GramercyOne, Profitably, and Erply Carve Out Territory in Cloud-Based Management Services; VCs Follow

11/2/11Follow @jpruth

A crop of New York startups is growing by providing other companies niche software via the Internet cloud. By leveraging the lower cost of offering Web-based software, these technology companies are out to attract new business customers and please their investors.

In recent weeks, sales and marketing software firm GramercyOne closed $14.5 million in Series A funding led by Steve Case’s Revolution Ventures, with participation from Grotech Ventures, Jubilee Investments, and TDF. The new cash will go toward technology development and new hires, according to GramercyOne CEO Josh McCarter. His company, as well as other cloud-based software providers such as Profitably and Erply—bred in Estonia with its U.S. office in New York—are building their businesses by offering flexibility to their clients. This is an interesting trend worth a closer look.

For GramercyOne, which was spun off in October 2010 from SpaFinder, the demand for software over the Web marks a sea change, particularly in the sales industry. “Three years ago being a cloud-based solution was a detriment in the sales process,” says McCarter. “Now it’s almost a requirement.” His company offers such services as point-of-sale software, appointment booking with customers, and mobile payment processing. McCarter says cloud-based software providers gain more new business because of the flexibility to deliver upgrades and the lower costs compared with software installed on computers. “It has made the process easier to convert people off their legacy systems,” he says.

GramercyOne and its staff of 60 counts as its customers some 2,500 businesses that include fitness centers, spas, and salons in 56 countries. McCarter says the company began in 2007 as a branch of SpaFinder but soon found demand for its services in other sectors. “The intent was to create the OpenTable for spas,” he says.

McCarter says GramercyOne also offers tools that work with location-based apps to manage how inventory is offered for daily deals. “The issue with group-buying deals sites is their proposition is all about demand creation,” he says. The challenge, he says, is determining whether or not such deals lead to repeat customers and additional purchases. GramercyOne’s software lets merchants track and control such special promotions. That way customers using deals won’t flood the business at times when merchants already see large numbers of patrons, McCarter says.

Erply, another provider of point-of-sale software and inventory management via the cloud, is also growing. The company, whose subsidiary Point of Sale is based in New York, raised $2 million in March 2010 from Redpoint Ventures, Index Ventures, The Accelerator Group, and other investors.

Robert Jacob, the U.S. vice president of sales with Point of Sale, says that in addition to providing software from the cloud, the company has released a Windows-based application that lets merchants operate independent of an Internet connection and then update sales and inventory once the connection is reestablished. “People do not like to be 100 percent Web-dependent at the register,” Jacob says. “[For some] it is too big of a risk to have registers go down for 20 minutes.”

Sorting out the financial management of a business can be as challenging as minding the inventory that keeps shops open. One-year-old Profitably in New York has developed Web-based business planning and analysis software that startups and small businesses can use to walk them through the management process.

Profitably raised $1.1 million in March in a Series A round led by White Owl Capital. The money was used in part to hire two developers and to facilitate a move into office space at the General Assembly technology incubator. Previously, in August 2010, Profitably raised a seed round of $300,000 led by North Bridge Venture Partners.

Adam Neary, the CEO and co-founder of Profitably, says his company’s software is designed to replace spreadsheets for such tasks as forecasting cash flow and creating analytics to show how companies have performed.

The Profitably platform asks questions about the users and then gradually fleshes out plans and forecasts based on their responses. “If you have an abrupt change in the way customers convert through the sale pipeline, it’s very easy to model that out,” Neary says. Users can also run scenarios such as what happens if the companies increase their pricing and conversion rates decline. “These are things businesses are dying to think through,” he says.

Neary says Profitably, which has a staff of six, released a new set of forward-looking business planning tools in August. The company previously offered backward-looking analytics to enter past performance data into accounting software such as Intuit’s QuickBooks.

Neary adds that his company is currently developing software for a future release that would let users automatically collect information to create what he calls one-click board presentations. “Most startups that I’ve talked to have investors who they need to report to on a monthly basis,” he says. “That process is onerous to compile the cash flow and other financials.”

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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