“I’m bringin’ sexy back
Them other boys don’t know how to act”
Think of the sexiest industries in tech, and it’s doubtful “compliance” jumps to mind first, or even at all. But we, at Sapphire Ventures, believe great investments sometimes come in innovative companies focused on solving business problems that aren’t exactly hot or sexy…at least not at the beginning. This is the tale of Convercent, a software company that’s radically transforming the way corporate compliance and ethics are effectively managed and bringing sexy back to the compliance industry as a whole.
Sapphire first invested in Convercent in October 2013, excited by the prospects of a large, albeit archaic, market that was ripe for disruption. We had seen a similar story play out back in 2004 when we invested in compliance software maker Virsa Systems, which went on to be bought by SAP in 2006.
In the case of Convercent, we were compelled to invest because of the company’s focus on the end-user, modern SaaS technology and proactive approach to solving compliance issues, all of which put Convercent in a league of its own compared to competitors. Just as important, like in many of our investments we found a strong cultural fit with Convercent CEO Patrick Quinlan and his management team — an impressive group of dedicated, passionate individuals committed to building a valuable company with integrity and humility.
But as is often the case, markets don’t always mature as rapidly as you expect or hope. So shortly after our investment, Convercent found itself asking if it was truly creating a “must-have” solution. And did corporate executives actually see the need, let alone appreciate, Convercent’s solution? Fortunately, as regulatory focus has brought about similar market tailwinds that we saw with Virsa and Sarbanes Oxley, the answers to these questions have become a louder and clearer “yes”.
One major catalyst for increased corporate compliance and the desire for solutions like Convercent was the Yates Memo, championed by Deputy Attorney General Sally Yates, detailing the Department of Justice’s stepped-up efforts to hold corporate executives individually accountable for corporate misdeeds (Read: potential jail time rather than small fines). We believe this has shifted conversations from informal chatter amongst individuals to meaningful dialogue at a corporate board level. And with that compliance started to become a hotter topic, making Convercent software start to seem a little sexier too.
We had a front row seat to witness this industry shift last Fall when Sapphire and Convercent co-hosted Compliance Tech Talks, an event that brought together compliance leaders from a number of corporate powerhouses including Cisco, Facebook, Oracle, Visa and VMWare.
During the event, we were struck by how much the topic of compliance has escalated in the past decade within organizations, all the way up to the CEO. The attendees talked about increased access to the CEO on compliance-related issues, amplified pressure from regulatory bodies on formalizing policy, and a heightened awareness around personal accountability surrounding corporate governance.
Since this industry event nine months ago, the buzz around compliance has only intensified as multi-national companies such as VimpelCom are being hit with $795 million fines for inadequate processes and controls to prevent foreign bribery exposure.
Just as notably, high-flying technology companies have found that a lack of focus on compliance can significantly hamper their growth ambitions. A few months ago, Zenefits CEO Parker Conrad resigned amid “inadequate compliance procedures and internal controls”, and the company’s new CEO, David Sacks, penned a blog a few weeks ago on The New Zenefits — Becoming the Compliance Company. More recently, LendingClub CEO Renaud Laplanche was pushed out of the company because of problems with its lending practices and lack of disclosure around a personal investment.
Not so coincidentally, VimpelCom and Zenefits have both recently become Convercent customers.
These headlines underscore the consequences of not staying on top of corporate compliance and maintaining an ethical culture. And luckily, now you don’t have to read about your company in the Wall Street Journal or TechCrunch before making a decision that can protect your company. Hundreds of companies, and more and more each day, use Convercent’s leading SaaS solution to proactively manage and address potential compliance problems.
Imagine a fully-integrated solution that provides management with real-time analytics on current compliance issues while giving insights into potential compliance exposure. Imagine an individual employee who can easily and anonymously report potential problems while receiving personalized tips and guidelines to improve his/her own work behavior. Now imagine knowing that you are doing everything possible to protect your company, your employees and your shareholders from the rogue actions of one or a few employees.
Pretty sexy, huh?
Today we’re more excited about the market, the company and the team than ever before. And this is why we’re thrilled to participate in Convercent’s Series C financing and excited to have Tola Capital join us on the journey. As we’ve gotten to know Stacey Giard and Sheila Gulati better through the diligence process, we’ve learned that their passion for operational excellence is only matched by their commitment to building a leading global compliance company. We’re delighted to welcome Stacey and Sheila aboard as board members and investors.
Onward and upward.
Justin Timberlake, http://www.metrolyrics.com/sexy-back-lyrics-justin-timberlake.html
The information set forth herein is not intended to constitute investment advice and under no circumstances should any information provided herein be used or considered as an offer to sell or a solicitation of an offer to buy an interest in any investment fund managed by Sapphire Ventures.
Sapphire Ventures does not solicit or make its services available to the public and none of the funds are currently open to new investors. Past performance is not indicative of future performance.
The portfolio companies referred to above do not necessarily represent all of the investments made or recommended by Sapphire Ventures, and were not selected based on the return on Sapphire Ventures’ investment in them. It should not be assumed that the specific investments identified and discussed herein were or will be profitable. Not all investments made by Sapphire Ventures will be profitable or will equal the performance of the companies identified above.