It can be difficult to cover public companies. Their companies grow a modest amount each year. Analysts from their constituents pester them with questions about gross profit expansion and sales rep efficiency. It can get a bit boring. There are also startups that grow faster and are more entertaining to talk about.
Shelf.io is a good example. This morning, Shelf.io announced impressive metrics, including the fact that its annual recurring revenues (ARR), grew 4x from July 2020 through July 2021. Shelf also announced that it had secured a Series B of $52.5 million from Insight Partners and Tiger Global.
This is rapid growth for a post Series A startup. Crunchbase estimates that the company raised $8.2million before it went to Series B. PitchBook puts the figure at $6.5 million. The company had a small capital base and was expanding quickly before the latest fundraising event.
What is the purpose of company's software? Shelf connects to a company's information systems and learns from it. It then assists employees in responding to questions without requiring them to search for or do any other type of research.
Customer service is the company's target vertical. Shelf CEO Sedarius perrotta said that Shelf can absorb information from Salesforce, SharePoint, legacy knowledge management systems, Zendesk, and other platforms. After training staff and models, the software of the company can be used to answer customer questions in real-time by support staff.
A company's tech can provide instant answers to customer questions that are not directed at humans and a searchable database with company knowledge to aid workers in solving customer problems faster.
Perrotta says Shelf will be targeting the sales market first, with other markets to follow. How does Shelf fit in sales? The company claims that its software could allow staff to submit proposals for similar deals or other related content. It is possible for companies with many workers to use Salesforce or answer support questions. Shelf will learn from this activity and become more efficient in helping employees. As software learning abilities improve, I expect that they will as well.
Shelf, which currently employs around 100 people, hopes to grow by at least double its size next year.
This is where the new capital comes in. It is expensive to hire people in the fields of machine learning or data science. The company will need to have a lot of cash in order to quickly scale up its hires.
Shelf's ability to raise such a large Series B was not due to its rapid ARR growth. Perrotta says Shelf has 130% net dollars retention and no churn, which means its customers are both sticky as well as organically growing.
Shelf is an interesting company today. It has clearly found niches that it can sell into. But I'm more interested in how far MerlinAI, the company's machine learning system, can go. If the tech is smart enough, it could be able to prompt and assist employees and reduce onboarding time. This would create a large market.
We expect Tiger to make this deal, which is a significant investment in comparison to previous rounds. This will allow Tiger to invest in a high-growth company with lots of market potential. The stock was purchased at a price that Tiger paid, but the company's continued growth will de-risk it. Our analysis shows that Tiger is not the market's leading bull for long-term software market growth. This thesis is well suited for Shelf.
