quickly and as pervasively as the web analytics market.  We anticipate consolidation early in the lifecycle of the market, but also believe there is room for one or two significant independent companies – a position we expect Ensighten to occupy.

#5:  Talented and Trustworthy Management Team

Let me finish this post with where my interest in Ensighten all started, the management team.  Specifically, I connected with Josh Manion, founder and CEO, the first time in August 2011.  He was kind enough to return the cold call of an associate who was in his first month on the job (related post: What Happens After The Associate Cold Call).  I met with Josh five times before we seriously engaged in discussions on an investment.  Josh is unique – home schooled through high school, chess champion, MIT grad, and grew up in a small town in Wisconsin.  The first thing I came to appreciate about Josh is an alignment of values.  He’s a nice guy.  He’s trustworthy.  He’s a grounded and decent person.  He’s got old-school values which I respect.  The second thing I came to appreciate about Josh is he’s just inordinately smart.   The third thing I liked about Josh is he’s deeply competitive and wants to win.  Don’t be fooled by him being a nice guy – he wants to dominate.

As I got to know the rest of the management team, I could see Josh’s characteristics throughout the team – off-the-charts intelligence, good people, and fiercely competitive.  They also happen to be real domain experts in the field of tag management and passionate about the problem they are solving.  At the end of the day, it was our confidence in the team that was the deciding factor on our investment.

So, there you have it – that’s why Volition Capital invested in Ensighten.  Needless to say, we’re excited to be involved and honored to be part of the team.

What Is Tag Management?

Posted in Founder-Owned Businesses, Growth Equity, Technology, Volition Capital by larrycheng on September 14, 2012

This week we announced Volition’s newest investment in enterprise tag management leader, Ensighten.  I couldn’t be more excited to be involved with the company and to join their Board of Directors.  I was sitting down to write a post about why we invested in Ensighten, but after some thought, I realized it would probably be best to first write this post to explain what tag management is for those who don’t live it every day.   My next post, therefore, will be about why we invested in Ensighten.

So, what is tag management?  Let’s set the stage for the problem.

For many companies, their website is a mission critical part of their business.  Hence, to get the most functionality and intelligence from their websites –  the webpages themselves interface with many different best-of-breed third party applications.   You may not realize it, but when you visit a reasonably sophisticated webpage today, it’s probable that many different third-party applications are loading on that page because of your visit.  Some of these applications are visible to you as the end user.  Examples of these are ad networks, recommendation engines, video platforms, chat applications, social network plug-ins, re-targeting platforms and feedback engines.  Some of these applications are not as visible to you as an end user.  Examples of these are web analytics applications, a/b testing platforms, content optimization engines, audience measurement applications, affiliate networks and marketing automation systems.

The way these applications interface with a company’s webpage is typically through a tag.  Think of a tag as a little program that is inserted into the html code of that webpage.  When the webpage loads, the tag fires, and the application runs.  That tag contains the instructions for how that third-party application will operate on that particular webpage for that particular user.  For a web analytics platform, it could define what specific parts of the webpage to measure.  For an ad network, it could contain instructions on what type of ad unit to run.  For a feedback engine, it could set the parameters for what type of feedback module to render.  For an a/b testing platform, it could set the algorithms for how different tests will run.  Simple enough.

Here’s where it starts to get complicated.

First of all, the tag for a single application can take many different forms.  For example, if you want a different ad unit on one webpage versus another, it could necessitate a different tag even if the ad is delivered from the same ad network.  If you want the web analytics platform to pull different data from different webpages, which is often the case, that could require different tags.  In short, tailoring any application creates many different variants of tags from any single vendor.  So, the first complication is there are many different tags, within a single application vendor.

The second complication is that sophisticated websites have lots of different tag-based applications running.  In our conversations with Ensighten’s enterprise customers, they may have 10-50 different tag-based applications on any single webpage.  The volume of tags is driven by two things.  First, companies want best of breed functionality on their websites across all application categories.  Secondly, they may be testing different application vendors within each application category.  So, that adds even more complexity to the equation.

