Sailthru Turns $8M Series A, Led by RRE Ventures, Into Plan to Double Staff

9/28/11Follow @jpruth

New York’s Sailthru plans to expand with its freshly minted $8 million Series A funding and nearly double its staff within 12 months, according to its CEO and founder Neil Capel.

The startup announced last week it completed the financing round, which was led by RRE Ventures with participation from AOL Ventures, DFJ Gotham Ventures, Lerer Ventures, Hatteras Funds, Thrive Capital, and Pilot Group. This latest funding, combined with a seed round in 2010, brings three-year-old Sailthru’s total financing to $9 million and positions the company for growth, Capel says.

Sailthru sends e-mails on behalf of clients such as The Huffington Post, Fab.com, Thrillist, and The New York Observer. Capel explains that his company curates flash deals, stories in newsletters, and other content that will be of interest to individual recipients. “We pick each piece of content for each user,” he says. “If there was a list of half a million, then half a million different e-mails would go out.”

On a macro level, Sailthru can be seen as a rival to e-mail service providers that handle distribution of bulk marketing, advertising, and other content for corporate clients. However, Sailthru says it offers individualized e-mails that it claims other providers do not.

Capel, a British transplant who confesses his accent skews more toward Australian these days, says his company wants to change the way content publishers and e-commerce companies communicate with their individual customers. “Rather than sending the same entire newsletter that’s the same for everybody, we can tailor the content down to that [individual] user,” he says.

E-mail, Capel says, is used more frequently to reach customers, especially in the burgeoning era of flash sales. “Ever since Gilt and Groupon, the volume of e-mail every user gets is so tremendously different than a year ago,” he says. The flipside to increased e-mail output is the potential for such messages to be ignored or dumped as spam. “If it’s not relevant, you don’t care about it,” Capel says.

While many companies communicate with customers via e-mail, Capel says flash sales websites in particular rely on the medium to announce the latest deals. The rise of Gilt and other flash sales sites, he says, have increased the importance of rewarding dedicated customers with relevant deals and content. “If you are not sending the right offer, they are going to unsubscribe,” Capel says. For example, he says, a customer in New York may be more interested in restaurant deals while a customer in a different city may be more interested in offers for spas.

Sailthru uses clickstream data—a record of where users click while browsing websites—from its clients to determine which sales, deals, and other content will be of interest to individual recipients. The content is chosen based on each recipient’s past interactions with the companies that originate the content. That keeps the customer from receiving newsletters or repeats on the same deal, Capel says.

Neil Capel says his staff will double within 12 months.

The company uses a behavioral algorithm to determine the content for each e-mail recipient, a service that Capel claims that third-party providers have yet to match. He is also undaunted by the possibility of e-commerce companies attempting to handle such e-mails on their own. Delivering messages focused on the individual among the masses requires specialists. “We see a few clients talk about doing this in-house,” he says, “but making sure you get 5 million e-mails out in 20 minutes is a difficult [task].”

Sailthru got its start after Capel was disappointed by the way other providers mishandled sending e-mails to customers on his behalf. Capel previously served as chief technology officer for such companies as Money-Media, Musicnation, and Hyphen. When he wanted automated messages sent to customers, especially to welcome them after initially signing up, he says the e-mails sent through the third-party providers tended to be delayed by several hours, if they were sent at all. “They failed me on some level, especially when it came to real time [delivery],” he says.

The startup became cash flow positive in April, Capel says. The latest funding round will help the company nearly double its staff of 31 to 60 within 12 months and open more offices in North America and Europe. Sailthru currently occupies shared space provided by AOL Ventures. The startup is hiring, Capel says, with emphasis on expanding the sales staff as well as its development team. “This is all expansion cash; it is about taking as much of the market as we can,” he says.

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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