By Peter High, published on Forbes
06-06-17
David Steinberg is a serial entrepreneur. In 1999, he founded Inphonic, a company that would reach a billion dollar valuation, and had a successful IPO. The company grew too quickly and with too much debt, and Steinberg resigned in 2007.
He immediately got to work on his next venture, a data drive marketing company called XL Marketing Corporation, and he leveraged the good of his past ventures, including collaborating with former Pepsi and Apple CEO, John Scully, who had been a part of the founding team at Inphonic, while learning the lessons of the trying times. This time around, they would self-fund the company, and do something that was anathema with many start-ups, especially at that time: it would grow profitably.
The caution paid off during the economic crisis the year after its founding, as Steinberg was able to assemble a world class team, and he was able to shop for many companies to fill out its portfolio of offerings on the cheap. When Steinberg initially sought venture funding, he heard many complaints about how the company was “too profitable.” Some VCs indicated that the company needed to put more money into sales staff and marketing campaigns.
Fast forward a few years, and the company, now called Zeta Global, recently announced a $140 million funding round led by GPI Capital and Blackstone’s GSO Capital, elevating the company to “unicorn” status as a venture funded company with a valuation above $1 billion. In this interview, Steinberg talks about the evolution of the company, the role that machine learning will play in the future, the value in having developed a 20 year partnership with one of the leading marketers in the world, as well as a variety of other topics.
Peter High: David, please provide a brief history and overview of your organization.
David Steinberg: We started out as a customer acquisition vehicle named XL Marketing. We recognized that to increase our success and help our customers, we needed to add customer relationship management to our services. This led us to buy a small company called Zeta Interactive. We broke up this company quickly. In fact, we sold off two-thirds of the business. We kept and ran the platform and it became one of our most important products. That was the first big step in our pivot from being a customer acquisition company to being a software-as-a-service company. As we continued to grow and move more into data and analytics, in addition to software-as-a-service, we thought the word interactive pigeonholed us, so we changed the name to Zeta Global to represent who we are today.
High: Zeta Global has grown considerably through acquisitions. A key success factor of your organization is how well you integrate businesses post-acquisition. Is there a playbook that you use when integrating acquired companies?
Steinberg: Acquisition and organic growth are mission critical to the growth of the business. Last year, the company grew almost 50 percent; half of our growth was organic and half of our growth was through acquisitions. We use four specific criteria for acquiring a company:
Most of our competitors think of their marketing cloud as a container. They buy businesses and put them in there, and it certainly works for them. We think of our marketing cloud as a fully integrated software solution. Full integration has been critical to our success. We have been successful in eight of our nine acquisitions. We have a campus in Hyderabad, India and another growing campus in Chennai, India. At these locations there are 600 to 700 full-time engineers and data scientists; over 75 percent hold a PhD or a graduate degree. At these campuses, we scale up operations as we buy companies. This allows us to dramatically increase profit, workflow, or, in most cases, both.
Over the last four years, our compounded growth rate was just under 50 percent, on average. Zeta Global is also profitable. Our profit is higher than most software companies that have grown at our size and scale. Part of our success is due to the fact that we have run companies before that were not profitable, and none of us wanted to do that again.
High: It is interesting to hear you say that your past entrepreneurial experiences of growing without profit, understandably, color the way you manage Zeta Global. You co-founded this business just prior to the worst economic downfall of either of our lifetimes. Did beginning a business during an intense and suboptimal business climate affect your entrepreneurial journey and choices, as well?
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