Software developer Knotice uses profits to drive company's desired expansion
Published by Crain's Cleveland Business
Written by Chuck Soder
Five years ago, Knotice Ltd. had nine employees. Soon it expects to have more than 10 times that number.
The Akron software developer is in the midst of a growth spurt. The company, which sells software designed to help companies tailor web, email and mobile marketing messages for specific customers, should employ 92 people by the end of August, when it finishes filling 23 new positions.
The growth is driven by new initiatives within the company and by rising interest in marketing via the Internet and mobile phones, said Knotice CEO Brian Deagan.
Another reason behind the current expansion is that the company now is profitable enough to fund it, Mr. Deagan said.
“It's definitely a bit of an inflection point,” he said.
Knotice not only is hiring people throughout the company, but it also is creating two departments. Three employees will form a business intelligence department, which will study data Knotice collects on consumer behavior to figure out what drives purchasing decisions. That information could influence how Knotice designs future versions of its flagship Concentri software.
Two more employees will form a business automation division that will analyze the company's internal processes, which Mr. Deagan said will prepare it for more growth.
Knotice also plans to open a Seattle office by early September. The office will be staffed by two existing employees with ties to the area as well as a few new hires from the current expansion, Mr. Deagan said. The Seattle office will help the company recruit employees from an area known as a hotbed of IT talent, he said.
The company's growth could accelerate over the next few years should it decide to develop a version of its software that could personalize display advertisements people see while surfing the web, Mr. Deagan said. The company also is thinking about raising equity financing to speed up its growth, he said.
Knotice hasn't accepted any outside investments since 2006, when it received $500,000 from JumpStart Inc., a nonprofit that assists and invests in startups in Northeast Ohio.
“It needs to be a great deal for us to pull the trigger,” Mr. Deagan said.
The seeds of Knotice were planted in 2001, when marketing firm Craver Marcom Inc. created a technology division designed to help broadband Internet service providers better communicate with their customers. The company hired Mr. Deagan and Bill Landers, who is Knotice's chief technology officer, to help run that division, called eMarketing by CMI. In 2003 they ended up buying it from Craver Marcom, which owner Douglas Craver shut down that same year to go into consulting instead.
Mr. Craver also connected the startup to Jonathon Grimm and his father, Richard Grimm, who helped finance the launch. Richard Grimm — who was CEO of Technicare Corp., a medical imaging company that closed its Solon plant in 1986 — remains on Knotice's board of directors. Jonathon Grimm, who previously worked in the investment banking and private equity fields, today is Knotice's president and chief financial officer.
The company began growing rapidly shortly after receiving the JumpStart investment, which Mr. Deagan said had a “huge” impact on the business. Knotice grew from nine employees in 2006 to 18 at the start of 2007 and 26 a year after that, according to data from the Crain's lists of local software developers. Knotice employed 35 people on Jan. 1, 2009, and that number grew to 44 people by the start of 2010.
Mr. Deagan said Knotice has been profitable since mid 2007. Sales hit $7.5 million in 2010, and Mr. Deagan said he expects revenue this year in a range of $11 million to $12 million. Midway through 2010, the company finished paying back JumpStart's money, with interest, Mr. Deagan said, noting that JumpStart's investment never converted to equity because Knotice didn't raise outside financing.
Happy in Vancouver
Mr. Deagan chalks up much of Knotice's growth to the way it designed its Concentri software. Buyers can use it to customize information that customers see on their websites based on information such as products those customers have checked out on the websites in the past, where they live and personal details they provide through loyalty programs. The software uses similar information to customize promotional emails and text messages.
The ability to customize websites, email and text messages has helped Knotice stand out, Mr. Deagan said. He added that he knows of no competitors that designed all three systems to work together when they originally were built, which allows them to work together seamlessly.
“That differentiation has been a big driver,” he said.
The software has “definitely boosted sales” at BuildDirect Technologies Inc. since the online building supplies retailer started using it about a year ago, said David Jenkins, vice president of merchandising and conversion for the company, which is based in Vancouver, Canada.
One reason BuildDirect chose Concentri was because it could deliver personalized messages via BuildDirect.com and email, Mr. Jenkins said.
“We've been leveraging it a lot,” he said.