Why We Invested In Prodly $10M Series A Round
Prodly.co the leading low-code Salesforce DevOps provider, announced today that it closed $10M million in Series A funding, led by us and with the participation of existing investors Shasta Ventures and Norwest Capital, and our colleagues from TMT Investments, Altair Capital and FlyerOne. To shed some light on the VCs decision-making process, at least ours in Leta Capital, let me share some thoughts about the AppOps market, give some explanation and highlight our thesis in this deal. I hope it’ll be helpful for everyone who is willing to get into the head of vcs and see the world through our eyes.
When Anton Shardin first introduced me to the opportunity to invest in Prodly it aroused both keen interest and confusion: “The strong team, behind the experienced serial-entrepreneur with a notable exit, is doing the AppOps solution for Salesforce Apps change management”. My initial thought was: “What did you just say? What are they doing?”
It was much easier to pass at this point, but Anton’s enthusiasm and the “business meta-data” clearly indicated that we need to go deeper and figure out how big the window of opportunity is. As for today, I believe that it was the right move, that ended up with our decision not just to invest in the Company but even lead its Series A. (I promise to review that article in 5 years from now :)
What Is Prodly And What Are They Doing?
Prodly (prodly.co) enables Salesforce teams to increase productivity by 65–80% while reducing risk up to 30% by putting next-generation DevOps into the hands of admins and citizen developers. By reimagining the change management experience, Prodly’s AppOps suite delivers greater business agility and governance without straining IT. With solutions for release management automation, version control, sandbox seeding, data migration, and regression testing, Prodly AppOps sets the standard for low-code DevOps and can be implemented 20 times faster than traditional applications.
I hope you are impressed already, but most probably you have a question…
What Is AppOps?
You most probably heard about DevOps as a way to create an automated life cycle between software development and IT operations teams (otherwise, welcome to the modern software development world). So you can think about AppOps as DevOps, but for low code application management. With the very same tasks: Simplify Data Deployment. Control Versions. Test Everything. Release Faster & More Often.
The basic idea behind AppOps is that the person who builds low-/no- code apps — aka ‘the citizen developer’ — is also the person responsible for operating the app in production. Despite the ongoing discussions around AppOps as a “new big thing” versus “next buzzword”, we believe that the thesis that the rise of low code automation will require better solutions to manage processes the same way as traditional software development definitely has its point. So we decided that companies like Prodly have a perfect chance to lead the category in their nascent niches.
After we saw the market opportunity, the next question was “why Prodly”? The thesis was built on the following main points:
Leta Capital Thesis Behind The Investments
Founder With Deep Expertise In The Industry
Max Rudman (CEO and founder) sold his previous company called SteelBrick to Salesforce (today it’s called Salesforce CPQ) for $360M. So it was a perfect match for Salesforce. Max joined the Salesforce team, where he worked for 3 years, and where he strengthened an understanding of his old thesis, which was discovered while building Steelbricks, about the problem of data migration between apps. That was his point to start a new business.
Max defines himself as a product-driven entrepreneur who loves to solve complex business problems with elegant technical solutions. I believe it's a perfect portrait of the tech-driven entrepreneur correcting the imperfections of the world with an engineering approach. Also, such a niche can’t be discovered from the outside. So for us, it sounds not just like a huge challenge, but as a huge opportunity.
Well-Formed Team
Of course, Max isn’t the one who is doing everything in the Company. The core team consists of very committed professionals in technical, financial, S&M areas. At the same time, Prodly not just put together a team that knows what to do right after the financing round but also has a clear vision about the existing lack of expertise and the challenges, which the Company will face in the future.
I could stop here, but there was one more thing that has increased our confidence in Max and his team. That thing was the fact that the team also…
Invested Their Own Money
The company has great investors such as Shasta Ventures and Norwest Venture Partners in their Seed Round. Nevertheless, founders invested not just their time, but also their own money in the Company. That showed us a high level of commitment and confidence that they believe in the future.
Customer Satisfaction
If you had a chance to read our Manifest, you may be wondering why we have a revenue threshold at all. The main reason behind that is the fact that as a VC, we can observe markets and trends only from a high-level perspective with no hands-on experience. The only way for us to get “an intel” and check the founders' words about customer needs and the market itself in a bottom-up manner is to talk to real users and customers who actually pay for the product (except cases when statistics start to talk better than any opinion :) ).
The happiness of customers is one of the most important indicators for building a long-term business, especially in the enterprise field. As a part of the Due Diligence process, our team talked to customers of the Company and Salesforce admins who have never heard about Prodly and AppOps.
All of them confirmed the pain and value that Prodly platform can bring to change management. Existing customers were happy about the usage and support. Also, they pointed out a few ways where evolving product offerings can be helpful for them. From our perspective, it’s a good sign to continue with the investment opportunity.
Traction And The Size Opportunity
To imagine the size of the opportunity we decided to look at successful comparables, such as Splunk (DevOps company). The company was founded in 2004. In 2008 it reached $9M in Annual Revenue, then $18M, $35M, etc (just like the TTDDD rule in the famous article ). Sounds cool, right?
You can tell me: “Sure, Sergey, it’s a great example where a middleware SaaS company achieved great success. But why do you believe that Prodly can go the same way?”.
Let’s look at Splunk funding history before : https://www.crunchbase.com/organization/splunk/company_financials ($5M in 2004, $10M in 2006, $25M in 2007). It looks like 2007 was the point where Splunk found its product-market fit and started to burn money on sales and marketing. Prodly is on its way with much better capital efficiency, so I prefer to believe that we’re at the very beginning of a similar story.
You can ask me, why it takes so long to start getting the traction. Some of the most recent unicorns can achieve bigger revenue in a couple of years from the very beginning (“look at the food delivery, Sergey!”). But the earliest results of companies like Prodly shouldn’t be compared with b2c, SMB software, or even some generic enterprise-level solutions (such as CRM or Project management tools). Our point here is that Prodly has found its product-market fit, proved it with a solid customer base and it is ready to build a Sales&Marketing machine to become an industry-standard while expanding its product offering. I believe that long-term potential is huge and much more reliable. Can the Company screw up all potential from that point? Yes, of course. But I believe that team is going to beat Steelbricks success, otherwise, Max wouldn’t have started that Company. Also, it is the venture risk we have to take, that is perfectly balanced with a potential reward for us.
Nothing sexy, hard to explain
The modern VC market lies on a huge fear of missing opportunity, the fast decision-making process, and a lot of attention to any “understandable” X_tech companies (you can put —Food, Fin, Insur, etc). In such circumstances, companies like Prodly stay out of sight. As a VC you won’t be a rock-star at a party if you start telling people “I’m an investor in the Company that simplifies change management for Salesforce apps”. My guess is if you start like this you will find yourself standing alone when you finish the phrase.
At the same time, for entrepreneurs, it means that there is not too much attention or competition from investors for the area and from other companies as well. Hard things are harder to make. In such situations, the underserved market gives us a bigger opportunity to move in a better environment, until the opportunity becomes obvious for everyone and the topic becomes hot and overvalued.
So having all that LETA Capital is proud to join the journey with Prodly team. I hope that together with the company we will achieve great results.
Call To Action For Everyone Who Has Read To The End
If you are an executive or technologist and find yourself overloaded with change management for Salesforce feel free to reach out if you would like an intro to the Prodly team.
If you are an entrepreneur working in the Enterprise automation area, and not competitive with Prodly, don’t hesitate to reach our team and tell us about your business.
