Can Low Profile Prevail in Silicon Valley? Maybe.

Normally, before a startup sells for nearly half a billion dollars to one the largest software companies in Silicon Valley, a series of things occur.

Venture capitalists outbid each other to partake in later-stage rounds at ever-escalating valuations. The company’s charismatic CEO is omnipresent at industry events and in the tech media.  Prodigious capital is spent building market share. And buzz of an impending IPO gets louder.

In the case of Demandforce, however, none of that happened. The San Francisco-based provider of marketing and customer communications software for small businesses, which Intuit plans to acquire for $424 million, raised just $11 million in venture funding in two rounds.  As for buzz, it went so far out of way to avoid attention that it asked partners at its largest funder, Benchmark Capital, not to list it on their website.

“This was not VC cocktail party conversation,” says Peter Ziebelman, co- founder of Palo Alto Venture Partners and a Demandforce board member, of the company. “That was one of the reasons I liked it so much.”

Palo Alto Venture Partners invested alongside Mike Maples, now of Floodgate Fund, in a 2007 round for $1 million, the company’s first institutional round, according to Thomson Reuters. Last year, it raised another $10 million in a round led by Benchmark Capital. That investment, Ziebelman says, was as much about gaining strategic and operational support from Benchmark as it was about raising capital. Presumably, the alignment paid off.

Benchmark’s Bill Gurley writes that the firm never even announced its funding of the company, a decision he believes is unprecedented. Demandforce CEO Rick Berry, meanwhile, was not part of the Silicon Valley celebrity founder circuit.

That’s not to say the company was entirely out of the limelight. Demandforce made Inc.’s list of fastest-growing private U.S. companies in 2009, 2010 and 2011. Last year it ranked #376 for its software-as-service offering focused on connecting small businesses and customers.

The company’s pitch is that it provides small local businesses–like salons, auto shops, chiropractors and dentists – with the same kinds of customer communication and marketing tools that larger companies have. As Gurley puts it: “If you have ever received an automated communication from your dentist, it was likely sent through Demandforce.”

The “local Internet” is an area that’s been talked about in venture circles as the next big thing for at least a decade, with a paucity of prominent success stories. But Demandforce appears to have gained some traction. According to Inc., the company had 2011 revenue of just over $15 million, up from a little more than $6 million the prior year. Investors indicate that its growth rate remains on track.

Though venture backers declined to specify returns from the Intuit acquisition, it doesn’t take a math genius to figure out it stands to be an exceptionally good outcome. As Ziebelman put it: “Both for the entrepreneurs and for us and the other investors, this worked out very well.”

Ziebelman added that the Demandforce story – one of a company generating a high valuation on comparatively little capital – is a plot line we’re likely to see more often. Overall, Internet startups are a lot more capital efficient than they used to be. That means venture investors who identify the best up-and-comers early will be able to generate bigger returns with smaller investments.

“I think that’s a good indication of what’s in the future for the venture capital industry,” he says.

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