Conductor raises $150M at a $525M valuation to build out its search-based, organic marketing technology

Conductor — a marketing technology company that was snapped up by WeWork at the height of the latter company’s expansion ambitions, only then to buy itself out in the wake of WeWork’s collapse — has raised its first round of funding as a once-again independent startup. It has picked up $150 million, money that it will be using to continue investing in its technology and building out its business: an organic marketing platform aimed at SEO, content and web marketing teams, leveraging insights from search traffic to help build more accurate marketing strategies.

Conductor’s CEO and co-founder Seth Besmertnik has confirmed to us that the deal — led by Bregal Sagemount, with other investors not being disclosed — was made at a $525 million post-money valuation. Relatively speaking, that is a big leap considering that the management buyout he led for himself and others at the company was made at a price of $3.5 million, according to data from PitchBook.

About half of the investment, he said, would be in the form of secondary shares that are going to the employee-owners of the business; and half is new equity to put into the business.

For those who might not be familiar with Conductor’s backstory, here’s a brief summary, since it’s relevant to what the startup is doing today:

Conductor’s appeal to WeWork back in 2018 was based in part around WeWork already being one of Conductor’s big customers. The highly-capitalised WeWork was using Conductor’s marketing technology to figure out what businesses might be looking for when it came to office space, and it made sure that its marketing was aligned with this to drum up more business for WeWork itself. That proved to be a very successful partnership, enough to give WeWork the idea that it if it owned Conductor itself, it could leverage its technology for its existing business customers to help them grow their “virtual” real estate presence as much as their physical one, just as WeWork itself had done.

For Conductor, the deal also made sense, Besmertnik said, because Conductor already counted a number of enterprises among its customers, and WeWork potentially could provide another route to it reaching more of them. 

Those developments, as we now know, never quite came to fruition as the two companies thought it might. Luckily, the acquisition never touched Conductor’s pre-existing business. So when it started to become apparent that employees at the division might get laid off as part of WeWork’s drastic cost cuts, Besmertnik and the existing team hatched a plan to buy out the business to give it a shot of survival. When it went independent again in 2019, Conductor left with its customer list intact, and it has built on it since then. Between then and now, clients that it has added to its list include Microsoft, GlaxoSmithKline, and AT&T, with other customers including Visa, Twitter, Comcast and LG — some 450 big names in all.

At its heart, Conductor’s technology would typically be one of many tools — maybe dozens these days — that a marketer would use to both gather and analyse data to formulate and run campaigns. And to that end, the company already integrates with dozens of other sources and platforms to make that management and use easier for customers (The list includes insights tools like Dragon Metrics, Google Trends, TalkWalker, DeepCrawl, and SEMrush; project management platforms like Jira, Asana, Trello and WorkFront; and measurement tech from Adobe, Google, Webtrends, and more.)

But what is also interesting is that its approach in focusing around search is possibly more relevant today than ever before: not only are there an increasing number of controls being put in place to safeguard data (whether those are regulatory measures like GDPR, or choices being made by platform providers like Apple), but we are also seeing rapid growth of walled gardens in specific apps: audiences spend a lot of time in gaming environments or social media platforms like TikTok and Instagram, and that gives a lot less visibility to marketers when it comes to understand what users want, or what they are doing.

Search essentially breaks through that, and Conductor’s belief is that it’s a big enough area that it provides a window into those activities and needs.

“No one ever lies to a search engine,” said Besmertnik. “Whenever someone needs to buy something or look something up, they are searching on Google. Big social media companies may be taking eyeballs away from other forms of media but when you want to act or seek something, search is ingrained in our blood. They still go to search engines.”

The traffic going to search higher than ever, he points out, in part because of Covid-19 and the shift that it brought around more people carrying out their lives online, which has served as a big fillip to Conductor’s business, and specifically around how companies are leveraging search.

“Covid has hit the accelerator on digital for many companies that were not digital-first before,” he said. “You can’t just have a great digital experience now. It has to be discoverable. It has to be able to be found.”

