An Overview to the ESP Market for VC’s

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Port25 Solutions recently surveyed over 120 Email Service Providers. Here is what they found.

To frame this article we segmented ESPs by specific volume and funding mode. Public, Venture-Backed and Private Companies. This post will help VCs sort through the noise for optimized strategic investment opportunities within the industry to ascertain dramatic growth. This post is the first of a three part series based primarily on volume of digital messages sent per month. The second post will focus on current funding by volume and the third post, will breakdown volume by funding.

Private ESPs and Marketing Automation Companies

Globally, there is a new ESP born almost daily. Up to this point, overall, 64.55% of the current ESPs and Marketing Automation companies still remain private. Additionally, of the ESPs surveyed 22% have been funded and are in early stage rounds with current VCs. While 14% are already public.

We placed these ESPs in four volume bins: 0-500M, 501M-1B, 1.1B-5B and 5B+. These figures represent the number of digital messages sent per month.

45% that send between 0-500M emails per month are still private. Of the ESPs that send between, 501M-1B per month, 11% of those ESPs are still private. When volume reaches between 1.1B-5B per month, the number of privately held companies (ESPs) dramatically drops to 7%.

For VCs, both the lower and mid-tier volume ESPs (0-500M), (501M-1B) are attractive. Indoctrinating ESPs within these segments into your messaging portfolio are valuable given the industry’s proven ability to rapidly scale. Most VCs use several growth metrics including the number of users on the ESP platform. We’d also like to introduce the number of “legitimate emails sent” as a secondary metric among industry insiders.CampaignMonitor received a record funding worth $250M on 1.3B emails per month

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For example, recently our client CampaignMonitor received a round of funding worth $250M on 1.3B emails sent per month. You can read the story here. It was the largest round for an email service provider in well over a decade. “The injection is among the biggest recent venture rounds. Since the start of 2013, only a few companies, including Dropbox, Airbnb and Uber, raised more money from venture-capital firms, according to data provider Dow Jones VentureSource and Wall Street Journal reporting.”

It’s also unusual for a single firm to make such a large investment. With this investment, Insight Venture Partners knows the space as well as anyone, given that CampaignMonitor was one of the industries best kept secrets for a long while in terms of users and message volume. Although based in Australia 80% of it’s customers are based in US or Western Europe.

In the next segment, we’ll discuss funding breakdown by volume. To give you a quick teaser, in the (0-500M) segment digital messages sent per month, 85% of ESPs still remain private while, only 27% are private in the (1.1B-5B])segment. The sweet spot is in the mid-tier segment, (501M-1B) where 80% of these companies are still private. Dig.

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fred
04/29/2014

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