Customer.io is raising a Crowd SAFE at a $400 million valuation with no discount. That’s an eye-popping valuation compared to most crowdfunding companies, but Customer.io is no average business. The company generated almost $13.9 million in revenue last year and achieved $20 million in annual recurring revenue (ARR) in March 2021. That puts this valuation at somewhere between a 20-times revenue multiple (based on ARR) and a 29-times revenue multiple (based on realized revenue from 2020). Either of those are pretty reasonable revenue multiples compared to the landscape of private software as a service (SaaS) companies. Customer.io’s high valuation means that most investors won’t receive a large enough slice of the pie to reap huge returns, but the price is fair based on the company’s performance. Thus, Customer.io’s price rating is higher than average.

The marketing automation software market is growing rapidly as digital technology penetrates additional markets around the world and marketers face increasing demands to personalize the customer experience with custom data and triggers. In 2019, the global marketing automation market was valued at $4.1 billion with an expected CAGR of 9.8% over the next six years. 

While Customer.io’s primary use case is marketing automation, it’s worth noting that the company also plays in the broader digital marketing software market. Even without sophisticated data aggregation and complex workflows, marketers can use Customer.io to send basic email blasts or simple drip campaigns, which makes Customer.io competitive with tools like Mailchimp and Constant Contact. Thus, Customer.io also benefits from growth in the digital marketing software market, which is expected to be worth $151.8 billion by 2027 with a projected CAGR of 17.4%. 

At roughly $4 billion, Customer.io’s core market is displaying strong growth but isn’t gigantic. However, the company has potential to draw value from several adjacent digital marketing market segments, many of which are even larger and growing even more rapidly. While Customer.io’s addressable market isn’t universal, it’s still quite large and trending larger. That’s why the company’s market rating is strong.

Customer.io was founded in 2012 by Colin Nederkoorn and John Allison. The two met while working for two years at ChallengePost, an online competition platform. Nederkoorn was the head of product for that company and Allison was the head of engineering. 

Prior to ChallengePost, Nederkoorn (now the CEO of Customer.io) gained several years of product experience as a project manager for various companies, including Thrive, a personal finance company acquired by LendingTree. Before transitioning to product, he spent a few years in finance (including time as an analyst for Morgan Stanley) and founded two small businesses. Nederkoorn holds a BS in management from Rensselaer Polytechnic Institute. 

Allison’s background is more technical. He graduated from Ouachita Baptist University with a BS in computer science and math, then served in successive engineering and development roles over the course of six years before landing the job as ChallengePost’s head of engineering. When he and Nederkoorn founded Customer.io, Allison served as the CTO. Per the company’s Republic page, he now serves as the “CTO Emeritus” but appears to remain a semi-active presence in the company as a board member. 

Beyond its co-founders, Customer.io has a robust team of 66 employees spanning engineering, product, sales, and marketing roles. The company has undoubtedly benefited from its co-founders’ shared work experience (specifically in product and engineering) and the strength of the team that has been developed over the last nine years. As a result, Customer.io’s team score is very high.

The landscape of digital marketing tools is a crowded one, and it can be difficult to determine the precise factors that distinguish one platform from another. However, Customer.io does offer distinct functionality that most tools do not. 

Customer.io’s most obvious competitors are email sending platforms like Mailchimp, Klaviyo, and SendGrid. Customer.io offers more flexibility and more sophisticated customer engagement opportunities than any of them. With Mailchimp, marketers have a basic customer relationship management (CRM) platform and can add tags and segments to customer profiles, but Mailchimp doesn’t easily ingest data from a wide variety of customer sources. Plus, Mailchimp’s method of building automated drip campaigns and other email workflows isn’t very user-friendly. Customer.io, on the other hand, allows marketers to access all of their customer data within the same streamlined customer profile (after some guided integrations with other tools in their product and sales tech stack). Then, marketers can use Customer.io’s excellent visual workflow builder to quickly and easily map out customer journeys in a much more straightforward way than most digital marketing tools allow. 

It’s also worth noting that Customer.io is much more affordable than most messaging platforms, at least for small- to medium-size businesses with manageable list sizes. Customer.io charges $150 per month for lists of up to 12,000 customers. Mailchimp’s competitive plan (with maximum functionality that still doesn’t quite meet Customer.io’s capabilities) is $299 for 10,000 contacts. In comparing digital marketing tools, many marketers find that Customer.io offers more for a lower monthly subscription fee. 

Many of these differentiators are very specific and require a good deal of research into multiple marketing platforms to recognize. So on its surface, Customer.io may seem similar to other customer engagement platforms, and the company is competing with many other brand-name tools. However, Customer.io offers superior functionality and more capabilities than the competition and is clearly the best choice for several key marketing use cases. That’s why the company’s differentiation rating is quite high.

