There are startups that grow fast, and then there’s Gong. Last August, following a $200 million funding round, the Israeli startup broke down the doors of the Unicorn club carrying a market cap of $2.2 billion. If you thought that much money was enough to run smoothly for a while, guess again. Today (Thursday), Gong announces the completion of a $250 million Series E funding round. And what about the company’s valuation? Gong nearly quadrupled it, now standing at $7.25 billion, and all of this in less than a year.
The current round was led by Franklin Templeton, with participation from existing investors Sequoia, Coatue, Tiger, Salesforce, and Thrive. With some pretty savvy math skills, we calculate the company has raised $584 million to date. Impressive for a company founded in 2015. In an interview with Geektime, CEO and co-founder, Amit Ben Dov, says that the company “is still at the beginning of its journey. We haven't even completed 10% yet.”
Second round in less than a year
Often, the main tool available to sales teams, other than their smartphones, is a CRM system, where they file consumer info, and hopefully, are able to record the content of the sales call. If you’ve ever interacted with sales or service agents, you certainly know that once the supervisor picks up the call, the truly important content from the call is left to the past, undocumented.
Gong has developed a system that documents and records all customer-facing interactions, whether via phone, email, Zoom, or other communication channels. Then the system analyzes the content, detecting patterns, trends, and providing actionable insight to help increase conversion, empower customer retention, and determine a company’s market cap. “On a strategic level, we created a new market. A lot of our customers already tell us that it’s their most impactful system in play,” claims Ben-Dov.
When Ben-Dov refers to the company’s customers, he’s talking about over 2,000 different companies from various sectors, including 3 Fortune 20 firms. “We brought in some nice deals and pretty big players. The investors saw that we’re in another zone.” The company lists LinkedIn, Twilio, Slack, PayPal, Zillow, among the trove of customers. The company’s sales and conversion rates tripled when compared to where the company was during last year’s funding round.
Less than a year ago, you raised a massive round, and you said that the capital is not going to be used yet. Is this true now as well?
Ben-Dov: “I still stand behind that answer 200%. We still haven't touched the $200 million or the previous $60 million. We didn’t plan on raising capital, there was no real need. Now, we have a much bigger bank behind us which is a good thing… We are starting to partner with major market players, who want to know that Gong has financial stability and will be there for the long haul. This allows us, when the opportunity presents itself, to make meaningful acquisitions for the company. Even if down the road the market takes a tumble, this capital keeps our heads safely above the water.”
When asked about the dilution that a massive round like this presents, he notes that the rise in valuation enabled the company to bring on additional big money investors, while carrying a small dilution of options, or “a slightly smaller piece of a much larger cake.” Ben-Dov seems far from afraid to state that “we don’t need the money. But the dilution is small, and it helps to have more money in the bank.” He explains that the company sees the capital as a resource that enables acquisitions, a more aggressive expansion, as well as supporting HR recruitment.
IPO? “We don’t need it”
Ben-Dove says that Gong is “a company that will take a while to build” and adds that “we’re still at the beginning of the journey. We haven’t even completed 10% yet.” Aside from the modest 2%-3% market cap, from what he defines as Gong’s “immediate market”, Ben-Dov claims that the company’s transcribing and insight system can be deployed across industries “like HR management, or even telehealth. The opportunities are endless and we can build a much bigger company.”
When I double down on the IPO question, he notes that it’s a realistic possibility, but quickly adds that it’s far down on the company’s priorities: “We don’t need it. We have enough capital, and an IPO wouldn’t provide added value, and it tends to come with a lot more responsibilities that we just don’t need right now.” Nevertheless, he does say it could be possible in a few years.
“People who are looking for massages, their place is not at Gong”
It looks like Gong is planning on quickly expanding. The company aims to double its headcount over the next six months, bringing the Israeli team upto 300 and adding 1,000 employees to global operations. This got me thinking of the company’s last round, when Ben-Dov said that the “this money is not intended for throwing out bonuses or bringing in ice cream and massages,” whereas at the same time, he is trying to recruit high-tech workers during a human resource shortage. Remember, this is a highly competitive market, companies are willing to do pretty much anything to recruit and retain quality personnel.
When I remind Ben-Dov of the quote, he quickly defends it: “People who are looking for massages, their place is not at Gong,” but he does explain that although the company doesn’t focus on the perks, “the conditions aren’t too bad.” He notes that the company pays well and the benefits are great, but he’s trying to pull in people who want to work on a product they love: “That’s important to the people we attract. Not to just be a company that throws money around, but rather make an impact where the opportunity is presented.”
Ben-Dov says that as part of that impact, Gong has been able to increase the number of women working at the company to 37% of the headcount: “It’s harder to find women in engineering,” he admits, “but possible… At the beginning, we were 6 men in the company and it was difficult to find women in the field… once we see the numbers drop, we adjust our focus during recruitment.”
To all the cynics out there, who love criticizing the tech world for highlighting diversity at the workplace, Ben-Dov answers that “my responsibility is first what’s best for Gong. I wouldn’t want to imagine a company without women, it just wouldn’t work. It’s part of our culture, and we can only benefit from it…”
Who else will benefit from Gong raising at an Israeli startup ecosystem high. The employees. Ben-Dov explains that the company will offer employees to offload their options for cash. “We did it last round as well,” he says, “and only 40% of those who could, did. Most of them sold only a small portion. We invest in what we need.”
For some reason I feel like we are going to hear the Gong again this year.