Venture capital is venturing carefully during the coronavirus crisis.
But raising money is possible, economic uncertainty aside, for companies with differentiated technology and a healthy customer base, especially if they’re focused on digital transformation.
On Tuesday, Glassbox, an Israeli startup with offices in London and New York that offers customer experience analytics for sites and apps, announced $40 million in Series C funding led by Brighton Park Capital, a relatively new private equity firm founded in 2018 that specializes in enterprise software, information services and healthcare.
The round brings the company’s total funding to $70 million since 2014.
Glassbox, whose clients include Air Canada and Israeli Bank Leumi, first started formal conversations with Brighton Park around five months ago, “just before everything went crazy,” said Zachary Gut, a partner at the investment firm.
The due diligence that takes place before a VC investment is a rigorous process, and it was more intense with COVID-19 as the backdrop.
Brighton Park paid extra close attention to how Glassbox was performing in the first quarter, chiefly its ability to continue sealing new deals. And it was even more important for Glassbox to demonstrate growth and stability during the month of March as governments instituted lockdowns and businesses began modifying their operations.
“That’s always an important part of the due diligence, but now it’s even more important,” Gut said.
Yaron Morgenstern, Glassbox’s CEO, took the extra scrutiny as par for the course. “I wouldn’t say they took things more slowly, but I would definitely say they were being very careful, and it makes sense,” he said.
Glassbox actually managed to close two big deals in Q1, one with a large fashion retailer which has had to temporarily shut all of its physical locations and focus on ecommerce, and a second with an airline. The airline is barely running any commercial flights right now, but it’s investing in its digital channels in preparation for the future, Morgenstern said.
One of the most apparent side effects of the ongoing coronavirus situation is the impact it's having on digital consumption and app use, which are both steadily on the rise.
Glassbox sells technology that helps companies understand how consumers are engaging with their sites and apps, such as identifying friction points and providing insights on how to improve the online experience, when people are spending more time online and adopting new digital behaviors.
“That is what gave us comfort and it’s actually the reason we got interested in Glassbox originally,” Gut said. “Big companies are spending hundreds of millions of dollars on digital transformation so they can interact with their customers in a digitally native way. That’s a great trend to invest in at any time.”
Most of Glassbox’s new investment round is earmarked for product and technology development and for new hires. “We have no plans for a hiring freeze,” Morgenstern said. Over the past few weeks, the company has brought on around 15 new people. “We’re learning how to onboard remotely, which is new for us,'' he said.
Global expansion into Latin America, EMEA and Asia is also in the cards, despite the undeniable perils of the current situation.
“From what I see in the market, companies are investing even more in their digital channels,” Morgenstern said. “Some countries and verticals are hurt more than others, but as a general statement, business continues, just more carefully.”
That sentiment also neatly sums up Brighton Park’s investment strategy going forward: a combination of confidence and caution.
Not every company may have the “macro tailwinds” to buoy them during this crisis, Gut said, “but there are some great companies out there that we’re having active dialogues with.”
“We’re letting people know that we’re open for business and we want to invest,” he said. “But we’re also trying to be respectful, take our time and wade in carefully so that we’re ready for when the world opens back up for business.”