Bain Capital VC is bullish on future of email in age of chatbots, other new tools // SUMMARIES ?> Ajay Agarwal, who heads Bain Capital Ventures’ Bay Area offices, has had success investing in email infrastructure companies in the past and remains bullish on the space. Veteran investor Ajay Agarwal is enthusiastic about the future of email marketing, despite a growing number of ways that businesses are getting their messages out and communicating today. The head of Bain Capital Ventures‘ Bay Area offices in Palo Alto and San Francisco has invested in a number of startups in the space, including TellApart, a Burlingame company that was a big score when it was bought by Twitter in 2015. Agarwal says he is looking for more. In this Silicon Valley TechFlash Q&A, which has been edited for length and clarity, he explains why. What makes you believe that there are still promising technologies involving email to invest in? Aren’t people shifting a lot of their business marketing and communications to other communications tools these days? Well, I would separate the world into two categories. There is the communication that goes on within a company or group, and then there is the communication that happens with people you don’t have those connections to. The bulk of the email we send goes from a company to a customer or to a prospective customer. I think for that channel — providing customer service as well as customer acquisition — email continues to be the dominant channel. I think that the primary reason for this is that it remains the only way to access a consumer in a way that’s universal and open. Open, I think, is the key word here. Nearly everyone who is interacting with the public has an email address. Therefore it is a very universal way to interact with your customers. The only gatekeeper is going to be some kind of a spam filter. That makes email very different than display advertising or social media or messaging. All the other communication vehicles that are quite popular are not universal by any means. Only about 12 percent of the population may be on Twitter or Snapchat, for example. Facebook is probably pretty close to email territory but it’s not open. Each owner on that channel is a gatekeeper and can just filter out some types of messages. As a result, email continues to be a predominant channel for many types of transactions. It’s what is used if I need to reset my password, for example, or I need to get confirmation of an order. It’s also an important channel for marketing reasons, such as telling you about a new offer, a new product or a new deal that we want to make you aware of. Email continues to grow as a channel despite the fact that tech-savvy individuals interact with our co-workers and with our families using a variety of newer digital communication mechanisms. Are there other important differences between communicating with email versus some of the new messaging tools? In the vast majority of use cases, I may not want to engage with a retailer at a particular moment about a particular piece of clothing. Or I may not want to engage with a travel company at a particular moment. Email provides me with the ability to engage with that particular communication when I want to engage with it. So I think that’s another advantage for email. But, again, I can’t stress enough the universality of it. No one has to ask Yahoo’s or Google’s permission to send an email, it’s completely inter-operable between those different services and systems. If I’m interacting on iMessage or on Facebook Messenger, however, those are completely well-guarded interactions. There’s no interoperability between them. That makes email very different, very unique. Artificial intelligence is a hot investment area lately and people have been getting excited about chatbots. Could that be a threat to email technologies? There have been a host of startups spotted in the last year that are trying to be at the forefront of conversational communication. Facebook made their Messenger with the idea that businesses are going to rely on some form of conversational interface with their consumers. I think you’ll see activity there and I think there will be some traction there. I think there are a certain set of use cases that where conversation makes a lot of sense. I think there’s still a lot of work to be done on the artificial intelligence and the semantic understanding for a machine to really be able to have conversations. But I think definitely you’re seeing a lot of investment there. Are you investing in companies that may point to the future of how email can be used? There are a variety of companies that are doing some really interesting things around the personalization of emails. These companies typically will use data such as what someone bought in the past to provide highly relevant and personalized email and communication. We have a company on the East Coast called Persado that uses an understanding of the English language to figure out what exact words somebody like a telecom company or a retailer should use in the subject line of an email message in order to get someone to open it up. They narrow it down to only two or three combinations of words that then can be tested and used by marketers to drive high response rates. They are an incredible company that works with some largest corporations around the world. Another one is a Silicon Valley company called TellApart, which got sold to Twitter for around half a billion dollars. It was doing personalized emails for larger retailers to customers who may have looked at a particular product on a website, gone away and came back. The email from the retailer would incorporate that information. Do you see more mergers and acquisitions coming in this space? We continue to believe marketing infrastructure is an exciting category and thousands of companies have been founded in the space in the last five, six, seven years. So I think we’re moving into a phase where you will see consolidation. The larger companies are in a position to leverage their scale and their access to customers and their distribution models by acquiring a bunch of smaller and very exciting innovative technologies. TellApart made a few acquisitions during its run before it was sold to Twitter. Mountain View-based BloomReach made a significant acquisition last fall with a Netherlands company called Hippo. SurveyMonkey made several important acquisitions. These larger-scaled companies — and we were fortunate to be involved with a number of them — are in a great position to continue building out their footprint and grow in the market. Part of the investment we made recently in a Denver company called SendGrid a few months ago was to provide additional capital for the company to pursue these kinds of acquisitions. Tell me more about SendGrid and how you found them. About two and a half years ago, a CEO who had run a Bain Capital Venture company, Sameer Dholakia, joined SendGrid as CEO. We were able to invest a piece of an inside round that happened when he joined the company, because of our relationship with Sameer. We thought SendGrid was going to be a leader in its space, we knew Sameer and he’s a superstar. SendGrid provides essentially the rails or the infrastructure that allows a company to connect their digital interactions with a consumer or customer with email. Say you forgot your password, for example. Companies will use SendGrid and its infrastructure to allow them to insert code into their applications so that when you click on a link that says, “I need a password reset,” you get an email that says, “Click on this link to reset your password.” It also manages things like spam and abuse. If your company is spamming customers or sending emails that are not appropriate, you will not be allowed on the SendGrid system or network. That’s because part of the value that SendGrid provides is a high-level of deliverability. If I’m a company sending out emails, I want to make sure that my emails actually get delivered and not ultimately end up customer’s spam blocker. So a lot of the work in technology that SendGrid provides ensures high rates of deliverability. Then for the marketing directors and the chief marketing officers, SendGrid provides technology sitting on top of this infrastructure that allows them to manage a marketing campaign. You can upload a list of emails, provide some segmentation, create the email content and workflows, and then go ahead and schedule those emails and then see some analytics that help you understand how well those marketing campaigns are performing. SendGrid provides a very intuitive, easy-to-use system for a marketer at a company to manage all of their email marketing campaigns. It manages email for thousands of companies and is completely in the cloud, API-driven and easy-to-use.