NEWS

Benchmark backs LiveOps $28M round

Daily Deal
Feb 13, 2007
By Paul Bonanos

Benchmark Capital has led a $28 million third round of funding for distributed call center operator LiveOps Inc., a profitable startup linking thousands of work-at-home call operators with customers in need of assistance.

Menlo Park, Calif.-based Benchmark joined existing investors CMEA Ventures and Menlo Ventures, both also of Menlo Park, in the round. The pair had previously led LiveOps' $22 million second round, which followed an early angel investment. Of the $22 million, $10 million went into the company, while the remainder went to existing investors.

The funding comes about two months after LiveOps introduced as its chief executive Maynard Webb, the longtime chief operating officer at eBay Inc. Benchmark general partner Bill Gurley introduced LiveOps to Webb, whom he had known through the firm's early investment in eBay.

Boutique investment bank Savvian Advisors LLC of San Francisco was a financial adviser to LiveOps as the transaction was completed. Webb said the firm explored several strategic alternatives before LiveOps selected Benchmark's private investment offer.

Although neither Gurley nor Webb would supply precise information regarding LiveOps' revenue position or valuation, Gurley said both numbers are "well north of what you might expect for a public company," while Webb added that LiveOps' revenue is nearly doubling each year.

Rather than pursue an offering, however, LiveOps elected to take in new funding and hire a new chief executive with significant operational expertise, according to Gurley. In Webb, they found someone highly familiar with the software-as-a-service model popularized by Salesforce.com Inc., where Webb remains on the board of directors.

For Benchmark, the investment is one of few the firm makes beyond the earliest formative rounds. "About 70% of our investments are Series A, first-money-in," Gurley said. "The other 30% are opportunistic investments in either companies that we've missed in categories we'd like to get into, or in executives we know and trust. In LiveOps, we had the chance to invest in a company that fits both criteria."

LiveOps has created a software platform that enables call-center agents to work at home rather than in a centralized office, and communicate with each other using various collaborative tools. LiveOps currently employs about 10,000 agents, and plans to add another 5,000 during the next year.

Many customers choose to deploy LiveOps' platform but use their own agents. Gurley said that some of those eventually convert to LiveOps' agent marketplace, but acknowledged that one day the startup could reap more revenue from customers who bring their own agents than those who use LiveOps' agent network.

Although decentralized networks of call center agents have existed for several years, the concept seems to be reaching a critical mass of users. Gurley compared the strategy to open-source coding, which involves a decentralized network of programmers.

"Although the idea of having coders work together in a decentralized fashion was initially met with skepticism, eventually people found out that decentralized networks could actually be more reliable," he said, noting the increased productivity of employees with a proper work/life balance and a more comfortable work environment.

In addition, more competitive long-distance telephone rates and greater penetration of broadband Internet connections to private homes have reduced the cost of operating such networks, Gurley said.

"Our network is uniquely qualified to handle big spikes in traffic, as with 1-800-Flowers.com [Inc.] on Valentine's Day, or pizza delivery during the Super Bowl," added Webb.
LiveOps expects to maintain continued profitability while investing in continued software development, additional agents, and an international presence. Webb also hinted that the company's technology would somehow be applied to other sectors outside of the customer-service realm, but declined more specifics.

Launched in 2004, LiveOps was created through the merger of an earlier company, also called LiveOps, with CallCast, an outsourced call services company. The relaunched LiveOps was guided by chief executive Bill Trenchard until Webb's arrival, when Trenchard became chairman.

Patrick A. Pohlen, the global co-chair of the Venture and Technology group in the Menlo Park office of Latham & Watkins LLP, advised Benchmark as the deal was completed. Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP provided legal services to LiveOps.