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After Raising $10M, Profitable ServiceSource Finds European Customers

June 29, 2005 - VentureWire

San Francisco, Calif.—After securing $10 million and some needed expertise from Benchmark Capital, profitable technology sales outsourcer ServiceSource Corp. has begun adding its first European customers

He said the round wasn’t given a classification because the investment didn’t fit the usual venture capital mold. With about 200 employees, ServiceSource has been profitable since its inception in 1999.

“We weren’t looking for capital, we didn’t need it. We were introduced to them and thought their skill set and knowledge base would help us,” Chief Executive Mike Smerklo said. He specifically was attracted to Benchmark’s technology expertise and business network, its understanding of growth companies and its international experience.

Among the company’s over 30 customers include Alcatel, Sun Microsystems, BMC Software, Novell and BEA Software. Each have one to three-year agreements; ServiceSource works on a pay-for-performance basis.

Over the phone, ServiceSource salespeople sell maintenance contracts to its clients’ customers after the customer’s contract year has expired.

Maintenance agreements are sold at the point of sale, and usually include help desk support and version upgrades. While typical technology lasts three to five years, the maintenance contract lasts only one year. “But this is the most profitable part for technology companies. We have a high impact on their profitability,” Smerklo said.

After closing the deal at the end of last year, Service Source opened its EMEA office in Dublin in the first quarter, with help from Benchmark. It had its first live customer in April and so far has three European customers. In the Dublin office, the company has about 20 people and is actively hiring. “We’re looking to add to that as we grow,” Smerklo said

The company is now coming out of stealth mode, Smerklo said. “Rather than going out and telling a story that isn’t mature yet, we wanted to be so far ahead we would feel comfortable telling our story.”