January 5, 2017, 3:14 PM

CloudCraze gets $20 million in funding

The provider of e-commerce technology will use the funding to “supercharge” product development, expand staff and grow internationally. E-commerce tech vendor Magento also received a windfall this week—$250 million—as vendors and their financial backers gear up to grab more B2B clients.

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CloudCraze is ready to kick its growth into higher gear in the business of providing technology and services that help companies sell to other businesses online, the company said today.

The company, whose cloud-based technology is built on the Salesforce.com platform, has received $20 million in Series A funding that it will use to “supercharge” product development, support continued growth in the United States and abroad, and expand its team of business-to-business commerce experts. In an interview today with B2BecNews, CloudCraze CEO Chris Dalton said CloudCraze plans to soon offer technology designed to let its clients deploy and operate their own business-to-business online marketplaces, and is looking into developing e-commerce site features and functionality including complex pricing, such as for seasonal ordering, and predictive analytics that can help business buyers better match their purchasing with their own customers’ demand.

He added that CloudCraze, which last year expanded its staff to about 100 from 40, plans to add another 30 or 40 people this year to continue building its technology and marketing personnel. And following the opening a year ago of its first overseas office in London, the company is looking to open additional foreign offices as it seeks to expand its business throughout Europe, the Mideast and Asia.

The funding follows a windfall in venture capital announced yesterday by e-commerce technology provider Magento Inc., which said it received $250 million from Chinese investment firm Hillhouse Capital. Magento, which provides e-commerce technology to B2B and retail companies, says it will use the funds to grow sales worldwide, develop new products and pay for future acquisitions.

The influx of funds into providers of B2B e-commerce technology is not surprising, as technology vendors and their financial backers see a big opportunity—and feel they must act fast to beat their competition—to serve strong demand from companies who realize they must get up to speed with e-commerce, says Andy Hoar, vice president and principal analyst for B2B e-commerce at Forrester Research Inc. “As the commerce technology space gets more crowded, vendors are funding up to land grab for B2B clients,” Hoar says. “The next 24 months are going to be critical for several private companies in the vendor space as they'll either win business or get squeezed out.”

The large investments in vendors underscores the challenges they face in meeting the demands of companies that want to effectively reach their business customers through e-commerce, adds Arthur McManus, senior vice president of FitForCommerce, a consulting firm that helps companies choose e-commerce technology vendors. “Companies across the board are now ready to focus on delivering an enhanced B2B e-commerce experience for their customers, and they are looking for solution providers who offer a deep set of capabilities that are easy to implement,” he says, adding, “You can tell by the large investments being made, that pivoting an e-commerce provider to offer B2B functionality requires substantial product development efforts.”

At CloudCraze, Dalton says his company produced “triple-digit” growth in sales last year, which he attributes to the company’s ability to provide a scalable and robust digital commerce platform used by major companies like The Coca-Cola Co., General Electric Co., Kellogg Co. and Ecolab, a provider of technology used to protect and manage water supplies, public hygiene and energy production.

The funding, which comes partly from Salesforce Ventures, the funding arm of Salesforce.com Inc., “marks a significant milestone for our company and the marketplace, further enabling growth for our company and B2B commerce on Salesforce,” Dalton says. The Salesforce.com platform includes cloud-based software suites for such operations as CRM, marketing, web analytics, and internet of things networks that can embed internet sensors into products for monitoring their maintenance and triggering online orders of replacement products.

By running CloudCraze e-commerce technology integrated with the Salesforce platform, companies can take such steps as displaying online product offers related to the needs of a particular customer, as reflected in activity recorded by the CRM system, helping to increase average order size. While companies could set up the same kind of content displays driven by CRM data on other technology platforms, they typically would require extensive software coding that most companies don’t bother with because of the time and expense required, Dalton says.

The funding is from Insight Venture Partners along with Salesforce Ventures. Nikitas Koutoupes, managing director at Insight Venture Partners, says his firm views B2B e-commerce as an important investment area and CloudCraze as offering what many companies need to grow with e-commerce. “CloudCraze improves the buying and service experience tremendously with its scalable and flexible solution,” he says. “We expect this round of funding to help CloudCraze innovate and grow at a much faster pace and larger scale.”

Chicago-based CloudCraze received an earlier round of $10.63 million in funding in August 2015 from investment firm Aktion Partners. Following that funding, Dalton, a co-founder and partner of Aktion, joined CloudCraze as CEO, succeeding Bill Loumpouridis. In effect, CloudCraze then became independent of EDL Consulting, which Loumpouridis continues to run.

Dalton and other partners at Aktion also developed the digital commerce agency Acquity Group, which they sold to technology consulting firm Accenture in 2013 for about $316 million.

Dalton and CloudCraze may have more deals ahead, he said in the interview. An initial public offering of stock could be an option before long, and he expects to continue to work more closely with Salesforce and its Commerce Cloud business. Salesforce formed Commerce Cloud after acquiring retail e-commerce technology firm Demandware last year for $2.8 billion, and CloudCraze already shares with it some clients that need both B2B and retail e-commerce technology—including consumer products brands Adidas and L’Oreal. “It’s all relatively new, but we work well together,” he said.

Sign up for a free subscription to B2BecNews, a twice-weekly newsletter that covers technology and business trends in the growing B2B e-commerce industry. B2BecNews is published by Vertical Web Media LLC, which also publishes the monthly business magazine Internet Retailer. Follow B2BecNews editor Paul Demery on Twitter @pdemery.

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