Customer.io outperforms the vast majority of crowdfunding investment opportunities. Customer.io has grown steadily since its 2012 founding using a “fundstrapping” approach — defined by Tyler King of Less Annoying Business as something of a compromise between bootstrapping and raising from venture capitalists. The company has raised just over $3.5 million total over the last nine years but has prioritized capital efficiency and organic growth to make those dollars sustain the business for as long as possible. And the results have been remarkable. Customer.io generated $13.9 million in revenue last year and hit $20 million in annual recurring revenue (ARR) in March 2021. 

Such strong revenue growth off of very little fundraising is very impressive, but Customer.io’s profitability is also notable. In 2019, the company generated more than $9.5 million in revenue and lost roughly $432,000, already a solid performance. In 2020, the company hit profitability and brought in a net income of $840,830. Between measured fundraising, strong ARR growth, and minimal burn, Customer.io’s growth trajectory is excellent. 

On top of all of these strong top-line metrics, Customer.io is performing well in terms of customer retention. The company retains 125% of net revenue after one year with new customers, with revenue retention at up to 250% after five years. Churn is decent compared to SaaS averages, with anywhere between 63% and 73% of customers retained after one year. Plus, Customer.io has diversified revenue streams with a strong base of non-enterprise users. The company’s top 10 most valuable enterprise clients make up just 11% of total revenue. 

All in all, Customer.io’s performance metrics are a SaaS investor’s dream. Strong year-over-year revenue growth, swelling ARR, large net income, and decent retention rates are all signs of a healthy and scalable business (particularly with little outside capital raised). As such, the company’s performance rating is its highest.

Customer.io is a relatively low-risk investment due to the company’s long operating history and strong performance track record. The fact that one co-founder has stepped back from an active c-suite role poses a small amount of risk. Customer.io’s high valuation, with no discount, also creates more risk that small investment amounts won’t achieve outsized returns even if the company continues to grow. Otherwise,  Customer.io is a stable business with a clear pathway to continue scaling.

Customer.io is a very strong business that has grown steadily over nine years to become a rising star in the marketing automation market. Any bearish scenarios are the kinds of unknowns that plague any business, no matter how successful. Can the company’s growth rate continue? What if competitors can innovate more quickly? What will Customer.io’s exit scenario look like? 

It’s certainly not guaranteed that Customer.io will continue to grow revenue sustainably and carve out a strong portfolio of clients who are constantly evaluating the benefits of other tools. Particularly as a SaaS business that caters to enterprise clients (though not exclusively), Customer.io stands to lose major clients, which could have negative effects on the bottom line. All in all, though, Customer.io is in a very strong position relative to the vast majority of crowdfunding investment opportunities, with few obvious risks.

Regulation Crowdfunding investors don’t often have the chance to invest in a well-established, rapidly growing SaaS business. Those deals are typically reserved for traditional venture capital firms. With Customer.io, investors have the rare opportunity to own a small slice of a business that is outperforming in many key areas. 

First, the company is operating in a rapidly growing market. The trends of the marketing industry are all in Customer.io’s favor. Brands are increasingly required to personalize their messaging and become more innovative in communicating with their customers at precise points of their journeys. Brands are moving more toward SMS and push notification marketing to combat stagnant email open rates and click rates. It’s now possible to collect data from every single brand touchpoint, and that data must be aggregated and put to work to generate more value. Customer.io harnesses all of these tailwinds to help marketers engage their customers in the most sophisticated ways possible. 

Second, Customer.io is a very competitive marketing software offering, even in the crowded landscape of similar tools. With solid G2 reviews (including many best-of awards) and a strong funnel of customer referrals, Customer.io is creating a delightful experience for marketers that has the potential to build even more steam as the company continues to expand. Plus, after nine years of development led by a seasoned co-founding team with experience in both product management and engineering, Customer.io’s product experience is best-in-class. It would take years for any competitor to meaningfully replicate Customer.io’s product, and switching costs for existing customers become higher each day as Customer.io takes in more of their data and customized workflows. 

Finally, Customer.io is exhibiting very strong year-over-year growth with no signs of slowing down. Booked revenue grew by 45% between 2019 and 2020 per Customer.io’s SEC forms, and results are even stronger based on 2021 data (the company reports 74% year-over-year growth between April 2020 and April 2021). All of this revenue has been achieved with minimal fundraising, and Customer.io even became profitable in 2020 with nearly $1 million in net income. All of these metrics point to a healthy, growing business that is a very attractive opportunity for prospective investors.