CATEGORIES

Categorized | Featured Articles, Profiles

Helping XSell excel: How Rob Lee’s financial strategy accelerated his company’s growth

By Robyn A. Friedman    

Rob Lee had spent 11 years working at ALLTEL Information Services when he came up with a better idea. Rob Lee Xsell“I saw that many of our clients at the time were very interested in more effectively engaging their customers,” said Lee, who headed up product strategy and software development at ALLTEL. “And most organizations aren’t very effective at that.”

Lee thought that if a company could improve its ability to cross-market to customers—selling a credit card to a customer who already banked with a financial institution, for example—then it would dramatically increase the retention of its customers. After all, it’s easier and cheaper to sell to an existing customer than to go out and find a new one.

But, at the time, the technology that would allow a company to cross-market that way was “not very elegant,” according to Lee, and required a large upfront investment. So instead of asking companies to purchase millions of dollars of software to replace their current systems and then take years to install it and teach employees how to run it, Lee decided to keep the software “in the cloud,” selling it instead as a service platform.

“The organizations that use our platform don’t install it—they access it over the network,” he said. “Whenever and however they engage their customer, they’ll link our platform into that engagement process.”

In 2004, Lee and three partners founded XSell LLC, a Jacksonville-based company focusing on delivering multi-channel cross-sell solutions to its clients. Its software improves targeting, delivers personalized value propositions, and ensures offer consistency for customers across any communication channel.

The four partners initially funded the company with about $4 million from savings and friends and family, “bootstrapping it” for about two years. The first customer using XSell’s solution went live in March 2005.

Basically, XSell’s platform does the following:

  • Aggregates and scores detailed public and non-public customer information to match product criteria with customer attributes;
  • Builds and continuously enhances a library of offers that are assembled in real time to create personalized customer value propositions at the point of a service interaction; and
  • Securely transmits customer transaction information for fulfillment once offers are accepted.

An example: You walk into a cell phone store to check out the latest phones. The salesperson enters your phone number into the computer. In seconds, he knows how long you’ve been a customer, what you’ve been offered before, what you like and dislike about the service, how often you call in, how you use your phone, and what packages are available in your area.

Based on that information, the XSell platform creates a narrowly targeted offer to entice you to buy an additional product from the company. The offer is based on your specific needs. In other words, a 20-year-old may be offered an upgrade that allows unlimited texting, while a senior may be offered high speed Internet service to facilitate video chats with the grandkids.

“It’s all about engaging that individual end customer with the most compelling offer—something that’s right for them,” Lee said. “We don’t want to sell things to customers that they don’t need.”

When Lee was at ALLTEL, he led the acquisition of a number of companies, and he noted a common theme among small companies seeking funding. “A lot tried to raise capital before they were ready,” he said. “That can put you in a very dangerous position because the days of raising a significant amount of capital without giving up most of the company are over.”

So Lee and his partners waited. Their strategy was to have XSell’s product used by a target set of early adopters. That way they could show potential investors that the company had paying customers who were seeing real economic benefits from using the XSell platform. “With a few of those customers, we then went out and sought investment in order to expand the company,” he said.

While XSell was already profitable, Lee wanted to raise capital to increase his sales and marketing budget—to hire additional salespeople and a public relations firm. So he sought angel investors. “Jacksonville is a very fertile area for raising angel capital,” he said. “You have to have the right network, know the right people.”

Lee did. Within 60 days, XSell had its financing. “We had a product that was delivered, installed, was working, and providing a result,” Lee said. “So it wasn’t something speculative, like in the days of Silicon Valley. It was something people could see and that had a customer base already.”

XSell raised $2.5 million during that first round of financing.

About 18 months later, the company went back into the market for an additional round. At that time, XSell had a customer base comprised largely of financial services firms, but Lee felt there was a significant opportunity to expand into the cable, telecom, healthcare, and insurance industries. To do so, he would have to hire personnel with some expertise in those industries. After successfully raising an additional $3.5 million from angels, the company hired four more employees to do sales and marketing.

“We’ve leveraged that investment a lot of different ways,” Lee said. “If you look at the resumes of our management, we definitely are moving from a financial -services bias to a communications/cable/telecom bias. And we’re going to make some moves in healthcare this year that will broaden us further.”

Lee won’t disclose how much of the company he had to give up to the angels in order to lock in the financing. But he will say this: “We’ve been in business six years, and the founders still have controlling interest in the company. And we’ve raised $6 million.”

The firm is up to 20 employees. Lee won’t release specifics about revenues, but he said that the company grew 400% from 2008 to 2009 and is on track to more than double this year.

What’s next for XSell?

“The exit strategy for us is that we are likely to be an acquisition target for a larger technology firm,” Lee said. “That’s really no secret. We’ve certainly had a lot of overtures from organizations that have related technologies. Fortunately we’re in a great position, and we’re not in a hurry.”

What advice does Lee have for other entrepreneurs trying to raise capital? “I can’t imagine going out for financing without a shipping product, a customer you can use a reference, and a result you can quantify,” he said. “There’s a lot to do before you get to those, but once you have it, that opens up a lot of options.”

Xsell (www.goxsell.com) is located at 10151 Deerwood Park Blvd., Bldg. 200/Suite 115, Jacksonville, FL 32256. Rob Lee can be reached at 904-854-6700.

Robyn A. Friedman is a contributing editor to Jacksonville Small Business Advantage. She can be reached at RAFWriter@att.net or through her Web site www.everythingwrite.com


Leave a Reply