Kustomer, the CRM startup acquired by Meta last year for $1B, spins out on a $250M valuation

Meta's grand experiment in building an enterprise-ready customer service platform has come to a close: The parent of Facebook has officially spun out Kustomer, the CRM startup it acquired last year for around $1 billion.

The new entity is starting life with a new infusion of $60 million from previous backers Battery, Redpoint and boldstart, and a major chop into its previous valuation -- it's now at $250 million, said one report last week forecasting today's news, a figure not disputed when I asked CEO and co-founder Brad Birnbaum about it earlier today. Birnbaum will stay at the helm of the spun-out company; Meta will remain a minority owner.

"Kustomer strongly believes spinning out was in the best interest of the company, customers and employees," he said, "and we are very excited to continue to enhance our world-class platform in ways we couldn't have imagined only a few years ago using advanced automations and generative AI."

Meta's intention to divest itself of Kustomer was first reported in March, amid a bigger cost-cutting and restructuring effort at the company.

Meta's "year of efficiency" -- the phrase used by CEO and co-founder Mark Zuckerberg -- has also included some 21,000 layoffs; closing down several new app and content efforts (Move, NFT support and Cameo clone Super among them); and killing some of the other non-consumer bets the company had made over the years, such as its Connectivity infrastructure efforts.

It's not clear if there were buyers interested in picking up Kustomer, but keeping a minority stake in the CRM business gives Meta the option of continuing to work with it to build out products, and to continue to service any clients that it had picked up in the year that Meta owned it.

All told, with the new innovations everyone -- including Meta -- is chasing around generative AI, there are likely some very interesting tools that the two could build and integrate across Meta's platforms. But on the other hand, it's not clear how much business the two had built together up to now.

Although the Kustomer deal was originally announced in November 2020, all regulatory clearances were only completed in early 2022, with Facebook officially closing the deal in February 2022 -- meaning Facebook (eventually rebranded as "Meta") really only owned $1 billion Kustomer for a little over a year.

The original aim with Kustomer was to build a new approach to CRM around the concept of "omni-channel" contact. Traditional CRMs, in Birnbaum's view, were not fit for how consumers (and would-be customers of businesses) engaged with companies these days.

Basic customer service lines, and customer service desks, are out; a variety of social media platforms, websites and messaging apps are in. So Kustomer's aim was to build a modern platform to be able to manage all that more easily, and to use that data to get better insights into consumer sentiment and to improve outgoing marketing communications alongside it.

This fit well with Facebook's (and eventually Meta's) vision of how it saw platforms like Messenger, Instagram and WhatsApp developing: people and businesses were already using these to communicate informally, so the thinking was to build enterprise-grade products to formalize, monetize and enhance that activity.

That could still be the case; it's just that now it will be done with Kustomer as a standalone entity.