Kabbage Scoops Up Radius for Its SMB Data
September 5, 2019 | Contributed by: Neal Polachek
Some context on Radius is useful in understanding the “why” behind this deal. I first came across Radius while I was helping the team at BuzzBoard. During my time there, Radius became the poster child for promoting the SMB data information space.
Radius claimed it had significant amounts of data about SMBs that could help customers anticipate which SMBs were ready to buy hardware, software, suppliers, or the like. At BuzzBoard, we were curious about the composition of the data behind the Radius curtain.
To its credit, Radius pushed forward with its model, taking some $120 million in venture money over the course of almost 11 years. In September 2014, it raised $42 million at a post-raise valuation of $210 million. Then just 10 months later, it took another $50 million, but this time at a post-raise valuation of $555 million.
It was sometime between those two rounds that we at BuzzBoard had the opportunity to learn more about the Radius data and came to understand that it was not as deep as the company appeared to portray.
What Radius had going for it was some very large customer deals. Companies like American Express, Lending Tree, and First Data, to name a few. No surprise that American Express was on that list, given one of Radius’s series B investors was American Express Ventures.
Then something interrupted Radius’s path to tech nirvana.
In November 2017, the company was seeking a series 1 round (I guess this happens after you’ve gone through rounds A through F?). The series 1 round, targeting $60 million, was canceled. This suggests perhaps the internal KPIs had not advanced since the prior funding rounds in 2014 and 2015.
While I am not a VC, it would seem that canceling a round of funding is a bad omen for any company. More to the point is that the post-money valuation in November of 2017 was just $200 million – a far cry from the $555 million post valuation in July 2015, according to Pitchbook.
Build or Buy?
Fast forward to this week, we can only speculate how much Kabbage paid for Radius. What really struck me is that Kabbage indicated it would shut down the data services business that Radius had been pursuing for nearly 11 years.
The piece in TechCrunch suggests that Kabbage would use Radius on a proprietary basis.
It looks like Kabbage made a make or buy decision for strengthening its SMB data. Had Kabbage decided to build this, what would it have cost? $50 million? $100 million? Or the company could simply find an asset that had run out of steam and convert it into its own asset. Seems like the smart decision. This leads me to think Kabbage didn’t pay more than, say, $35 million for Radius. Possibly far less.
So perhaps we at BuzzBoard shouldn’t have been quite so envious of the success Radius was having at raising money and generating attention. Perhaps its data really wasn’t as compelling as it was sold to be. Maybe collecting lots of SMB data points and pushing it into a database wasn’t such a compelling business model after all.
As it says in Pitchbook, “The funds will be used for the company’s continued development of Radius’ predictive marketing software suite and its proprietary data science engine (the Radius Intelligence CloudSM), which measures 30 million companies across 50 billion data points.”
So is 30 million companies and 50 billion data points not enough, or is it way too much? Maybe it isn’t the gross amount of data but the depth and usefulness of the data that matters. We’ll be eager to see how Kabbage leverages a decade of work the Radius team applied to solve a very difficult problem.
What’s Up, Scott?
Now, for an interesting aside. As I was pouring through Pitchbook to research this post, the name Scott Thompson kept popping up. If this name rings a bell, it should.
Scott Thompson is a former Yahoo CEO. What’s interesting about Scott today is how deeply woven he is into the SMB landscape. He’s a director at Plastiq, EverCommerce, and Zebit, as well as at Kabbage and Radius. It’s probably fair to say Scott has his finger on the pulse of the SMB fintech and martech space.
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