Tom Chavez and Krux: a Great Outcome, an Even Richer Journey Reply

Congratulations to Tom Chavez, Vivek Vaidya and the entire Krux team on the big win — the sale of Krux to! For the founders, this is tremendous validation for years of hard work. For IDG Ventures, that single investment returns most of our $100 million fund.

Delivering investment returns is our job, but the journey is just as important. And this is why, for me, Krux represents the ideal VC experience: from the vision, the technology, the market, to the special entrepreneur who built an amazing company. So from my perspective as an investor, here are the highlights of the Krux journey and the key ways in which Tom Chavez created a remarkable experience.

The Vision

I first met Krux founder Tom Chavez in the early 2000’s through then-investor, now-entrepreneur Marc Friend, who sang Tom’s praises as a brilliant founder and technologist (thank you, Marc!). Tom was running Rapt (later acquired by Microsoft), and I was a partner at Sprout Group. We were both in our early 30s with a few successes under our belts, and we were figuring our way through the post-bubble environment. Although there was no immediate business opportunity, it was clear to me that Tom was a special entrepreneur, and we would likely cross paths again.

I was here at IDG Ventures when I heard about Krux in 2010, and I set out to reconnect with Tom. Despite my proactive interest, it wasn’t a slam-dunk investment opportunity. It took a few long discussions before I finally saw Tom’s grand vision and signed a check (at the end of August, when VCs are rumored to be on summer break), along with Arthur Patterson of Accel, who backed Tom at Rapt. Tom’s vision was to build a big data platform that enabled publishers and marketers to collect, manage, and activate first-party data across devices, channels, and platforms. For consumers, the result — fueled continuously by machine learning algorithms — would be smarter, more personalized content and commerce experiences at the right time and in real time. This was an entirely innovative vision; neither the technology nor Tom’s notion of “people data” previously existed.

As a reminder, this was over six years ago, when big data was a new buzzword in the tech industry. The concept had been around for years, but real applications were just starting to emerge. In hindsight, Tom was years ahead of the time.

Krux Market Positioning Slide 2011

The Challenges

The market at large wasn’t sold on the Krux vision initially. Many industry experts with whom we spoke were negative about Krux’s prospects. They pointed to early competition, the omnipresent Google, and the difficulty in selling to publishers (Krux’s early customers). Their observations were correct; but their predictions were incorrect. When we invested, Krux lacked revenue traction ($12.5K to be exact), but it had just enough customer engagement to validate the vision — exactly the type of risk we like as early-stage investors. Subsequent to Series A, IDG Ventures and Accel financed an internal round to give the company more runway.

When it came time to raise a Series B round, the Krux team again encountered plenty of skepticism. Adtech was messy, the market opportunity seemed narrower, and the technology was complex. Both Oracle and Adobe had acquired DMP competitors, which complicated the story yet created more opportunities. Potential investors had trouble grasping the technology and the ecosystem, and we had many declines before Nino Marakovic of Sapphire Ventures recognized the opportunity and led the Series B round.

In the last two years, adtech took a few more big punches as most public companies struggled, leading to doomsday declarations that the industry was dying. Tom and Vivek remained unruffled. I have learned increasingly over the years that Tom doesn’t get easily deterred. As he often tells his team, “Don’t relent!”

The Team

Building a great team is a cornerstone of successful companies. But there’s a reason why it doesn’t always happen: remarkable people are hard to find and hire. Tom managed to build what I can only describe as a dream team. How did he do it?

The thing about Tom is that he has a powerful effect on people. He’s both intense and charming, intellectual and street smart, deadly serious and really funny, technical and business-savvy. He really cares about people, he’s authentic, and he forges meaningful connections. Plus he can spot real talent. That’s how he recruited CRO Matt Kilmartin, COO Link Data Cloud Mike Moreau, CMO jsd, VP Ops Jos Boumans, VP Products Joydip Das, and others.

Added to Tom’s magician-like charm is the loyalty he inspires. From the Rapt team, Tom recruited his co-founder and CTO Vivek Vaidya, CFO David Ron, Chief Solutions Officer Xavier Zang, VP of Applications and Data Roopak Gupta, VP Marketing Ben Crain, VP Business Development Chris Goldsmith, and earlier VP Strategy Dave Smith.

The Technology

I mentioned earlier that Tom’s vision of cross-device “people data” and the underpinning technology were completely revolutionary concepts. Krux’s technology grew more unassailable over the years, from the initial powerful segmentation engine to the ability to store, track, and analyze the entire consumer path. Over time, Krux widened its market lead by building out yet more powerful functions, like global frequency capping for marketers and predictive AI-driven analytics. Perhaps the most impressive Krux feature is “completeness”: the platform’s ability to pull data from the present and past, and make predictions about future behavior of a consumer — all in real time. What’s more, the platform doesn’t require hours (or days) to provide data insights; a query and its results can be run in minutes.

How do you build unassailable technology in this day and age? Only with a rock star technical team. In Krux’s case, it flowed top down, from Tom and Vivek to Roopak Gupta and Jos Boumans and many others. As a team, they had the foresight to anticipate the scale of their operations by using AWS, Hadoop, Cassandra, and other technologies well before the rest of the market caught on. The same foresight was applied to preserving consumer privacy through anonymized data management. While other platforms later scrambled to cobble together fixes to big issues like these, Krux was working on the next big thing.

Alignment with our strategy

The sweet spot for IDG Ventures is $3 million-$5 million investments in early Series A rounds of founder-led companies that build technology to disrupt huge markets. Adtech has been, and remains, one of our focus areas. We are flexible on ownership, making us an easier partner for founders, other VCs, and prior investors. This really was a perfect fit.

Krux Market Positioning Slide 2012

The Outcome

By the end of 2015, most of Tom’s vision had become a reality, evidenced by Krux’s burgeoning portfolio of customers, many of them well-recognized global brands such as Anheuser-Busch, BBC, ConAgra, E*trade, HBO, JetBlue, Kellogg’s, Viacom, and more. Gartner and Forrester analysts named Krux a leader in the DMP space. Revenue continued to grow at ~100% annually, and gross margins reached ~80%. And as Tom and Vivek predicted 5 years earlier, the connection to enterprise CRM was natural, as marketing clouds desperately need data management and analytic capabilities.

And thus the tremendous outcome to this incredible journey, which makes me bubble with joy and pride…as well as sadness, for my part of this journey is ending. Thank you, Tom, Vivek, Matt, Mike, DRon, JSD, Xavier, Joydip, Roopak, Jos, Chris, Ben and the rest of the Krux team, for the unforgettable experience.

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