AVG Exits Stella Connect For 3x
October 6, 2020 | Abree Murch
Quality of customer service is implicitly connected with motivation and engagement of a company’s frontline employees (employees who deal directly with customers). Many companies rely on low-paid customer service employees to be the faces of their brands. Given the rampant low morale of many of these employees, companies are at risk.
Enter Jordy Leiser and John Ernsberger. The pair founded StellaService in 2010. The company’s initial business, Stella Metrics, provided customer service ratings and audits for online retailers. This solution helped shoppers make more informed purchasing decisions, while in turn providing online retailers with customer service data and insights.
While Stella Metrics found good early success and the support of a blue chip set of VCs (Bessemer, Norwest, and Comcast), the company found itself engulfed in the challenging macro retail environment in mid-to-late 2015. In early 2016, StellaService launched a new business unit called Stella Connect, a performance management system for frontline teams. The platform leverages real-time customer feedback to raise employee morale and improve the customer experience.
How It Works
Stella Connect sends feedback requests to customers after every service interaction. Requests include a photo and bio of agents, which humanizes the service experience and drives higher response rates. Customers can use the opportunity to suggest rewards (paid out by the company) for a job well done. After sub-par service interactions, Stella Connect instantly captures suggested areas for improvement. These real time, agent-focused insights create micro-coaching moments and highlight performance issues at a scale that is simply not possible with traditional QA programs.
Stella Connect also measures and reports on data over time. Beyond simply gathering data from customer service interactions, Stella Connect puts this data in front of both front-line employees and their managers. Agents can see their own customer ratings, feedback, and reward votes in real time on a customized dashboard. The platform also provides a portal for managers that delivers up-to-date insight into the performance of individual agents, teams, and overall departments.
Doorway to the Deal
In January 2018, StellaService recapitalized its business and officially pivoted its focus to Stella Connect, successfully attracting customers from a diverse array of industries, including Dell, Mercedes Benz, Betterment, Postmates, Nestle, Sam’s Club, ESPN, Lemonade, Lululemon, Riot Games, and Williams Sonoma. It was at this point that Green D Ventures was connected with the investment opportunity via Dartmouth alum Sam Landman of Comcast Ventures.
Initially, after extensive discussion within the Investment Committee, the Green D team elected not to participate, though the business and the market were promising. Fast forward a year to Stella Connect’s 2019 $11 million Series B raise with a new lead (Harbert Growth Partners) and new terms, and Green D spearheaded AVG’s participation. Other investors in the round included Norwest Venture Partners, Comcast Ventures, Battery Ventures, RRE Ventures, Toba Capital, Forte Ventures, and Zendesk.
There were a number of features that made Stella Connect an attractive investment:
- Valuation. A $20 million pre-money valuation ($31 million post-money valuation) was an attractive entry point for a SaaS company that ended 2018 up 76% YoY with limited investment in the business.
- Product/Market Fit. Companies have been able to use Stella Connect to generate response rates from customers up to 5x greater than other customer feedback techniques and platforms. Early customers continued to renew and increase contract sizes, and Stella Connect ended 2018 with an impressive net ARR retention.
- Team. We invested in a team that sported some “battle scars” from its past experiences and knew how to leverage the lessons learned. CEO Jordy Leiser, described as a “force of nature,” is an expert in attracting talent, maintaining morale, and driving company vision. The addition of SVP of Sales, Bill Hilliard was also a strong positive. Hilliard added a lot of “institutional” rigor to Stella Connect’s sales strategy.
- Terms. In contrast to our first review of the company, we liked the new-investor-friendly terms of the Series B.
Building Call Center Efficiency
In early September 2020, Medallia (NYSE: MDLA) announced a definitive agreement to acquire Stella Connect. Medallia is a pioneer and market leader in Experience Management with an award-winning SaaS platform, the Medallia Experience Cloud. The company is based in San Francisco with over 1000 employees, as well as offices in San Mateo, New York, London, Paris, Sydney, Buenos Aires, and Tel Aviv. Medallia acquired Stella Connect for approximately $100 million in cash, resulting in a 3x return for AVG investors.
Leslie Stretch, president and chief executive officer of Medallia, said in a press release: “Combining Stella Connect with Medallia Experience Cloud and Medallia’s new Speech technology creates the work-from-anywhere contact center. Increased automation of contact center workflow lets agents focus on higher value, higher priority interactions addressing industry-wide high staff turnover. With Stella and Medallia, we can turn contact centers into virtual service centers by connecting feedback to coaching action in live time.”