Startup Segment Is Worth $1.5 Billion, Thanks to Companies’ Troves of Customer Data

(Bloomberg) -- Segment Inc., a startup that helps companies manage the ever-growing streams of data they collect about their customers, raised $175 million in venture funding, the company plans to announce Tuesday.

Existing investors Accel and Alphabet Inc.’s GV co-led the round with a new stakeholder, Meritech Capital Partners. The funding valued the San Francisco-based company at $1.5 billion, according to a person familiar with the matter who asked not to be identified because the details are private. Other returning investors include the Y Combinator Continuity Fund and Thrive Capital.

Segment helps companies such as Glossier Inc., International Business Machines Corp., Atlassian Corp. and Intuit Inc. provide better support and service by combining together all the different ways a company might collect data on a customer—in a store, through a mobile app, through email and more. For example, Glossier uses 14 different analytics tools across 12 different platforms such as their website, their mobile app and their brick-and-mortar store, said Segment Chief Executive Officer Peter Reinhardt. “Each tool has its own copy of the customer data and history of privacy preferences,” he said. “You can imagine the sort of complexity Glossier has to deal with.”

Vas Natarajan, a partner at Accel, has been a Segment board member since his firm led a $15 million funding round in the company in 2014. The startup is “a Salesforce-sized opportunity,” he said. “For a company, it’s really hard to stitch all that data together into a single customer profile, to answer, ‘What were all my interactions with this person this month?’”

Reinhardt said the businesses it works with also value the way Segment helps them manage customer privacy across different tools. There’s been a “massive uptick” over the last two years of people seeking to understand how private—or public—their data is, he said. Segment also launched a campaign around helping businesses handle data-deletion requests and other new requirements related to General Data Protection Regulation compliance in the European Union.

It may be easy now for investors to see a path forward for Segment, but the founding team struggled for a year and a half to get off the ground. They originally went through Y Combinator’s incubator program in 2011 with a product that aimed to let students in college lectures alert professors when they were confused. It was a flop, partly because students took out their laptops to use the tool but all ended up using Facebook instead, Reinhardt said. The team then tried building an analytics tool before realizing the plumbing they built to connect those tools to each other would be more valuable.

Segment launched its new product in 2013, and the company plans to use this new funding to hire more workers internationally.

To contact the editor responsible for this story: Anne VanderMey at avandermey@bloomberg.net, Molly SchuetzMark Milian

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