There are a lot of other martech companies out there that have also discovered the power of search — specifically search-engine optimization specialists like SEMrush, Botify, BrightEdge, DeepCrawl and many more. Conductor’s customer list is one way that it has stepped out from the crowd to appear at to the top of the results, so to speak.

“At Bregal Sagemount, we pride ourselves on working with market leaders. The feedback we heard from Conductor’s customers and the market was definitive— Conductor is the leader in organic marketing,” said partner Michael Kosty, in a statement. “We are excited to partner with Seth and the whole Conductor team to advance their technology and their mission to empower brands to transform their wisdom into marketing that helps people.” Kosty is joining the board with this round.

How to buy back your startup from a tech giant like WeWork

When SEO and marketing company Conductor sold to WeWork in March 2018, it was a bit of a last-ditch effort. Leading up to the sale, Conductor’s executives and employees owned around 9% of the company, which had about $28 million in revenue. To make its mission a reality, Conductor needed more funding, which meant more dilution, CEO Seth Besmertnik tells TechCrunch.

That’s when WeWork came along and offered Conductor as much money as it wanted to grow, along with an unconstrained, autonomous environment.

“So they said we were basically going to have a lot more upside and a lot more ownership, and there weren’t really a lot of strings attached to it, other than making WeWork really good at doing organic marketing,” Besmertnik says.

The deal closed and Conductor went on to have a phenomenal rest of 2018, Besmertnik says. Last year, however, Conductor began to realize being part of WeWork wasn’t serving them.

“There turned out to be no synergies,” he says. “All of the efforts we made to do integration and have them sell our product and integrate into their platform — none of them happened and there was no plan for that to happen. On top of that, all we were really getting from WeWork was money but we had no board, we had no governance. We actually didn’t own any equity in Conductor, so no matter what we did as a company, it wasn’t tied to our compensation. More importantly, WeWork was pretty clear that they didn’t care how well we did or if we grew the business. It didn’t matter to them. This was demotivating and ultimately it became difficult to run the company.”

That’s when Besmertnik started exploring how to spin out Conductor from WeWork.

Conductor execs buy their company back from WeWork

It’s been less than two years since WeWork announced the acquisition of SEO and content marketing company Conductor — but those two years have been bumpy, to say the least.

Briefly: Parent organization The We Company’s disastrous attempt to go public resulted in the ouster of CEO Adam Neumann, an indefinite delay of its IPO and reports that the company was weighing the sale of subsidiaries Meetup, Managed by Q and Conductor.

So it’s no surprise that Conductor is, in fact, being sold — not to another company, but to its own CEO and co-founder Seth Besmertnik, COO Selina Eizik and investor Jason Finger (managing partner of The Finger Group and founder of Seamless).

“We’re grateful for our time with WeWork, during which we’ve been able to invest aggressively in R&D, doubling the size of our team with world-class talent that helps our customers achieve success everyday,” Besmertnik said in a statement. “People don’t want to be advertised to or sold to anymore. Our solutions make it easier for brands to deliver marketing that is helpful and valuable. It’s marketing that consumers actually seek out.”

The company also says that Conductor’s employees will be given a new category of stock that they’re calling founder-preferred shares, turning them into “250 employee co-founders” who can appoint a representative to the board of directors. This should give them a bigger stake and a bigger say in where Conductor goes from here.

In fact, Besmertnik noted that pre-acquisition, the Conductor team (including himself) owned less than 10% of the company, while under the new structure, employees will own “more than four times what they did when we sold the company” — and combined with Besmertnik and Eizik’s shares, they have a majority stake.

“Our ownership model is going to really create an even more committed and even more passionate group of people as we apply that to our mission and vision,” he told me.

Conductor started out with a focus on helping marketers optimize their websites for search, then expanded with tools for creating the content that’s being found through search. Since its acquisition, the company has operated as a WeWork subsidiary, and it’s currently working with more than 400 enterprises including Visa, Casper and Slack.

The financial terms were not disclosed, but Conductor says that as a result of the deal, it’s fully divested from The We Company.