Samsara raises $40M in Series C funding to fuel growth in industrial IoT
Announcing Samsara’s latest financing round, and a closer look at why technology companies can grow at a faster pace than traditional businesses
At Samsara, we spend a lot of time with the “behind the scenes” industrial companies who work hard to deliver fresh produce, reliable electricity, clean water, and of course, all those Amazon packages. It’s an interesting way to learn first-hand about how different types of businesses operate, especially outside of Silicon Valley tech companies.
Something unique about industrial companies is the measured pace of their growth. I’m always amazed by the black & white photos in our customers’ lobbies — several of them are still going strong after a hundred years! It’s nearly impossible to think of a 100 year old tech company other than IBM, and even giants like Google and Amazon have yet to celebrate their 25th birthdays.
This makes you wonder — how can successful tech companies achieve scale in a handful of years, while traditional businesses take an entire lifetime?
A case study from our past lives
As company founders, John and I spend a lot of time thinking about what makes organizations tick. We were fortunate enough to have experienced fairy-tale levels of tech company growth at our first startup, Meraki, which has given us an up-close case study of how tech companies grow quickly. Like many small companies we started off in 2006 with a $1M run rate (which was great for some grad students who had never sold anything!) Then we managed to double revenue every single year, eventually becoming part of Cisco Systems in 2012 in a $1.2B merger. The Meraki business has continued to grow, and now has a reported run rate of over $1B per year, with over a million active Meraki networks around the world, all in about a decade.
So how was that possible? First, we’ve always known that we got lucky with Meraki — we happen to have built the right technology, with the right people, at the right time. Second, we have come to recognize we achieved many of the scaling patterns of hyper-growth tech companies: the adoption rate of an innovative product, a massive market, and a thriving sales and engineering culture. As we begin to grow our second company Samsara, we’ve managed to use those lessons to achieve a higher rate of growth than our previous venture.
The virtuous cycle of tech company growth
After studying dozens of companies looking for patterns, we’ve noticed modern technology firms have several unique factors that help sustain exponential growth rates, especially when compared with traditional businesses:
- Skilled engineers and sales people who can build and market innovative products on top of rapidly advancing technologies. The talent pool of Silicon Valley is world famous for exactly this reason. The side-effect is companies have to pay high market rates for great talent, but it’s worth it if you can achieve scale.
- Access to sophisticated venture capitalists who take a long term view of building market leading companies. The top-tier tech VCs invest over 7–10 years time horizons and have access to billion-dollar funds, versus more traditional investors looking for short-term returns and dividends.
- Products which address huge markets, along with software-based distribution models. Thanks to the Internet, cloud-based software products are able to scale to customers at very low marginal cost (bits are a lot easier to move than steel!)
Over the past 35 years these factors have led to a positive feedback loop of growth for technology companies, as talent and money from successful companies has been reinvested back into the ecosystem. The evidence is in the numbers: it used to be the rare HP or Microsoft that emerged from the sea of small startups, but now there are over 600 tech companies generating $100M or more in revenue according to McKinsey.
This pace of company growth is almost only seen in technology, which is why startup growth seems so foreign to outsiders. Reid Hoffman, who was a founder of both LinkedIn and Paypal, coined the term “blitzscaling” to describe what happens to modern tech companies as they scale up from a dozen engineers to thousands of employees in a handful of years. The general idea is to start with a high-quality team and to be patient while waiting to verify you’ve built a technology that targets a big market, and then to invest heavily in growth to capture market share away from incumbent solutions once it’s gaining traction. The details matter of course, so if you’re curious to learn more I highly recommend his article in the Harvard Business Review or the videos from the scaling class they teach at Stanford (yes, they teach a startup scaling class at Stanford!)
Scaling from a small seed crystal to a large organization based on feedback loops is one of the reasons hiring great talent and treating employees well is so critical in technology companies. Successful companies grow exponentially with little time for formal training, so the organic culture set by the first few dozen employees determines how the company operates a few years later at the scale of a few thousand.
Announcing Samsara’s $40M Series C growth round
When we started Samsara, we wanted to make sure we built a real technology solution to the problems of the large industrial market, so we took the first few years to recruit a group of talented people and make sure we built something truly useful.
In the last six months, we’ve started to see many telltale signs that Samsara is entering our own phase of “blitzscaling” — rapid adoption among industrial customers, an outstanding win rate versus incumbent solutions — and as a result we’ve managed to consistently beat our sales targets over the past year.
Our success in the first phase of Samsara has been due to combination of luck and a talented team. We were able to get to this point efficiently, having used less than half of the funding from our initial $25M Series A investment led by Andreessen Horowitz more than two years ago (or the $15M Series B round we raised six months ago). Today we’re announcing an additional $40M in Series C financing, led by General Catalyst, to strengthen our balance sheet as we enter the long-term growth stage of the company.
Our plans over the next year are to continue growing in size from 100 employees to over 250, while investing in research and development so we can continue delivering on our vision of a next-generation Industrial IoT platform. Having a strong balance sheet helps us stay focused on the long term, through economic cycles and technology shifts, as we grow through the coming decade.
We hope you’ll follow along with us as we continue our journey through hyper-growth and if you happen to know anyone who might be looking to join a technology company — we’re hiring!