LivePerson.com Loads Consolidation Ammo

A new office building. A new management team. And an ambitious mandate that could result in an initial public offering sometime next year.

LivePerson.com, a New York-based provider of turnkey customer service solutions designed to personalize the impersonal Internet, plans to use a recently completed $4.6 million private equity placement and a subsequent offering in the next 90 days, to consolidate this rapidly growing segment of the Internet.

“Right now there are no market leaders in this space,” said Robert LoCascio, the company’s president and chief executive. “It’s a fragmented group of small companies that are all rapidly growing. What there needs to be is some leadership.”

The company held a final $1.6 million close on its first round of financing June 1, adding Allen & Co., Sculley Brothers (led by John Sculley, Apple Computer’s former CEO) and Banc of America Securities’ Senior Managing Director Alan Braverman to a list of venture capitalists that have lent support to the consolidation theme. Dawntreader, FGII, Sterling Payot and Silicon Alley Ventures funded the company’s initial $3 million close in February.

“I have not encountered any Internet companies that would not want to employ LivePerson’s customer service technology,” said Bob Lessin, president and chairman of Dawntreader.

Currently, there are about 50 companies that use the company’s technology to interact directly with customers via online chat sessions. But management and the company’s venture backers believe the success brought by clients such as CBS Sportsline’s IGoGolf.com, NationsBank’s Carfinance.com and 9Net Avenue will lead to an eightfold increase in the number of customers utilizing the company’s software. Existing clients report closing sales at a rate between 25% to 35% when an operator engages a customer.

“Build up critical mass when it comes to customers,” LoCascio said. “Get some brand name customers, some really big Tier 1 customers, raise another round of financing in 90 days and then take it out.”

With the goal of being the first company from the sector to the public market, LoCascio hopes to enlist as many as 400 customers by year-end, including four or five Tier 1 wins within the next six weeks. According to LoCascio, one key to the LivePerson business model over enterprise resource competitors such as eShare and Acuity is cost. The company charges clients an initial set-up fee of $500 and a recurring monthly per operator fee that starts at $250.

The LivePerson technology, which requires no hardware or software, is compatible with standard browsers and can be accessed from remote locations. Further, it enables operators to handle up to four conversations at one time. Also, unlike traditional call centers, operators can use pre-formatted responses and “push” URLs to increase the number of customers serviced.

“The whole Internet has been focused on automating everything,” LoCascio said. “Automation works on the commerce side, but you don’t want to make the process of building a relationship with customers automated.”

After entering 1999 with just eight employees, LivePerson has moved into a new office in the heart of Silicon Alley to make room for additional management and sales and marketing personnel. LoCascio expects to have about 55 employees on the payroll by the end of the year, more than double the current 25.

Most recently, LivePerson has padded its management team with industry leaders. Proceeds from the equity placement were in part used to attract 24/7 Media founder Scott Cohen. Cohen will serve as executive vice president of sales and strategic alliances. Other recent appointments include: Vice President of Marketing Larry Wasserman, who previously filled the same role for Bertelsmann Online’s U.S. operations; Vice President of Sales Vince Beese, formerly with AT&T’s Interactive Group; and former Cendant COO Kirk Shelton, who will occupy the same spot at LivePerson.