UserGems raises $20M to take on ZoomInfo to help with prospecting and sales intelligence

Finding a way to connect with people who might buy from you, while spending less time pursuing those who will never be interested, is something akin to a holy grail of the world of sales and marketing. Now, a startup called UserGems, which has built a platform that combines AI with data mapping to help identify the most likely candidates for B2B sales and marketing prospecting -- by making it easier to connect with those who have been customers before who have now moved to different jobs -- is announcing $20 million in funding -- pointing to the opportunity for sales tech that helps address this challenge.

The Series A is being led by Craft Ventures, with Battery Ventures and Tiger Global -- both new investors -- and previous backer Uncork Capital also participating, along with individual angels. It brings the total raised by the startup to $22.4 million.

UserGems now has some 90 customers in the mid-market segment, including Procore, Medallia, UserTesting, Sisense and BrightTALK. It plans to use the funding both to invest in product and talent.

Based out of San Francisco, UserGems has an interesting origin story that speaks to how sometimes ideas and businesses can grow out of unlikely places.

Christian Kletzl, the Austrian CEO and co-founder of UserGems, was living in Chicago after getting an MBA at Northwestern, when he encouraged his twin brother Stephan -- who had been working for PwC in Europe -- to come to the U.S. and join him in building a startup.

They came up with ShelfFlip, an e-commerce effort that aimed to compete against the eBays/Craigslists of the world with more efficient technology to sell your books, electronics and other pre-owned items. Early on, the pair applied to join Y Combinator with the idea, and they got in, but the concept wasn't really taking off for the pair.

"We went into YC with ShelfFlip, but scrapped the idea during the batch," Christian said. "We were motivated by the large list of companies that pivoted during YC and went back to the drawing board. We talked to a lot of companies in our batch and outside and came up with the idea of SmartHires," a referral network for startups within the same investment portfolio.

We covered it here, after the startup joined YC as part of the Winter '15 cohort.

Part of what the brothers built for SmartHires was software they could use to track when one customer (specifically one of SmartHires' "main champions" said Christian) moved from one company to another. Startups have a high rate of turnover, and so when the brothers mentioned this to some others in the cohort, they got enthusiastic about it... more than they were about SmartHires itself.

"More people seemed interested in that than our actual company, and that is how UserGems came to be," he recalled. "Basically we pivoted twice since the YC days."

UserGems is built on two basic ideas: how sales and marketing move; and how much of the modern workforce moves.

On the workforce side, as Christian describes it, the days of having a job for life, or even for several years, are long gone for many, and we have now entered "the great resignation."

In the databases and sites that UserGems tracks -- it covers and processes information from a wide range of publicly available sources of information, ranging from Google searches through to news articles and much more -- at least 20% of people change jobs every year. That means it's hard to predict regularly when a person in one position will be there the next time you look.

As for sales and marketing, these have become massively data-driven exercises in the digital age: we have more information about people than ever before, and more software than ever before to manage contacting them en masse, more channels to do it, more analytics to measure how well they work, and so on. That, however, doesn't change the fact that when it comes to successful sales and marketing, the hit rate is significantly higher when it involves people who are already familiar with you or might be more readily interested in what you are selling.

UserGems essentially brings these two state of affairs together: It's a tool for sales and marketing types that integrates with whatever CRM they are already using, to help track people who they have done business with previously, to continue working with them elsewhere, where they become "prime candidates for marketing," Christian said. "It's a treasure trove to utilize in the sales process."

He notes that in some ways what UserGems is not new: the best salespeople essentially already keep detailed records and tabs on their best contacts. What UserGems does is allow anyone to essentially do this "at scale."

This is also just the first step of the platform that UserGems has built out. After contacts are established, machine learning algorithms then start to learn more about who users contact so that it can recommend which people they should be reaching out to next, based on similar product usage and other signals, to find those prospects who are more likely to buy.

On one side UserGems is competing against the likes of ZoomInfo, LinkedIn and other platforms that help people search for the right sales prospects at specific companies; on the other it's also sitting in another area of sales technology more generally known as predictive sales, where you have really fast-growing startups like People.ai (which has seen some COVID-19 growing pains but bounced back and is now valued at over $1 billion), LeadIQ and 6sense (now valued at over $2 billion). But with the trends around employment churn set to continue, and that creating yet more complexity on the sales side, it's an area where clever approaches to solving the issue are bound to continue to get attention, one reason why the likes of Tiger Global -- which has been behind some of the biggest follow-on rounds for enterprise startups -- is getting in early here.

"B2B sales and marketers today have a hard time cutting through the noise—most follow the same demand generation playbooks and send hundreds of generic sales emails and sequences. That’s why many sales teams miss quota and customer acquisition costs skyrockets,” said Brian Murray, partner and COO, Craft Ventures, in a statement. “UserGems understands that past users are future opportunities, and has become an undeniable asset for high-growth teams, driving bigger pipelines, increasing win rates, and reducing churn.”