This piece was originally published by the Council for Entrepreneurial Development as part of a content series on its network effect. Read it and other stories here.
Netsertive, which specializes in digital marketing intelligence, is one of the fastest growing companies in the U.S. In 2015, Netsertive had one of the larger capital raises in North Carolina with a $24 million Series C. River Cities Capital Funds (RCCF), which has a Raleigh office, led the round, joined by Babson Capital Management and Netsertive’s existing investors.
Here is the oral history of how Brendan Morrissey, CEO and co-founder of Netsertive, and Rik Vandevenne, director at River Cities, got connected and put this deal together, starting with a fortuitous meeting at the 2010 CED Tech Venture Conference.
The Meet
Rik: We first met at the cocktail hour at the CED Venture Conference at Pinehurst in 2010. We [RCCF] were there because the CED conference is the best place to meet entrepreneurs and catch up with other VCs that come to town to see the best of NC investment opportunities.
Brendan: Correct, the tech venture conference was the first time we met. Netsertive had been operating for about a year and we had decided to raise venture funding, so we initiated our A round process by meeting with investors at the [CED] conference. I was also new to the Triangle, having moved here from Los Angeles about 18 months before, so I saw the conference as a way to learn about and better connect with the tech ecosystem in general.
Rik: I recall it being a beautiful evening and people just mingled about with wine and beer in hand. I met Brendan and Scott Newnam (chairman of Netsertive) separately in random conversations and was impressed by both of them. Netsertive was an early stage company at the time we first met and had really just gotten off the ground. We meet thousands of companies like this each year.
Brendan: We were very small [at that point in 2010]—5-6 people, perhaps 50 clients, the basics of our tech platform—and had recently shifted our go-to-market model to focus on enterprise brands and their local retail affiliates. We liked Rik and the team but we also learned that they invested in companies that were further along in their development.
Rik: Because of their stage, it was more of a ‘nice to meet you, let’s keep in touch.’
Brendan: Even if there was no investment opportunity, I knew that the RCCF group was solid and, as part of the tech/entrepreneurial fabric in the Triangle, it would be good to develop a relationship over time. Undoubtedly we would be running in the same circles and might be able to just help each other professionally, etc.
Staying In Touch
Rik: Brendan and I stayed close over the years. Systematically, our firm has a process of tracking opportunities over time, which allows us to build relationships with earlier stage companies so that we are top of mind when it’s time for growth funding.
Brendan: That’s right, we kept in touch over time and would see each other at events such as the subsequent CED Tech Venture Conferences and other tech-related things in the Triangle. I kept Rik apprised of our progress over the next 2-3 years, over the occasional coffee-meet up, or other opportunity to connect live. We discussed ideas about the business and how it was developing and Rik always had some interesting insights.
Rik: We actually were close to doing a deal in 2014 but the company decided to continue to focus on the business and did an insider-only round. While we were disappointed, it did give us the opportunity to form a closer relationship and to watch how the company performed over the next 12 months.
Brendan: Yes, in 2014 we considered doing a raise but decided to put it off and make more progress. But in that time period, we got to know them even better, met more of the RCCF team and got to a deeper level of detail with each other than we had before. That really set the stage for what happened a year later when we came together.
The Deal
Brendan: In 2015, the company grew nearly 50% year-over-year again and reached about 200 people. For us to continue to drive high growth as a larger company and build out the right product set quickly, we needed to leverage some additional capital. The company had raised only $14.5 million before this round and built a pretty good-sized enterprise in five years, without even spending all of that capital. So, given we had been incredibly capital-efficient, we didn’t “need” the money to maintain, but we believed there was a huge opportunity to move faster and keep grabbing share as our space unfolded over the next few years.
Rik: Brendan, Scott [Newnam] and I grab lunch every few months to talk about Netsertive, SaaS companies, growth strategies and talent. It became clear that they were going to be kicking off a process to raise money and since we had already done a lot of work to get to know the company previously, we were comfortable in moving quickly to get a fair term sheet in front of the company. It was a win-win since the company didn’t have to spend months educating a bunch of different investors to get multiple term sheets in a broader process and we were able to get a great company we knew well into our portfolio.
Brendan: The timing was perfect. We initiated a raise process and immediately had a lot of interest in the company from both coasts. But as we spent a lot of time with Rik and team over the past year, and they were interested in seeing if we could make a deal happen, we were fired up to dig in with them. They were able to move quickly and our mutual learning curves weren’t as steep as they might otherwise be with new potential investors. This drove us very naturally into a pretty quick, smooth deal-making scenario.
Rik: The company was now a more substantial business with a proven and efficient means of acquiring customers. They had accelerated the pace of major brand acquisitions, expanded their product offering and added additional talent to the management team. They had a clear path to becoming the industry leader and we were pleased to be in a position to help them write the next chapter of their story.
Brendan: We have been incredibly fortunate to continue to build an amazing investor group for Netsertive. It started with RRE Ventures and Greycroft Partners, both NYC-based, in 2010. In 2012, Harbert Ventures (Richmond-based) led our B round and then the RCCF team leading our C round in 2015. Our first investors continued to contribute in the subsequent rounds and RCCF feathered smoothly into the existing group without missing a beat.
Rik: This also is a great local story. We are always looking for great growth stage companies and it is great when we find one in our own backyard. Since we have invested, I’ve been over to the company multiple times to talk about strategy, budgeting, talent, etc. which are all easier discussions to have in person. In addition, in the actual deal process, we knew the corporate attorney well (John Fogg at Robinson Bradshaw & Hinson) and we used Chris Lynch at Wyrick Robbins. Since all parties were familiar with each other, we were able to drive the overall process very quickly, efficiently and fairly.
Brendan: This part is terrific. We have awesome non-local investors who spend a good amount of time here in the Triangle (some of whom also have other portfolio companies locally) and this was a chance to augment that with a great locally-based investor that we could even more easily spend time with. Rik is incredibly generous with his time and ideas and it’s so easy to get together live. Additionally, our attorneys at Robinson Bradshaw & Hinson and theirs at Wyrick Robbins know each other and each party, as well as our venture bankers at Square 1. So when you put all of us in a meeting or on calls together, there is already a relationship, professional trust, etc. and that helps things move smoothly.
What’s Next?
Rik: I am excited to be on the board of Netsertive with some great co-investors and board directors. I hope to be able to apply the knowledge that my firm has gained in backing many successful SaaS companies as well as my own experiences across the 10+ boards I have been a part of over the last decade. Each company has its own unique story to tell and I enjoy immersing myself in the learning process every time.
Brendan: We love having RCCF on the team and having Rik so close, literally. His fit with our existing board was seamless and RCCF brings additional strong analytical and operational expertise to the table. Together we’re going to build Netsertive to its next level of success over these couple of years and aim to be a Triangle tech success story that hopefully adds to the chorus of tech success for our region, which many people outside the Triangle have taken strong notice of these past 5-6 years.
Rik: River Cities is fortunate to have partnered with some great entrepreneurs over the years to build many industry leading businesses. It is these successes that have allowed us to raise five funds from great limited partners. Our goal is to continue executing on our own strategic plan so we can be a great source of growth stage capital to the Triangle and beyond.