The third complication is volume.  A single website can have hundreds of thousands, if not millions, of webpages.  If a tag for a single application needs to be placed on every page, that can be hundreds of thousands of tags on hundreds of thousands of webpages for a single application.  Not only can companies have websites with lots of webpages, they may in fact have lots of different websites.  Many large enterprises have different web properties with distinct domains often in many different geographies.   Some enterprises have hundreds, if not thousands, of distinct web properties.  That obviously multiplies the volume problem.  Then throw on top of all those websites and all of those webpages –  tons of web traffic.

Therein lies the complexity: (lots of tags) x (lots of tag-based applications) x (lots of websites) x (lots of webpages) x (lots of traffic) = millions of tags firing every day to users like you and me from a single company’s web properties.  And, I won’t even start talking about other platforms like mobile and flash at this point.

That sets the context, now what’s the problem?

The problem occurs when you want to change, delete, add, fix or reconfigure a tag.  Think of a typical marketing analytics or optimization organization at a large enterprise.  They’re sitting on top of this sea of potentially millions of tags firing every day as users interact with their web properties.  Let’s say they need to change a single tag.  Maybe they want to run a different ad unit or capture slightly different analytics data.  Because that tag sits in the html code of the webpage, marketing must convince IT that the single change should be in the cue of the next release cycle for the website.  If they are successful in that, which is an if, then they must wait until the next IT release cycle for the website which could potentially be many months away.  Think about that, it could take months to make a single and simple change to one solitary tag.

In reality, large enterprises need to change tags all of the time.  Tags can be programmed improperly, so they need to be fixed.  The website itself could change which could necessitate a change to a tag.  Maybe they were testing an application on part of the website, and now want to roll it out to other parts of the site.  Maybe they want to take down an application or deploy a new one.  There are reasons why enterprises need to engage with their tags and their tag-based applications in a dynamic way.  But the current model of being beholden to the IT release cycle brings marketing agility to a halt.

That’s where Ensighten comes in.

Ensighten turns the entire methodology for managing tags upside down through its Tag Management System (TMS).  They start by placing a single line of code in the header of the website:

<script type=”text/javascript” src=”//nexus.ensighten.com/clientID/Bootstrap.js”> </script>

That’s it, one single line of code.  That code interfaces with Ensighten’s cloud-based TMS every time a user views a webpage.  The magic of Ensighten’s TMS is it enables marketing organizations to manage all of their tags without ever touching the code of the website.  That means they can now fix, change, add, delete, and reconfigure any and all tags in Ensighten’s TMS right there in the cloud without ever engaging with IT – and those changes will render on the webpage as if the tag was hard-coded onto the page itself.  It bears repeating, Ensighten enables this flexibility for any tag-based application.  Enterprises now have ultimate flexibility to try different applications, configure existing ones differently, and remove underperforming applications with complete ease.  What could take months, if not years to do, can now be done in a days with Ensighten’s TMS.  We talked with many of Ensighten’s blue-chip clients like Microsoft, Sony, Symantec, United, Dell, Seagate and several others – and the feedback was very consistent with this sentiment:

“For me to get a new tag added to the site or change an existing one, it would take 4-5 months.  In order to get that tag changed, I would have to go through IT, log a defect, get in a release cycle, fight and claw.  I was at the mercy of our bureaucratic IT processes.  This is one of the best things we’ve ever done.  I can go in and change tags within a day.  If I need to add something new, I can add it within a day.  It has made my life much easier.  I am in control of my own destiny.” – Fortune 500 Ensighten customer.

Hopefully that gives you a window into what tag management is and what Ensighten does.  I could go into how Ensighten does it, but that would be a longer post.  But, let me just say that what sounds simple required some really brilliant technical minds to come together to create.  We think the problem of tag management will be a pervasive problem.  We think the tag management market will quickly accelerate to be one of the most prominent sectors of the web because the problem is unavoidable.  And, we know that Ensighten has a significant lead in the market.  But, I shouldn’t get ahead of myself.  Now that you know what tag management is, my next post will be about why we invested in Ensighten.

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