Ken Romley never doubted that his Durham-based company Zift Solutions would be successful. It was always just a question of when his industry would catch up to him.
October 2, 2015
Zift Solutions CEO Reflects on a Pair of Acquisitions, $14M Raise & Opportunities Ahead
With cash in hand, customers like Red Hat and an increase in channel marketing, Durham-based Zift Solutions is poised for faster growth.
“What happened is that I think we were a little bit ahead of the market, and when we started this we were convinced that digital marketing was the key and nobody was going to buy anything big unless they did a Google search to start the process,” Romley says. “We’ve seen this all in the last year, so it’s been really nice to watch it come together.”
Now as the company enters its ninth year in the channel marketing automation business, Zift Solutions is enjoying more success than ever.
In the month of September alone, Zift not only acquired a new company, but it also received $14 million in Series B financing to help fuel its forward momentum. And Zift has steadily brought on more customers, including technology leaders, to its core verticals throughout the year.
“So much is changing in marketing right now, and we have an even better pipeline of things that are going to be hugely impactful and make our mark that much bigger in pulling us that much further ahead,” Romley says.
Zift specializes in channel marketing, meaning it works with large corporations and their channel partners to coordinate marketing initiatives and ultimately boost sales.
The way the relationship works is fairly simple—take Raleigh-based tech company and Zift client Red Hat, for instance.
Red Hat designs and develops its software and then sends this software to companies, or channel partners, that market and sell it to the public. Zift works in the middle by creating solutions that build the relationship between the developer, in this case Red Hat, and its channel partners.
These solutions range from finding where the ideal customer is online to coordinating tailored, useful content between both the developer and the channel partner in order to better target prospective customers while also increasing existing customer satisfaction. Zift’s goal is making sure its clients are maneuvering the digital world in the best way possible, Romley says.
And for a company as large as Red Hat, having a cohesive message can make a big impact on sales, and Red Hat has already seen this difference, according to Romley. Zift’s strong relationship with Red Hat helped to propel the company forward, with Red Hat employees going so far as to point local investors Zift’s way.
“We had over a four-year relationship with Ken and the team and had watched them progress, then one of the marketing people at Red Hat came to me and was adamant about us investing in the company,” Jason Caplain, a general partner at Bull City Venture Partners and Southern Capitol Ventures, says. “That was one of the catalysts about why we started digging into what they were doing, and once we started digging in, we not only became more comfortable with the space and with the market trends, but also with the team.”
The Raleigh-based investor first funded Zift in 2010 and has continued to do so as the company has grown.
In order for Zift to bring a company’s channel partners on its platform, a code must be embedded on each individual website. Once the code is in place, Zift is able to not only track the channel partner’s traffic, but it can also push out specific solutions to help that partner bring in more leads. For some of Zift’s clients that means several hundred independent companies having to add Zift’s code on their websites.
Romley says this coding conundrum has led Zift to take action in two ways: by investing heavily in its technology and acquiring some of its competitors, such as its October 2014 acquisition of Teakwood Capital Company’s Marketing Advocate and its most recent acquisition of The Channel Company’s SharedVue.
“Overall it just didn’t become cost effective to say we’re going to be the standard when it takes so much to change the code on those independent third party websites,” Romley says. “So instead of changing a code, which is a lot of work on these independent companies, we buy a company and link the existing codes back to our servers.”
Romley says this strategy has been highly successful as Zift works to grow not only its size but also its technology. For instance, through its September acquisition of SharedVue, Zift was able to double the size of its research and development team, allowing for faster innovation and greater responsiveness to customer requests.
“We’re trying to make it as easy and beneficial for the clients as possible,” he says. “And by buying up and being the dominant player, it just makes it easier to deliver more value.”
Zift now has about 100 employees and works with more than 30,000 channel partners around the world. And while its acquisition strategy has continued to prove success, Zift is not actively pursuing any at the time, according to a company spokesperson.
Paying for its acquisitions requires capital, which is one reason Romley and his team recently closed a round of Series B financing. With the $14 million cash infusion, Zift was able to complete its acquisition of SharedVue.
Now Zift is now at a size where it has to “go across the country to find those partners who could help promote our capabilities, and they’re going to get a huge return on the investment,” Romley says. Santa Monica, Calif.-based Arrowroot Capital and Memphis-based SSM Partners led Zift’s Series B financing, with Southern Capitol Partners reupping its commitment to Zift as well.
“The company has grown revenue by 8x in seven years (before the acquisition), so the company has experienced really fast growth and they’ve been able to not only sell really big enterprise customers but also grow those accounts really effectively and retain them,” Caplain, who has a seat on the Zift board of directors, says. “We’ve been really pleased with the performance of the company, which is why they are a really big winner within our portfolio and it’s become one of our larger investments.”
With the channel marketing automation segment continuing to grow, Zift is positioned well to continue its path to success for many years to come, Caplain says. 79 percent of B2B marketers claim to now use channel marketing, according to research firm Regalix.
Despite having to look outside of North Carolina for extra capital, don’t expect Zift to leave the Tar Heel state.
“I think it’s changing— it used to be that you have to be in Silicon Valley, but I think you’re going to see a lot more stuff coming out of the little bit smaller markets because they’re way more cost effective,” Romley says. “Your dollars go farther, and you’re always looking to get the best return for your clients.”
Romley is confident that as the company grows and looks for senior resources to move Zift forward, there is no better place to look than the Research Triangle.
“In San Francisco, you might pay someone double to be a developer, but that doesn’t mean they’re doubly good,” he says “We have top talent worldwide here, and they can live way better.”