Eric Laughlin joined Agiloft as CEO in July 2020. His arrival coincided with an investment from FTV Capital. I spoke to him later that year in a wide-ranging interview.
In May, the firm saw KKR take majority ownership of the company. FTV Capital is again participating in the company they have helped fund the growth of. I had the opportunity to catch up with Eric again to see how that investment will change the company and what has happened over the last four years. I began by asking Eric how the KKR investment came about.
On the investment
“It’s my job as a CEO to ensure we always have the right financial backers. We have been with FTV Growth Equity for about four years. We’re about five times bigger than we were when they invested. There were a couple of factors in play. One was ensuring we had an investor who could continue to back that level of growth and allow us to pursue organic growth and think about acquisitions.
“It was also time for our founders to take a little bit of money off the table. To get some reward for this great company that they helped build. As a company, it gives us the financial backing to pursue our product roadmap, customer success, community and all those things that have made us do so well over the last four years.”
How will the board be strengthened following the acquisition?
“Our board now has members from our investors, and we will welcome some independents as well. One change is that our founders will retire from the board. The management team remains the same. We’re all continuing.”
On KKR
Why did you go with KKR as the lead investor?
“KKR is a world-class investor. They have been tracking this CLM space and waiting for the right time to get into it for quite some time now. They absolutely believe in this market.
“I’ve been talking to KKR for the last four years and developing a relationship with the firm. So, I felt a lot of comfort in getting it together with KKR. Similarly, I’ve known JMI for that same amount of time, and FTV is our existing investor. So there’s a lot of comfort with this investor group.”
Eric went on to explain why KKR selected Agiloft, saying, “They believe in CLM, and so it is a very big vote of confidence for the market. When they look at how Agiloft has succeeded in CLM, they see we’ve grown significantly faster than the market as a whole. We’ve succeeded in creating a space in the mid-market and enterprise.
“If you look at the research they did coming into this acquisition, they see Agiloft as having higher customer happiness and net promoter scores than any of the rest of the CLM competition. So that was really important for them.”
What happens next?
Eric explained that initially, Agiloft will invest in more of the same. It will continue to build out its no-code platform and push ahead with its AI roadmap. According to Eric, the funding will enable Agiloft to “pursue a more aggressive product roadmap around AI.”
It will also allow it to expand in Europe. There is already a team in the UK, and Agiloft is looking to expand into new countries. However, it wants to ensure local support before it does so.
One area on the funding announcement was that KKR would bring its ethos of employee ownership to Agiloft, but I understand that Agiloft already has a scheme.
“KKR believes in employee ownership. Part of their investor hypothesis is that people work harder when they know that there’s a reward for them in the company doing well, and them doing well. I’ve always believed the same. All of our employees have always had some form of equity or option. We’ll be announcing a new program through KKR.”
Customer and Partners
Eric moved on to discuss how the funding will impact customers and partners. Regarding customers, Eric said, “On the first day (following the funding announcement), I spent a lot of time talking to our customers to give them a heads-up. They were universally excited that we have the financial backing to continue our product roadmap. I believe that they’ll get more and more out of this.
“From a partnership perspective, we announced partnerships with Oracle and PwC. PwC has a robust CLM program and group within the firm. Oracle is an incredibly important vendor in the enterprise software space. They recognized that they had a hole within their CLM offering. They brought us in to work alongside their go-to-market and product organizations to create a really compelling product experience for our joint customers.”
That Oracle partnership sees Agiloft pitted directly against SAP with Icertis. Eric agreed, adding, “I think it draws the battle lines pretty clearly in the market.”
I asked Eric whether the Oracle partnership involved Fusion and NetSuite. He replied, “Currently, it’s just the Oracle suite. NetSuite is a future consideration.”
He also revealed that Agiloft will use its partnerships with PwC and Oracle to help it reach even larger customers and examine the public sector. On the issue of FedRAMP, Eric shared, “Not yet. On the way.”
Acquisitions
You mentioned inorganic growth. What acquisitions are you looking for?
“What we won’t be doing is a roll-up strategy. I don’t believe that buying customers is the right move in CLM. It doesn’t help my existing customers. There are a lot of startups with interesting technology or approaches that have viable features but are not viable companies in the end. We’ll be looking certainly at those.
