Varolii Rolls up $8M to Grow Communications Biz After Surviving the Great Recession

[Updated 11:15 am, see below] Varolii, an 11-year-old software company that handles customer and employee communications for big companies, has served as something of a barometer for the U.S. economy’s troubles over the past few years.

After generating double-digit sales growth in the mid-2000s and preparing for an $86 million IPO, Varolii had to back away from the public markets as the downturn took hold in mid-2008. Layoffs followed in 2009 and 2010, as the Great Recession and its aftermath walloped the ledgers of Varolii’s corporate customers.

Now, as the economy continues its long, slow recovery, Varolii is announcing some positive news: an $8 million round of growth financing from existing investors BlueRun Ventures, Draper Fisher Jurvetson, Institutional Venture Partners and InterWest Partners. It’s the first institutional money since 2002 for Varolii, which is based in Seattle and has a major satellite office in the Boston area.

New CEO David McCann, a former Microsoftie who took the helm at Varolii about four months ago, says it’s a strong vote of confidence that reflects the accelerated switch to cloud-based services expected from big corporations in the next couple of years.

“A lot of little fragile companies disappeared off the map” during the recession, McCann says. “We clearly have the revenue strength and the customer base that absolutely gave us the ability to withstand the downturn in 2009 and 2010.”

[Added info on Pawlak here] Varolii was founded in 2000 under a different name by MIT grads Scott Sikora and Michael Ho, and Ken Pawlak, who now works in Microsoft’s Startup Business Group. It makes software tools for text messaging, voicemail and email that help businesses reach customers and employees. The client roster is about 400 deep, and includes large banks, utilities, airlines, and health insurers.

McCann says he plans to use the cash infusion to speed up efforts in the smartphone arena, including extension of Varolii’s current communications platform to include Android and iPhone devices on top of the existing voice, email and text options.

Varolii also wants to incorporate more proactive self-service customer care features, making sure people get their problems resolved short of getting on the line to a call center unless it’s really necessary.

“If you’re an entity that’s got millions of customers, how do you divert the right customer to self-service? Varolii is right in the middle of that decision path,” McCann says.

Varolii’s not the only company working on that sort of thing. Nuance Communications, for instance, is among the providers that offers an interactive customer service application for wireless carriers, an outgrowth of the company’s acquisition of the former Bellevue, WA-based SnapIn Software.

Varolii now has about 230 employees nationwide, including about 160 in Seattle and another 40 or so in the Boston area, a result of the company’s purchase of EnvoyWorldWide. McCann said the balance of Varolii’s employees are at offices around the country, typically near large customers.

After riding the economy’s ups and downs—OK, mostly downs—over the past three years, Varolii is now seeing more signs of a thaw in corporate spending: McCann says his company’s pipeline of projects is up about 60-70 percent over last year.

“Companies are beginning to unlock their budgets,” McCann says. “They’re still being very careful—no companies have got massive growth budgets—but companies are unlocking their capital and their expense budgets. Companies are also getting much more comfortable with the cloud.”

Trending on Xconomy