Big Market, Deep Technology And A Great Team – That’s How IVP (Ad)Rolls

By Eric Liaw

Today IVP is pleased to announce our participation in a $70 million financing round in performance marketing leader AdRoll. With over 15,000 active advertisers, AdRoll is the most widely used retargeting platform in the market today. Proceeds from the round will enable AdRoll to accelerate product expansion and international growth.

IVP is a leading later-stage venture capital firm based in Menlo Park, CA. We are passionate about working with talented entrepreneurs to help them build truly disruptive companies like Buddy Media, Dropbox, HomeAway, Kayak, Marketo, RetailMeNot, Snapchat, Supercell, and Twitter.

Our approach is to invest in 10 to 12 of the most dynamic and promising companies across all technology sectors annually, a strategy that remains in place as we invest IVP XIV, a $1 billion fund. Over the last decade, IVP has had the good fortune to meet many impressive entrepreneurs in the digital advertising market. While the market’s size and growth make it highly attractive, AdRoll stands out to us and we are thrilled to become an investor in the company. Here’s why:

In a large and noisy advertising market, retargeting works

Not too long ago, in the pre-Internet dark ages, advertisers who wanted to reach their target customers hired an agency. Talented, hard-drinking, chain-smoking men and women would channel their creative energy into developing catchy visuals and then buy media from one of three broadcasters to hit the biggest audience possible, blindly hoping that some percentage of that audience would be interested in the product being hawked and that after the umpteenth impression, the message would stick. Like the caveman and his club, this blunt and inefficient instrument had to suffice, for lack of any better alternative.

Today, marketers and agencies have gotten more sophisticated and have traded in (some of) the scotch for statistics. A few early visionaries realized that online, prospective customers were incredibly willing to provide clear indications of intent. First Overture and then Google harnessed the explosion of intent data to empower advertisers to reach customers in the most efficient way possible.

Nearly 20 years after the advent of SEM, leveraging user-supplied intent to deliver highly relevant ads and drive traffic to one’s website remains an essential weapon in the arsenal of any marketer and often times the standard against which other channels are judged.

Nonetheless, conversion rates are considered successful even if they remain in the low single digits. The other side of that “success” is that 90%+ of traffic leaves unconverted. Some percentage of that traffic will have just bounced but there is certainly a meaningful percentage of that traffic that perused a few pages, viewed a few products and even populated shopping carts. And that is where retargeting comes in. Retargeting allows advertisers to realize even greater efficiency from ad budgets by identifying prospects that have already visited, and left, their websites. Across the web, first on desktop and increasingly on mobile, advertisers can deliver even more specific and relevant messages that correspond to genuine user interest, as evidenced by actual site behavior. As you might expect, users respond more frequently and favorably to tailored messaging. In an age of greater demand for accountability and transparency in marketing, the results are undeniable, retargeting simply works and is poised to become an increasingly larger percentage of the $5 billion in display advertising spend powered by real time bidding.

AdRoll’s technology brings retargeting to everyone

Retargeting is highly effective and the market is certainly large, so naturally there are several companies that offer credible services. However, AdRoll has emerged as one of the world’s hottest ad tech providers. The facts speak for themselves: AdRoll has 15,000 active advertisers, far more than any other provider. How could they have possibly built an advertiser base of this size, you ask? The solution, like many large scale data problems today, lies in AdRoll’s proprietary technology platform.

Taking a cue from the most successful digital marketing platforms of the last 10 years (hint: three companies whose names start with G, F and T), AdRoll has invested in and built a powerful, yet easy to use self-service platform to enable advertisers of all sizes to launch their own retargeting campaigns and reach their audiences across desktop, mobile and social media with no assistance required. AdRoll further reduces any friction to adoption because they happily take payment via credit cards with no minimum budget. AdRoll’s software platform provides a fully integrated set of automated real-time bidding, campaign optimization and closed loop reporting tools so that marketers can easily, accurately, and transparently reach their unique desired objectives. From an advertiser’s perspective, where they previously depended on the caveman and his club, they now have total control and the precision of a surgeon’s scalpel without necessarily relying on third party assistance.

The elegance for AdRoll is that their technology platform is the foundation for a business model that has many advantages. Unencumbered by the manual, service-intensive approach of other companies, AdRoll can easily layer on additional service offerings for larger brands and service a huge customer base. Businesses of all shapes and sizes around the world now use AdRoll, from sole proprietors all the way up to Fortune 500 companies across many verticals beyond retail, including technology, travel and education. Here again, the data speaks as AdRoll has a retention rate of 97% across customers as well known and diverse as, Zendesk, GoPro, American Apparel, New Relic and Levi’s.

From an investor’s perspective, the size of the market, efficacy of the platform, breadth and diversity of the customer base are all key ingredients for a scalable, highly predictable and rapidly growing business. Today, San Francisco-based AdRoll reports a run rate of over $150 million with 15,000 active customers in more than 100 countries and offices on three continents. With momentum like this accompanying a maniacal focus on customer success, AdRoll may have been the biggest ad tech company you’ve never heard of, but that is changing as Forbes named AdRoll the 30th most promising company in the US last year and the SF Business Times ranked AdRoll as one of the fastest growing companies in the Bay Area.

A cohesive management team making it happen

A big market, deep technology and happy customers are certainly key components to a successful company. But the right people make all the difference and AdRoll is led by a focused and cohesive management team that has built the company from the ground up for the last seven years. The leadership team combines their disparate skills and experiences, ranging from NASA, Google, Salesforce, Microsoft, Good Technology and OpenTable to lead an energetic and rapidly multiplying group of talented, passionate employees. Every AdRoll employee revels in making their customers successful, but they also take just as much pride being named a “Best Place to Work” by the SF Business Times two years in a row. This is evident by the buzz you feel when walking through the front door of their offices in SoMa.

For entrepreneurs and venture investors alike, a high degree of mutual trust is vital for any successful investment and I’m happy to say that we have that here in spades. IVP is incredibly impressed with the company AdRoll has become, and equally thrilled to be part of the next phase of its growth. Keep on rollin’!

Eric Liaw is a Principal at Institutional Venture Partners (IVP) in Menlo Park, CA. He oversees late-stage investments in high-growth companies in the consumer Internet, enterprise software and mobile sectors.