“We strongly believe that CLM is an enterprise tool, not just a legal one. Most of our customers are using Agiloft across departments. There’s room not only to think about what the core CLM experience looks like. We will connect it to other workflows on a company’s sales and buy-side by using Agiloft CLM.”
Will there be more consolidation?
Over the last few years, consolidation has occurred in the CLM space. How do you see the market evolving in the next few years? Will there be more consolidation, more niche players making a play, or what?
“There is room for multiple winners in this space—multiple CLM players at scale. We’ve seen some smaller providers stumble over the last year or two. We will see the acquisition of those providers that might not be viable, large companies with good ideas around the space.
“If you look at four years from now, when we’re having this conversation, certainly some large software providers will have made some significant acquisitions, and it’s pretty clear that that will happen.”
What’s changed in the CLM space since you became CEO?
“It’s been a fun four years. A lot has changed. There was a wave of heavy investment in 2020. We saw a huge amount of entrants into the space. What’s been clear over the last four years is that many of those providers have not reached a scale which makes them viable contenders for a leadership position. Only a few of us have reached that scale, which puts us in consideration for that upper mid-market and enterprise leadership spot.”
Is AI a game changer?
What has changed recently in the AI space?
“What’s clearly changed is the emphasis on AI. Agiloft has invested quite a bit in AI, as have all other CLM vendors. It’s clear that without a viable AI product, you’re not a viable CLM company at this point. The change and the shift towards generative AI have been critical.
“Agiloft just announced our generative AI prompt Lab. It allows our customers to take any data point within their Agiloft solution, use our prompts or create their own. They can use those from within the company or use prompts developed within the community and apply them to any step of the CLM workflow process.
“We believe that not only creating our own finely tuned use cases is important, but also putting that power in the hands of our customers, for them to refine the way that Agiloft does it or create new and imaginative ways to use generative AI is really important.
“Allowing a customer to dream about what is possible to make something more efficient and then giving them the tools to either use Agiloft’s prompts or create their own to make that happen is a pretty big change in the market versus something you could have seen four years ago.”
What’s next for Gen AI?
What is your current approach to Gen AI, and how do you think it will change the CLM market in the next few years?
“It is a two-part strategy for us. One is to ensure we identify the highest and best use cases for generative AI across different parts of the workflow. Many folks, including ourselves, focused first on redlining and drafting use cases. We’ll continue to release specific modules around high-value use cases.
“Part two of the strategy is to put the power of AI into the hands of our users and give them the creativity to do their own or to learn from the community what else they can do. We think that part of the fast innovation cycle of generative AI is allowing you to be creative about specific problems you want to solve within your company or find specific, interesting, and novel solutions.
“I don’t believe Agiloft has a monopoly on good ideas around generative AI use cases. So, I really think it’s important for our customer community to be able to innovate and share their different ideas, prompts, and solutions. What else could they do to make themselves more efficient, and how can they share that with the community? We have to allow our customers to harness that power and provide them with the tooling to do that.”
On the future
What most excites you about the next phase for Agiloft?
“What’s been exciting for the last four years is seeing how successful our customers have been and developing relationships with them. Being able to do that at a broader scale, and make this company even larger. I hope when I’m talking to you, four years from now, in a similar conversation, that we’re five times bigger again and that we’ve seen a lot of maturity in the market.
“Our customers are solving a lot of problems for themselves right now. They still have a lot of work to do to expand CLM into every department within the company. The dream is to make sure that our customers are sharing the success across departments, geographies, and business units.
“And we really do and can firmly say, this is a system of record, this is the size, this is the scale, and this does have all the potential of CRM and procurement, human capital management and ERP. I think we’ll be there in four years.”
Looking Back
Looking back over the last four years, what have you learnt as a CEO?
“One of the things I’ve learned over the last four years as a CEO is that customer success is so inextricably linked to the culture of the company. I call that EX equals CX. I think that’s a phrase that’s pretty important within our company: the employee experience equals the customer experience.
“We spend a lot of energy internally making sure that our team feels very supported by each other and by the company. We think that continues under KKR with the employee ownership perspective, but just making sure that the culture is one where employees feel supported, which allows them to support customers.
“And our customers feel that. At our last customer advisory board meeting, we gave them a moment to give me some advice on what to do as CEO. Around the table, the most common comment was don’t change your culture because we love working with your people. It’s part of what makes you successful.”
