The company had over-hired sales people in an accelerated fashion (often on the basis of just one phone call) in anticipation of fuelling growth, but the team struggled to perform. There was a high churn in the SDR team and eventually the person who headed it was asked to leave. Every single team member that was hired in that period quit or was fired within a year. CloudCherry struggled to rebuild the team.
Analyzing the conditions
Muthukrishnan also realized the strategy of focusing on mid-market customers was not a sound choice, in retrospect. The needs of large enterprise customers were the same as those in the mid-market segment and the buying process and competitive scenario were fairly similar. It, therefore, made little sense to target smaller ticket mid-market customers rather than larger ticket enterprise customers.
The company corrected the course.
In the US, Muthukrishnan rejigged the team and customer focus. Instead of taking a shotgun approach, CloudCherry focused on winning customers in specific segments such as credit unions in the BFSI (Banking, Financial Services, and Insurance) vertical. Once the company had won enough customers there, it moved upstream targeting larger banks and financial institutions. The company also started expanding to non-US markets globally. While the initiative in the Middle East wasn’t particularly fruitful, CloudCherry saw great success in South East Asia with several large banks and retailers signing up as customers.
While CloudCherry’s revenue was not large by global SaaS standards, it was meaningful – in the range of $5 million ARR (annual recurring revenue) according to sources.
Process in the intervening period
But in the intervening period, between CloudCherry’s founding and now, the CX market has changed irrevocably. While there was much more customer interest and awareness about the need for CX solutions such as NPS (Net Promoter Score), the market was heavily crowded. Companies such as Medallia had gone public and every large enterprise software vendor from Microsoft to SAP was either rolling out CX products or acquiring vendors in the space.
Muthukrishnan considered the possibility of raising another funding round. By virtue of being in the US for a few years, Muthukrishnan had developed a fair number of investor connects and was also routinely getting inbound inquiries from US investors on a regular basis.
At this time, CloudCherry received an inbound acquisition offer. It was soon followed by two other offers. Muthukrishnan presented these offers to the company board as he was required to do. This is when Cisco came into the picture.
As an institutional investor, Cisco had not one but two board observer seats on the CloudCherry board – one person from the Cisco investment team and the other, a senior VP from the business team. The presence of the latter underlined the fact that Cisco saw the world of CX as a logical extension of the customer care market in which it has a big presence.
Where there temptations?
Cisco valued many facets of CloudCherry.
For one, it recognized that despite having raised over $16 million in funding, it had a single product (developed and supported by a very small engineering team of just eight people), and more importantly, a singular focus on the CX market. Despite many temptations to build other adjacent products and expand to adjacent markets, CloudCherry had refrained from doing any such thing.
Also, the Cisco executives on the CloudCherry board were impressed at the discipline with which Muthukrishnan ran board meetings – sending out dockets two weeks in advance and handling all issues in a regimented and structured manner. They also knew that the company had a strong product culture across both the US and the Indian teams.
Finally, Cisco was one of CloudCherry’s biggest channel partners. CloudCherry’s solution was integrated and sold with other Cisco offerings in the collaboration, voice and contact center spaces.
So when the inbound acquisition offers came in, Cisco decided to make an offer itself. By virtue of already being on the cap table and board of the company, Cisco already had first-hand knowledge about CloudCherry’s strengths and weaknesses.
Muthukrishnan was happy to accept this offer for three reasons.