Why did First Analysis invest in StreamLink Software?
Demand for grant management software is on the rise — and the Cleveland company has what it takes to capitalize on that trend, according to Corey Greendale, managing director at First Analysis in Chicago.
StreamLink recently raised $10 million from First Analysis and a long list of existing investors.
The money will help StreamLink ramp up its sales and product development efforts at a critical time: New rules and regulations are pushing government agencies and other organizations to keep better track of the grants that they award and receive.
First Analysis wanted to take advantage of that trend, but it wasn’t ready to invest in StreamLink when it first learned about the company a few years ago. At the time, StreamLink hadn’t yet generated enough customer traction to fit First Analysis’ investment strategy. So the firm put the Cleveland company into the “potentially-interesting-but-come-back-to-it-later bucket,” Greendale said.
When First Analysis called StreamLink for an update this past December, the company was well on its way to achieving the ambitious goals it had laid out a few years earlier. As a result, the investment firm, which also offers investment banking and equity research services, ended up chipping in $3 million during the latest round.
“They’ve done what they said they were going to do,” Greendale said.
StreamLink’s revenue stream has grown by huge percentages for several years in a row. Sales increased by 80% in 2015, said CEO Adam Roth, who declined to give specific revenue figures. Today, the company has 43 employees, a number that will rise as it ramps up its sales and product development efforts. To make room for them, it recently moved into an 11,000-square-foot office on the fifth floor of downtown Cleveland’s Caxton Building. The company previously used about 7,000 square feet on two other floors.
During the company’s first few years in business, its growth was driven by its first product: BoardMax, which was released in 2008, helps nonprofits communicate with their board members. Today, however, 70% of the company’s revenue comes from its grant management product, AmpliFund, Roth said.
Though StreamLink will continue to offer BoardMax, Roth predicts that AmpliFund will continue to generate most of the company’s growth for the foreseeable future.
The federal government is doing a lot to create demand for products like AmpliFund.
For instance, in May 2014, Congress unanimously passed the Digital Accountability and Transparency Act, which requires the U.S. government to collect standardized data related to federal spending and publish it online. DATA — which is being implemented over the course of several years — requires grant recipients to meet new reporting requirements.
Then, in December of that year, another set of federal rules called Uniform Guidance went into effect. Among other things, those rules require states and other entities that distribute federal grant money to monitor it more closely, Roth said. Thus, StreamLink aims to start winning business from entire states — not just state agencies.
Another factor driving demand for AmpliFund: These days, governments are more inclined to share data on how they spend taxpayer dollars via the web, even when they aren’t forced to do so by regulations, Roth said.
“They can’t (share the data) if they can’t capture it,” he said.
Land and expand
The company already works with the District of Columbia, and it’s starting to do some work with state-level agencies, which could help it eventually win statewide contracts.
Winning statewide contracts could help StreamLink land more local contracts as well, Roth said.
“If we sell to a state, for example, and a state signs up its counties and distributes funds to those counties, we see all those counties as potential full customers of AmpliFund at some point,” he said.
The new capital will help the company go after bigger contracts.
StreamLink is already starting to win larger customers. For instance, as First Analysis was performing its due diligence, StreamLink “signed the largest deal in its history,” Greendale said, noting that the client is a government entity.
Greendale predicts that even bigger deals are on the horizon.
“A single deal could potentially be 100% revenue growth,” he said.
In addition to First Analysis, the $10 million round included capital from several existing investors: North Coast Angel Fund and North Coast Venture Fund, both of Northeast Ohio; Blu Venture Investors of Vienna, Va.; Hyde Park Venture Partners and Hyde Park Angels, both of Chicago; and several individual investors and management team members.
By Chuck Soder, Crain’s ClevelandRead Original Article