Durham software startup ServiceTrade lands $49M investment, plans fast growth
UPDATE: This story has been updated to include a regulatory filing related to the funding round.
Despite the coronavirus pandemic throwing the U.S. economy into turmoil, ServiceTrade, a Durham-based software developer for the commercial services industry, brought in a record number of customers in the second quarter of the year.
And now, after landing a $49 million investment, the company hopes to accelerate its momentum into even larger growth. The new investment comes from local investor Bull City Venture Partners and the Charlotte-based growth-equity firm Frontier Growth.
Founded in 2012, ServiceTrade has nearly 600 customers across the U.S. and Canada, mainly in the HVAC, electrical and fire protection trades. The company’s cloud-based platform helps companies schedule and dispatch technicians efficiently, produce online quotes and track historical data.
ServiceTrade also offers features to help technicians manage their inventory of parts and automate accounting.
The goal of the investment is to grow the startup’s customer base significantly in the coming years. And the pandemic, it turns out, could serve as a solid launching pad for that growth.
“We feel like they could have over a couple thousand customers in a few years,” Frontier Growth partner Richard Maclean said in an interview. Frontier, which is managing a $700 million fund, focuses on taking software companies with an established product and boosting their growth with money and managerial experience.
“A lot of these (service) companies are doing more work remotely,” Maclean added. “That’s hard to do if you don’t have a cloud-based system.”
In the last three months, ServiceTrade CEO and cofounder Billy Marshall said, the startup added a record 55 new customers, with many of its new customers taking advantage of downtime in their business to invest in new technology.
“Even when (our customers’ businesses) are slowing down, a lot of them are taking an opportunity to apply some improvement projects,” Marshall said. “Particularly, they are looking at things like ServiceTrade that allows them to do work without going into the office. Email is a poor substitute for a highly tuned app for sharing information.”
That growth has already allowed it to hire 20 new employees this year, taking its total headcount to 72, Marshall said. The company will hire more sales and engineering staff in the coming months, he added.
ServiceTrade last raised money in 2015, when it raised $4.1 million from investors, though the company did take a bridge investment from Bull City Venture Partners last year.
Before starting ServiceTrade, Marshall previously led a startup called rPath, whose assets were later acquired by SAS, and worked at Red Hat. At Red Hat, Marshall met Bull City Venture Partners cofounder Jason Caplain.
The companies originally did not disclose the exact amount of funding from the deal — though Maclean said the number was around $30 million.
But a filing with the Securities and Exchange Commission showed that the funding round was worth $49 million. That would be one of the largest raises by a software company in the state this year.
Marshall said ServiceTrade wanted to partner with Frontier because it had experience helping companies take the next step in their growth. The company’s existing shareholders, he said, had helped the company get off the ground. But they didn’t have the experience to guide a company that is transforming into a $50 million to $100 million business like Frontier does.
Even with the pandemic, investments into startups in North Carolina have kept pace with last year’s totals, The News & Observer reported.
Before the pandemic, venture capital and private-equity firms had compiled large amounts of cash to put into companies. With interest rates at near-zero, and the stock market continuing to do well, investment firms are continuing to chase returns by looking for investment opportunities in startups, Caplain said.
Maclean said he had been impressed by how the company had “bootstrapped” its growth so far.
“They have been extremely efficient with a limited amount of capital,” Maclean said.
Maclean, along with two other Frontier Growth employees, will join ServiceTrade’s board.
Caplain, of Bull City Venture Partners, said he was excited to invest in ServiceTrade because the services industry hasn’t adopted new technologies as quickly as some others.
“There is a lot of space for these guys to scale the company,” Caplain said.
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate
This story was originally published August 4, 2020 at 6:00 AM.
