Earlier this week we covered the pending IPO of Denver, CO-based EverCommerce, and looked at some of the metrics revealed in the prospectus. Today we learn of another local services software provider garnering another hit of investment money. This time it’s Glendale, CA-based ServiceTitan, the highly valued company that has taken a very different approach to the market.
The eight-year-old start-up raised another $200 million to add to its $900 million in earlier raises. The series G Round places the company’s value now at $9.5 billion. With 1,600 employees it is essentially the same size in terms of employees as EverCommerce and has a valuation that is over 2.5 times that of EverCommerce. On a value per employee basis, ServiceTitan comes in at almost $6 million per employee while EverCommerce comes in at just over $2 million per employee. Pretty radically different valuations.
As it unveiled its latest funding round, ServiceTitan also announced it has acquired Aspire, an eight-year-old St. Louis, MO-based software provider to the landscape industry. According to the company’s website, Aspire has some 1,100 customers and 48,000 users driving $3.5 billion in landscape-related revenues. We’ve written before of ServiceTitan’s impressive ARPU that depends upon the company targeting the “medium” sized local service provider. Aspire seems to have been targeting a similar-sized customer base since our math tells us its customers’ annual revenues average $3.1 million.
Quality Over Quantity
ServiceTitan has certainly been playing a winning hand. Revenues have accelerated from $100 million two years ago to $250 million this year. Those revenues are coming from some 7,500 customers with a combined user base of some 100,000. As a comparison, EverCommerce’s 500,000 customers are driving total revenues of about $340 million. That’s about $700 per year. ServiceTitan, by focusing on the “medium” sized local service provider, generates roughly $33,333 annually from each customer.
ServiceTitan CEO Ara Mahdessian said this. “We originally started in the plumbing, HVAC, and electrical trades. That’s where [co-founder] Vahe’s and my core expertise was because of the work our parents did. But our mission from Day One has always been to help all hardworking contractors across all trades, and we want to help all of them reach the level of success they deserve.”
According to Fermin Rivera, who owns 15-person Red Apple Air HVAC in Los Angeles, he found out about ServiceTitan from a colleague’s Facebook post. Apparently, the software has helped him automate some of his marketing and customer relationship management activities. In a market where finding, hiring, and retaining great employees is harder than ever, tools that can help business owners do more with fewer employees will make a real difference.
Focused on the “M”
As we step back, what is so impressive about what ServiceTitan has done is its discipline to target the “medium” sized companies in the local services sector. The company could easily get distracted and onboard a two-person landscaping firm to add to their customer count. Yet that would fly in the face of their product-market fit which is clearly pointed at those local service providers with dozens of employees and millions of dollars in annual revenue.
When, and if, ServiceTitan chooses to go public, it will certainly be interesting to understand its true business economics. We can’t wait for the S-1 to drop so we can learn even more.