Coveo says it uses artificial intelligence to help companies guess their customers (or employees) next step, need, or pain point. That ability appears to be in high demand.
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Today, the company announced that it raised CAD$227 million ($172 million USD), in a round led by OMERS Growth Equity. The new round for the Candian company pushes its valuation above the $1 billion mark (USD), making Coveo a new member of the unicorn cohort.1
Coveo plans on using the money to fund its “aggressive growth” and expand its platform, according to CEO Louis Tetu. The company has been hiring about 60 employees per quarter and that will likely accelerate. Coveo will probably make some acquisitions with the new cash as well, Tetu said.
“At a high level, we can help any company be like Amazon or Netflix, so to speak,” Tetu said of the software’s ability to personalize suggestions. In an increasingly digital world, what Coveo is doing – bringing companies a SaaS product to unlock growth and better understand their elusive customer – seems to matter: over 500 companies (largely enterprise companies) work with Coveo.
For example, in a healthcare context, Coveo can help by giving relevant context to a patient’s needs, “whether that be to create a more personalized website experience or a more effortless self-service interaction,” according to its website. In the retail space, Coveo offers an AI-powered search to check out website visits of a customer, and then use those to bring up relevant suggestions. The goal? Increase online conversion rates and get more money for the company.
Other applications can tell a company when it is time to update its website, untangle a complex catalog, or help a sales team with suggestions on what a client might need next. Coveo calls its service day-to-day “AI-powered relevance.”
Coveo last raised money in April 2018, when it brought in $100 million in a private equity round led by Evergreen Coast Capital. It acquired AI search and discovery startup Tooso in July, according to Crunchbase.
Fast forwarding, let’s get to the new unicorn in the room.
Unicorns, Timings, Rules
Coveo’s entrance into the unicorn club is notable for its timing. There are now hundreds of unicorns around the globe (Coveo is not Canada’s first, of course; Shopify, another Canadian company, was a phenom while private and has proved an impresario since going public), meaning that Coveo is merely one in a crowd.
Given recent chop in the late-stage market and how it has impacted how private market investors are said to vet investments, Coveo could be a company invested in under a new, stricter set of criteria. Catching you up, after some late-stage companies have seen their valuations fall, investors in more mature private companies are said to have higher expectations for things like paths to profitability, and efficient growth.
As for whether or not the company will IPO in the near future, Tetu said Coveo could have gone public but there was enough interest and competitiveness from the private market for their product that staying private was a better outcome for the time being. An IPO is a financing event, not a destination, Tetu said, and he and other executives on the Coveo team have been through public offerings before.
“We would be a candidate [for an IPO], yeah, but I’ve got that T-shirt, so it might not be as much of a destination for me as for others.”
Coveo’s growth rate of 55 percent expansion of SaaS revenue compared to a year ago meets the general credential for later-stage companies. However, as we don’t have companion profitability metrics it’s hard to further vet the company’s health in terms of new investor assumptions.
The Coveo round was completed sufficiently far in advance (when a round is announced it has been fully-baked for some time) to have missed the tightening gauntlet altogether. That said, we’d hazard that it did in fact have to deal with changing winds in the late-stage capital market.
This is all rather impressive for a company nearly impossible to decipher.
Illustration: Dom Guzman