It was announced Tuesday that email management startup SendGrid had raised $5 million in Series A financing from a handful of prominent investors, including Foundry Group, Highway 12 Ventures, Dave McClure, David Cohen and Wordpress founder Matt Mullenweg. SendGrid, a graduate of last year's summer TechStars program, launched last fall and raised some seed funding from many of the same investors on its way to sending nearly 1.2 billion emails for its over 4,000 clients.
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SendGrid is a cloud-based service that helps companies, big and small, manage automatic transactional emails sent to its users while also providing analytics and delivery assurance. A demo plan gives companies 200 free emails per month, and after that monthly prices range from $10 for 10,000 emails, to $800 for 500,000 emails, along with a few other premium features.
More interestingly, the company managed a solid Series A round after strong customer development and acquisition without the blitz of marketing tactics we see from a lot of young startups. Sure it's important to spread the word about your product, but in other cases, letting your product speak for itself through customer referrals can play a large part of product growth.
Ryan McIntyre of Foundry Group mentored Isaac Saldana, SendGrid's co-founder and CEO, during the TechStars program last summer and spearheaded Foundry Group's efforts to lead the investment round. Tuesday morning, McIntyre offered a look into the SendGrid investment, which he says fits with Foundry Group's theme of protocol investments.
"As we observed SendGrid's rapid customer growth, which has occurred through word of mouth and without formal sales or marketing efforts, we made an offer to invest in SendGrid, and, thankfully, they accepted our offer to lead this round," writes McIntyre.
Being a graduate of TechStars has been an obvious benefit to SendGrid. Dave McClure and David Cohen have participated in both the seed and Series A rounds of financing, and some of the programs other graduates (SnapABug and Next Big Sound) are users of the service. Other more prominent companies have started using the service as well, including Plancast, HootSuite, Get Satisfaction, SlideShare and Foursquare, all helping to spread the word about the service.
Not only is SendGrid providing an excellent service that many startups could take advantage of, but they also serve as an example to other early-stage companies out there looking for funding. First, they are a shining example of the opportunities that come from participating in startup incubators like TechStars, as some of their investors and customers have come from the program.
And secondly, SendGrid's focus on steady customer acquisition and development, instead of on viral marketing, is a valuable lesson. Last Friday we mentioned a book called The Referral Engine which helps companies focus their business strategies to drive customer referrals, and it seems SendGrid has done this well, growing their customer base without traditional marketing blasts.
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