While Pendo has raised $56 million, CEO Todd Olson says gathering capital has been his biggest growth challenge. A graduate of Carnegie Mellon University, he worked for several software companies before starting his own.
By David Ranii
They might regret it now, but a lot of investors weren’t eager to plow money into Todd Olson’s startup focused on enabling product managers to make their software more user-friendly. Many of the investors Olson met after he and three colleagues founded Raleigh-based Pendo in 2013 balked because their target clients had no budget to purchase the tools envisioned by the new company.
Though the rejections sparked some self-doubts, Olson persevered. In early 2014, the company raised $1 million from a group of investors that included Idea Fund Partners in Durham. Olson’s co-founders were Erik Troan, chief technology officer; Eric Boduch, chief evangelist; and Rahul Jain, vice president of business development.
What didn’t click with investors struck a nerve with companies that recognized software utility and ease-of-use have become paramount. “We are seeing new startups get created, disrupting old categories, solely based on the quality of their software,” Olson says. Today, Pendo has more than 600 customers — Red Hat, Realtor.com and Citrix are among them — including nearly 300 added in the fiscal year that ended in January. Subscription revenue has more than tripled in each of the last two years. Employee headcount more than doubled last year and now totals 214, including 152 in Raleigh, and Olson anticipates adding another 30 to 40 workers by year-end. The company receives 4,000 job applications per quarter, Olson told WRAL TechWire in July.
The influx of customers solved the funding problem. To date, Pendo has raised $56 million from investors, including $20 million at the end of 2016 and $25 million in July 2017. Funds run by Meritech Capital Partners of Palo Alto, Calif., Salesforce Ventures of San Francisco and Battery Ventures of Boston are among the company’s backers. Olson, 42, says the company is now very well-capitalized, and he doesn’t foresee raising additional money anytime soon.
Pendo could become a unicorn — a startup valued at more than $1 billion — if it can continue to manage its rapid growth, says Lister Delgado, managing partner at Idea Fund Partners. Many startups, he says, die from indigestion rather than starvation. “I think this team can keep up,” he adds. “But they still have to do it.”
Pendo’s cloud-based technology helps companies improve their software by providing feedback on which features customers use and which ones they ignore. It also delivers pop-up messages and enables user surveys. Last year’s acquisition of Israeli startup Insert enabled Pendo to expand its capabilities to encompass mobile apps.
“Pendo allows you to see in detail what is really engaging for the user,” says Nikhil Gopinath, senior product manager at Campbell, Calif.-based Saama Technologies, a data-analytics company.
Pendo’s software was inspired by Olson’s experience as vice president of products at Rally Software Development, a Boulder, Colo.-based company that acquired his startup, 6th Sense Analytics Inc., for an undisclosed sum in 2009. “I lived the pain,” Olson says.
“I found it very difficult to really do my job without effective data.”
Pendomonium, the company’s two-day user conference, attracted 402 attendees to a downtown Raleigh hotel in March, up from 161 last year. Customers at the conference praised the software. “The dashboard screen provides me with high-level information that helps me very quickly assess what is going on,” says Mark Sapiano, senior director of product development at DiscoverOrg, a Vancouver, Wash.-based software company. “It has a level of detail that allows me to drill into areas that I can examine further.” Using Pendo enabled DiscoverOrg to determine that a redesign of a feature doubled user activity in that particular area.
Pendo’s competitors — all of which are startups — typically offer a single function rather than providing the suite of tools Pendo offers, says Bill Binch, Pendo’s chief revenue officer. “A buyer can come to us and have just a single buying experience and get a product that is world-class with all these different components,” he says. In the software realm, that means a single login; just one application that users need to learn how to use; a single phone call if a problem arises; and no integration issues.
Binch’s résumé includes stints at Oracle, PeopleSoft, and, recently, Marketo, where he led Asian Pacific sales. When considering his next step, he heard a lot of positive buzz about Pendo. “Pendo was a recurring theme with folks out in [California’s] Bay area,” he says.
Pendo’s immediate challenge is expanding beyond its base of tech-oriented customers to marquee consumer brands, many that are using software to interact with customers.
Some competitors are convinced they ultimately will prevail against a company based in North Carolina rather than Silicon Valley, Olson says. “I love that.
People say we carry a bit of a chip on our shoulder, and I think that makes us a stronger business. I take nothing for granted.”