Parature co-founder Duke Chung was a student at Cornell University in 2000 when he and four of his classmates brainstormed their way to success.
Their ideas would later create a thriving business, attract Microsoft’s attention and take their ideas global. Microsoft announced its acquisition of Parature in January.
At their university in Ithaca, N.Y., the classmates, while working with Blackboard education technology, thought about what was lacking online in the early days of the Internet. They took steps to fill that void, ultimately creating a live chat software product called Cyracle, developing a company and moving it to Northern Virginia.
The company secured funding from several initial “angel” investors, the first being Ching-Ho Fung, according to Chung. He supported Blackboard and soon, the startup.
The company later tweaked its product offering, creating an integrated customer service solution suite. In 2003, it changed its name to Parature, an abbreviation of “Paradigm of the Future.”
“We had a lot of local angels help us get Parature started,” he said, noting that they helped build D.C.-area customers. “The early angels were very helpful to us and helped us get the momentum going.”
Three years later, the company had more than 300 subscribing customers. It secured $13.5 million in Series A venture capital from Valhalla Partners and Sierra Ventures. It operated out of both Northern Virginia and San Francisco, Calif.
In 2006, Parature secured a $16 million expansion round from Accel Partners. The next year, Webex signed an agreement to resell Parature’s support products and services to its customers. And three years later, Parature developed Parature for Facebook, allowing direct engagement with customers, prospects and fans on Facebook. In 2013, Parature for Mobile and the Parature Social Monitor were introduced, and that same year, Microsoft approached Parature with an offer.
Microsoft had built an empire, but lacked certain key product offerings in what Parature considered its strength — customer engagement solutions. With Parature completing all the pieces of the multichannel customer service puzzle, soon, Microsoft and Parature started to win many deals together. Parature, based in Herndon, is now a subsidiary of Microsoft, which retained the company’s 100 employees through the acquisition.
“Microsoft is a tremendous platform for us,” Chung said, noting that he’s excited about the people and the culture there.
“Times have changed but that is still the most discussed topic — fundraising and acquiring capital.”
Parature was built on Microsoft, so there’s that synergy, he said, and tens of thousands of companies use Microsoft, so to be able to bring a product to that company is amazing, he said.
Today, Parature serves more than 500 business-based customers and 70 million end users worldwide. It provides cloud-based social and customer engagement solutions that help organizations deliver more efficient customer service and support across more channels, including social media. The flagship product is Parature Customer Service Software, utilized through software-as-a-service delivery.
“What we were able to bring to the table is a really modern customer service technology…” said Chung.
Recalling the company’s early days, Chung said that its initial vision involved creating collaboration and live chat capabilities for universities, and people loved their web-based chat product, which was similar to ICQ. The product was marketed online and companies soon began signing up for the chat products.
A bit surprised, Chung and his associates reached out to businesses that were using the product to find out how they were using it. Customer service was where it was at, they discovered.
Businesses — a floral company for example, would use it to help provide information to, and communicate with, customers. The chat function was very useful for small, medium and new businesses that saw what Amazon and eBay were doing with real-time engagement and wanted to get online, too, Chung said.
“It was right before innovation,” he explained. It was a time when customer service was carried out primarily in person in the store or on the phone through a 1-800 number.
“We believed over time that consumers would start going to the Internet first to find information,” Chung said.
Today, 89 percent of people go to the Internet first to find information they’re looking for, according to a recent Fleishman-Hillard and Harris Interactive global survey. Chung said that in the early 2000s, most of the company’s sales were geared toward customer service managers.
But for a cloud-computing product, Chung said the company needed capital upfront.
The angel financing in the early days helped the company buy servers and provide hosting, and the products also helped support students and faculties at universities. The investors gave the company the capital it needed to grow, Chung said.
He explained that one of their company’s early competitors was 10 to 15 times its size. They found that companies were buying the competitor’s product and for every deal Chung’s company won, the competitor would win nine.
Chung knew his company still had a good product though, so they raised money and built the company’s sales and marketing force.
“It took about five years to get to 300 customers,” Chung said.
“We believed over time that consumers would start going to the Internet first to find information.”
The company sought out West Coast financing, too, and focused on the Bay area where it already had customers. By 2008, it had grown substantially and word of mouth spread. It secured a $16 million expansion round from Accel Partners.
Once in the Washington, D.C. area, Parature saw federal agencies starting to sign on.
Chung said that if he had to do anything over, he would’ve perhaps begun to raise money a little sooner.
“We may have been a much bigger business in the end,” he said. He also said, drawing from lessons learned, that he’d advise young entrepreneurs to narrow down their focus instead of trying to cover every base. “Doing one thing well is really important,” Chung said, suggesting a focus on one market segment.
And, he said, building a strong culture is important for a startup. People tend to think it happens in companies more than it does, Chung said, noting that in the early days of a company’s growth, there are ups but many more downs.
“You do a lot of work making little money and there’s slow progress,” Chung said. “I think it’s really the spirit — the culture and passion that the founders build — that keeps everyone together.”
Chung advised that new businesses should start from day one to build a strong culture, and as business leaders, understand that they should create options. For instance, he said, part of time spent as an entrepreneur should include fundraising and building relationships with potential strategics.
“As much as we like technology and IT, the people are really important, too.,” Chung said. “If you’re just meeting the people during the M&A exit process it’s really not authentic.”
Chung, who has served as a speaker at various business conferences and events, said that the topic of garners a lot of curiosity and interest is how to raise capital.
“Times have changed but that is still the most discussed topic — fundraising and acquiring capital,” he said.
What’s changed over time, he said, is that raising capital is very competitive and even more challenging now. He likened it to becoming a professional athlete. The feat is harder today, he said, because technology moves so quickly and capital is required to attract the people, too.
Many times entrepreneurs don’t understand just how big the market is, he added, stressing that building a really good team and developing it to go after that market is important.
Chung, of course, knows something about success.
“We dreamed about companies using Parature,” Chung said, and now its products are in the UK, Australia, Asia, all over. “They are buying it because of the Microsoft brand, and it’s so exciting to be able to deliver these products globally.”