Human resources software start-up Culture Amp has visited the venture capital market four times in four years, most recently in July when it raised a whopping $40 million in Series D funding led by Sydney-based Blackbird Ventures. The July deal brought total funds raised to $77 million and saw other long-term backers increase their stakes, including California-based Felicis Ventures, Index Ventures, and Sapphire Ventures.
Revenue and staff have doubled every year since 2012 when founders Didier Elzinga, Jon Williams, Doug English and Rod Hamilton launched the software platform that helps medium to large enterprises field employee feedback and build a strong company culture.
“The latest capital injection has put us on target to reach our goal of $100 million in turnover by 2020,” said Elzinga, the talkative chief executive of Culture Amp, in an interview with FinanceAsia. “I hope we don’t have to go back to the venture capital market again but never say never. Our focus now is to achieve self-sustaining profitability.”
By year-end the company expects staff numbers to hit 300 and plans to open a fourth international office. “Maybe Singapore or Hong Kong, we haven’t decided when and where just yet,” said Elzinga. “We already work with global companies that have large Asian footprints and the next step is to bring Asia-based businesses onto our platform.”
Culture Amp’s other international offices are in San Francisco, New York and London, and while it can be challenging to manage the time zones and long-haul flights, there are no plans to move the company’s headquarters from Melbourne.
“When we first hit the radar of investors, there was pressure for us to head to Silicon Valley, but we figured that if we wanted to build a global company, we had to be able to do this from anywhere on the globe,” Elzinga said.
Rick Baker, partner at Blackbird Ventures, believes that Australia makes a sound base for companies that use digital sales and marketing channels to distribute their product. “There are plenty of high-quality software engineers in Australia and not as much competition for their skills as there is in Silicon Valley,” Baker said. “Local start-ups also benefit from a tax credit system that refunds companies for research and development costs.”
Elzinga talks a lot about staff culture and has a quirky habit of reciting quotes. (When I ask how he came to identify the human resources sector as a gap in the market, he answers, “Henry Ford was famous for saying: ‘Why when I need a pair of hands do I also get a brain attached?’”)
He said that Culture Amp does more than run employee satisfaction surveys. “The product is built around the idea that workplace culture matters and that if you want to run a business that is truly customer-centric then you have to put culture first because that is your biggest lever.”
The real value in Culture Amp is the intellectual property it has developed around what companies can do to increase employee engagement. “We are deepening the sophistication of our tool by using our evidence-based learnings to give clients a clear set of actionable plans that can actually move the needle on whatever it is they want to focus on.”
Baker at Blackbird likes the vision and describes Elzinga as “an exceptional founder with a deep understanding of the problem of training and retaining good staff”.
Blackbird was so keen to ensure that Culture Amp had sufficient funds to reach its 2020 turnover goal that it invited superannuation fund Hostplus to make a $10 million co-investment in the last round.
“Co-investing gives us the chance to reap the rewards when a company really starts to take off,” said Sam Sicilia, chief investment officer at Hostplus, adding he would like to do more such deals. “The superannuation pool is enormous and if funds like Hostplus aren’t there to provide late-stage funding, local start-ups will do what they have always done and go offshore,” he told FinanceAsia.
Investors with long-term horizons are a good fit for Elzinga, who said he isn’t looking for a quick exit from Culture Amp.
“An IPO is not on my bucket list and nor is a trade sale. I suppose if someone put a ridiculous sum of money in front of me I might consider it, but I am more interested in seeing the vision through to its full potential and creating a truly global business,” he said.
Culture Amp is one of six Australian startups profiled in the Fall 2018 issue of FinanceAsia's magazine. We selected young companies that already have an established customer base and are generating revenue. Each has raised capital in the past 12 months – ranging between $15 million and $80 million – and they have a number of large-name venture capital firms behind them.
