James Lee — 3 February 2020
This article was originally published and written by Paul Smith from the Australian Financial Review on Feb 3, 2020. Visit the original article here.
A Brisbane-based marketing technology start-up, which has created a platform to let companies manage their branding consistently across various campaigns and office locations has attracted the attention of US venture capital, raising almost $20 million to put towards plans for international expansion.
Outfit has closed its second external funding round at $19.5 million, with US-based Five Elms Capital funding the entire round, as it seeks to emulate the global inroads made by fellow local design start-up Canva.
The company initially started when software production house NetEngine was contracted to help US software company Red Hat with its marketing, and its founder and CEO Bruce Stronge realised the solution developed could be applied to all companies.
Five Elms first noticed the company's progress 18 months ago and secured the deal with Mr Stronge despite significant interest from a number of Australian venture capital funds.
Its software platform is sold via a software as a service (SaaS) subscription model and lets users create marketing material, but forces them to stick within pre-defined branding guidelines. It means companies with multiple offices can create branded materials anywhere, without having to get things approved by centralised marketing departments, or expensive marketing agencies.
Since it raised its first external funding round of $1 million in 2017, Mr Stronge said the business had been self-sustaining, investing only the money it was making off clients in the growth of the company.
However, it developed a relationship with Five Elms Capital over an 18-month period, and will use the funding to support ambitious international expansion plans, predominantly in the US.
We still have a fair way to go on the journey and we don't pretend to know which way it is going to go yet. - Bruce Stronge, CEO, Outfit.
"What they loved about us is that we didn't need the money, we wanted the money, so it wasn't a rush, it was about doing a deal when we were ready to take on the US properly," Mr Stronge said.
Locally Outfit has proven particularly popular with universities, with The University of Sydney, Deakin University and Monash University among its clients, while it is also being used by large local franchise-based brands like Ray White real estate agencies and Bakers Delight, and some of the banks.
Mr Stronge said Five Elms Capital was the perfect backer for the company's current aspirations, as it already has a strong track record of helping international software companies expand in the US, and had an "anti-Valley" approach to its investments, where it valued sustainable growth, rather than pushing for a rapid explosion to so-called unicorn status.
"Obviously, being US money, they are keen on our plan to ramp up in the US market, so the funding will help with sales and marketing in the US. We already have an office in LA and that is a great base to expand across universities and other potential new clients," he said.
Five Elms Capital partner Austin Gideon will join the board and said his firm’s investment was based on a belief that Outfit has forged a unique position to capitalise on a fast-growing global market, which was still transitioning from outdated and expensive marketing systems into the SaaS era.
“Outfit has developed an industry-leading product and reputation for serving the needs of its customer base really well, both of which we plan to build on as we work together to fuel Outfit’s next phase of growth,” he said.
While Canva is different to Outfit, in that it is based on enabling graphic designers to be creative, rather than stick to marketing templates, Mr Stronge said its reputation was helpful to other companies like his, in being taken seriously in the US.
It could feasibly compete against Canva as Canva seeks to take on more enterprise-level clients, but Mr Stronge sees big digital asset management platforms like Adobe as more of a direct competitor.
"Canva has been doing a great job of marketing the Australian tech industry as world leaders, so that is a big part in investors actually shopping in Australia ... and also in opening up the category we are in," Mr Stronge said.
"But we have been in enterprise for six years now and our platform has been built based upon the needs of enterprise customers, whereas Canva comes from a designer DNA. We are dealing with brand directors who then work down the stack."
While Mr Stronge said the funding round could last several years, he is aware that Five Elms has the funds available to follow on further if things continue to go well, and he remains open-minded about the potential for a future IPO or sale to one of its larger tech rivals.
"Those are the only two options ultimately and I am open to both. In fact I particularly liked that Five Elms were similarly comfortable, because ultimately either can give fantastic returns for investors," he said.
"We still have a fair way to go on the journey and we don't pretend to know which way it is going to go yet."