Chrome River Raises $100 Million
Chrome River Technologies Inc., a company whose software helps large corporations manage employee expenses, raised $100 million from Great Hill Partners, proving that a software company doesn’t have to double revenue each year to attract significant investment and challenge incumbents, despite some of the rhetoric in the venture market.
Several startups, such as Expensify and Bento for Business, are developing expense reporting software, but they largely target smaller businesses. Chrome River’s customers, by contrast, are large corporations that require compliance, customization, international support and other complex features. Few companies compete in this segment of the market, and recently the list of competitors got even shorter.
Chrome River’s advantage, according to Alan Rich, co-founder and chief executive, is an intuitive interface that employees like, including features such as supporting mobile, taking cellphone photos of receipts, automatically categorizing the spending, and allowing approvals within email. Those employee-friendly features are combined with a software design that is agile and can quickly and easily respond to changes in rules, such as a decision to lower the cap on hotel spending in a particular country.
The Los Angeles company is selling its cloud software at a steadily increasing clip. This year it plans to draw $25 million in revenue, up about 50% from 2014 figures, according to the CEO. Its service has staying power, just half a percent of customers drop out each year, he said.
“Alan’s business could be growing at 100% if it didn’t matter how much money we spent,” said Matthew Vettel, managing partner at Great Hill, which led the deal.
“We had lots of interested parties,” the CEO said. “They know that if you are starting to grow too fast, the wheels can come off the bus.” Some investors, he said, want only companies that will become a billion-dollar-business in four years. Others “want to see that you’re aggressive and are pushing hard and have a big market that you can grow into,” but have “reasonable expectations.”
The new investment will allow Chrome River to get more aggressive. The number of competitors just winnowed, as SAP SE bought Concur Technologies Inc., combining the two companies’ offerings, and International Business Machines Inc. said it would discontinue its software offering for the sector.
That, Mr. Vettel said, is opening an opportunity for Chrome River, which recently signed on Cargill Inc., a company that is implementing the software currently for use by tens of thousands of employees.
“They started getting into RFPs [requests for proposals] and surprisingly winning more than 50%,” Mr. Vettel said. Mr. Rich said Chrome River recently won three or four Fortune 500 accounts, all of which are implementing the software across all their departments that use expense reporting.
The market is still wide open, roughly 65% of large enterprises use in-home systems, as well as spreadsheets and word processing software, and even paper, to handle expense reporting, according to Mr. Vettel’s research.
Already more than 70% of Chrome River’s 380 or so customers have more than 1,000 employees. The new investment will help Chrome River show up in more bid requests for large corporations, by allowing it to invest into sales and marketing and opening international offices. That will be its main challenge, as well as making sure that the rest of the company keeps up with increased growth. It currently has 138 employees.
The company also has an invoice management product and is contemplating other product lines.
Chrome River started out by selling to law firms. Mr. Vettel said that this was one of the most complicated expense-management sectors, and that Chrome River did well here. Law firms were natural first clients for the company, as they were some of the same customers that Mr. Rich and his co-founder and Chief Operating Officer, Dave Terry, knew from their prior company.
Before Chrome River they were executives at Elite Information Group. Originally a family business started by Mr. Rich’s father, Elite became publicly traded and was eventually bought by Thomson Reuters for about $120 million.
After the successful sale, the founders created Chrome River, first funding it out of pocket. They drew in outside investment in 2012 and raised $20 million before this round from Bain Capital Ventures, First Analysis and Argentum Group.
Early venture backers remain investors but didn’t reup in this round, the CEO said.
Chrome River used San Francisco-based Financial Technology Partners LP and FTP Securities LLC as an investment bank to raise the new funding.