Pendo Announces Series A Funding
Today, we are announcing our Series A financing of $11M led by Battery Ventures. They were joined by new investor Salesforce Ventures and existing investors Contour Venture Partners, Core Capital Partners, and IDEAFund Partners. As part of the financing, Neeraj Agrawal from Battery is joining our Board of Directors.
Throughout this process, we’ve had the opportunity to get to know the teams from Battery and Salesforce. We’ve been impressed with the deep market knowledge and thoughtfulness of the teams, and we’re excited to add this caliber of partners to our team.
How we did it?
When chatting about financing events I typically get asked, “How did you do it?” Truthfully, this is likely due to where we’re headquartered. Unlike the Bay Area (or other major tech centers), medium to large seed and Series A rounds are not typical in Raleigh-Durham, NC. Plus, it’s nearly impossible to read technology news and not see an article about the “Series A Crunch.”
The key milestone for a Series A is achievement of product-market fit. In January, Brad Feld published a must-read article on the subject that really resonated with me at the time. We had just closed our first paying customers, and we were wrestling with the question of whether we had fit or not. Also, I had just spent a month or so having preliminary discussions with some VC’s, and we still felt like we had work to do. Based on this, we raised a small extension to our seed round to give us space to continue building traction with customers.
Over the course of the next 3-6 months, we grew our customer base one-by-one. Just as importantly, we increased the breadth and depth of usage within our customer base. Salesforce calls its customer success team Customers for Life, and our goal has been to evolve our products and service our customers to create customers for life. Our newfound customer traction generated interest from a few firms in the venture community, notably Battery Ventures, and the rest is history.
- Focus on making customers successful. There’s a difference between a customer that’s simply willing to take a phone call and say a few nice things about your product/company and a customer that’s actively using your product. It’s the difference between spin and authenticity, and I’d argue this difference is the key to product-market fit. You can’t fake customer engagement. Since launching, we’ve grown usage of our product 50% each month. Plus, making customers successful isn’t just good for fundraising — it’s good for your business.
- Have early, informal yet open conversations. There’s always a fine line here, but I’m a big fan of openness. At the end of the day, you’ll never find the right partner if you don’t share information about your business. During my first meeting with Battery (and others), I gave a fairly exhaustive walkthrough of the business including some key customer examples. This information helped them start doing some due diligence and getting excited about our story. Plus, these meetings often led to introductions to portfolio companies, many of which became early customers.
- The right investors will get it. Like many entrepreneurs, I’ve had some head-scratching conversations with potential investors. Those conversations usually include companies that have nothing to do with us or justification of market size. The investors that really understood us had their own perspectives on market size. They didn’t waste our time explaining where we fit in the market — rather they told us how they saw the market with us in it. Ultimately, raising money is NOT a sales exercise — it’s a match-making exercise. Stress less about your pitch and stress more about finding the right fit.
What does this mean?
I love cooking, and in some ways creating a company is much like creating a dish. You start with the best possible ingredients and combine them in a way to create magic. This funding doesn’t change our recipe, rather this funding represents adjusting the serving size of the recipe that’s enabled us to get here. We’re now focused on finding more of the best possible ingredients. If you’re a current customer, you should expect more even more from us. If you are not, you should expect a call 🙂
Lastly, I wanted thank our customers, partners, families and friends that have supported us to reach this milestone. Raising this round is certainly an accomplishment, but it’s really only an early milestone of many on the path to creating a great company.