Salesforce Joins Pendo Funding

Customer relationship platform Salesforce (CRM) has participated in a $25 million financing round for privately held Pendo.

Pendo has created an ‘analytics and guidance’ software system that helps companies better understand how users interact with their software.

Salesforce has supported Pendo financially and in the marketplace by using its system and enthusiastically spreading the word.

As a result, CRM is in an excellent position to influence product development or acquire Pendo at an appropriate juncture.

Investee Company

Raleigh, North Carolina-based Pendo was founded in 2013 to develop a better way for companies to track how users are using their software, for the purpose of improving the usability and value of their software investments.

Management is headed by co-founders Todd Olson, CEO, and Erik Troan, CTO. Olson was previously VP Products at Rally Software. Troan was previously Director at TheraSim and rPath.

Below is a brief video from Salesforce about how it has used the Pendo system:

https://www.youtube.com/watch?v=JKExF5XRbkA

(Source: Pendo io)

The company’s customer base predictably includes many software-centric technology companies, as their business model success rests squarely on the ability of their customers to derive value from their software.

Investors in the current deal in addition to Salesforce include lead investor Meritech Capital Partners (Rob Ward), Spark Capital, Battery Ventures, Contour Venture Partners, Core Capital Partners, and IDEA Fund Partners.

Notably, most of the investor base (including Salesforce) invested in previous rounds and has continued to support Pendo’s capital needs, so indicates strong growth results and prospects for Pendo.

Investment Terms and Rationale

Valuation for the current round was not disclosed, nor were there ‘whisper’ numbers in the tech press.

Pendo has raised over $56 million in several financing rounds, with Salesforce participating in rounds A, B and now C.

As the above video shows, Salesforce has been an enthusiastic user of Pendo’s user tracking and guidance technology and approach.

The system was designed by product-centric people for software product-centric companies, and Pendo says its revenues quadrupled in 2016 as its customer base grew to hundreds of firms, no doubt helped by Salesforce’s testimonial.

This highlights an important benefit that corporate investors such as Salesforce can bring to early stage technology companies: a ‘marquee’ customer that stands up in the industry and says ‘here is a promising new solution that we are using’ can be invaluable.

Salesforce is also a ‘platform’ that many other software-centric companies use, so the effect is multiplied as word spreads that a new software company has a solution that others may use to improve their operations.

The result is impressive, as Pendo stated that it ‘now tracks over 20 billion user actions and improves the product experience of over 22 million users every month.’

Of course, those numbers are designed to be as large as possible, but Pendo has the chance to become a ‘category-defining company,’ and now has the financial support and visibility from investors and partners such as Salesforce to propel it forward.

Salesforce stands to gain an inside track by possibly influencing new product development at Pendo as well as a potential success story for its platform of offerings.

It also likely has a right of first refusal for Pendo should the firm wish to sell at a later date. Optionality is a key value for corporates and Salesforce has acquired that position by continuing to invest and support a promising new software company.

Disclosure: I am LONG on Salesforce