Vendasta VC Round Shows Investors Love Scalable SMB Solutions

Vendasta’s C$40 million VC round this week places the SMB SaaS platform company among the elites in its home base of Saskatoon. No Saskatchewan based tech company has ever raised that much money.

What’s more interesting to us about the deal is what it says about what investors are looking for when they pour money into a small business software company.

I spoke earlier today with Vendasta CEO Brendan King and CMO Jeff Tomlin. Brendan observed that a big challenge small-business software companies face in raising money is convincing investors that they have a scalable customer acquisition model. Investors love the size and potential that small business represents but are spooked by the prospect of high churn and out of control customer acquisition costs.

Below is a short clip from my conversation today with Brendan where he addresses this question by talking about working with resellers that already have a trusted relationship with small businesses in a specific area — whether it’s marketing and advertising, HR and payroll, information technology, or something else.

In fact, Vendasta’s channel strategy is now moving much more in the direction of finance and technology-oriented channels like telecoms, banks, IT resellers, and fintech platforms than the company’s past focus on acquiring media companies and digital agencies.

“We are attacking a space with huge growth. Small businesses are moving to the cloud three times faster than enterprises,” Brendan said. “The problem is no one wants to sell to SMBs. Churn is too high and customers acquisition costs are too high. We sell only through people that small businesses trust.”

Vendasta is actually moving away from using the term resellers and instead is describing its partners as “cloud brokers.” It’s a term that comes out of the IT reseller space that Vendasta has adapted to describe the role is foresees for its partners — helping SMBs assemble the right stack of cloud tools to run their businesses more efficiently and effectively.

As for what Vendasta plans to do with the money, Brendan offered a fairly standard response. They will put the money into R&D, sales and marketing. Brendan’s ambition is for the Vendasta technology to serve as an “end to end commerce platform…broadly applicable across any software as a service product.”

In the following clip, Brendan explains why Vendasta is shifting to the term “cloud broker” to describer its reseller partners.

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