Australian user research software company Dovetail announced today that it has closed a $63 million Series A led by Accel. The company has now raised just over $70 million in total and added its new capital at a valuation it describes as “north” of $700 million.
As you can tell by the numbers, this is no ordinary Series A. Instead, it’s kind of a late-stage investment by Accel, a venture capital firm that has a history of making big investments in tech companies that have raised little or no capital. who invest themselves. -funded until they raise, later in life, a big check.
Since the dovetail ride isn’t our standard Series A fare, let’s take a moment and talk about the deal, starting with how the company started and what it’s building .
Boostrapping (rather) Dovetail
TechCrunch spoke with Dovetail co-founder and CEO Benjamin Humphrey about the capital raise, going back in time to the start of the company itself. Per Humphrey, after a stint in the Bay Area with a technology company, the New Zealander joined Atlassian in Australia, where he remained for several years. After that, he co-founded Dovetail with no intention of raising venture capital, instead planning to build the company on the model of Buffer and Basecamp, well-known tech companies that pursued a more self-funded approach to growth.
The company’s focus on building software for the user research market may seem niche, but Dovetail found enough traction in its early days to grow into a six-person team with around half a million dollars in annual revenue on its own. At that time, however, Humphrey said, venture capitalists approached the company, so Dovetail raised a modest round of around A$5 million in 2019.
One of its investors, Felicis, wanted to put more capital into the company towards the end of 2020. Dovetail, its CEO said, didn’t need the money, so he raised a first round at a valuation north of $100 million, a price indicative of its market position. (Lesson: Being profitable and growing is a startup’s real fundraising forte.)
And that’s it, until today. According to new investors Rich Wong and Arun Mathew of Accel, Dovetail only burned through half of its total fundraising before it got the chance to invest.
Software vendors don’t tend to grow without hardware consumption in today’s market, which means customers were showing up to buy what Dovetail is building.
What does Dovetail sell?
The Accel duo described what Dovetail is building as a sort of new category, namely the “registration system for user research”.
Humphrey put it in more prosaic terms, describing Dovetail’s product to TechCrunch as a productivity tool for researchers. Engineers have GitHub and designers have Figma, he said, noting that user researchers need their own software. Silicon Valley and the broader startup scene, he added, have done a lot of work on building tools for the “D” in R&D, but much less on the “R” part of the equation.
Dovetail’s product is software that allows customers to collect user feedback data from NPS (net promoter score) surveys, audio, video and text responses, which are then tagged by teams, analyzed by machine and shared within an organization. The goal, Humphrey said, is to create a relational database that allows companies to store their institutional knowledge about customers so they can make decisions faster.
As an example, he said that when a product manager (PM) leaves a company, they take a lot of knowledge with them. This means that new PMs will have to rush to ask questions of the company to get up to speed, instead of having that knowledge stored and secured. Dovetail could help companies retain research data and knowledge, making it both accessible and more permanent.
I’m still learning what Dovetail does, so expect more over time as we explore the research software market. But what I can say today is that Dovetail is growing like a weed. According to Humphrey, the company tripled its revenue and customers last year. Everything is self-service, as the company only hired its first account manager a few months ago. It is real product-led growth.
Product-driven growth, the idea that a person’s service or real good will attract customers, is essentially a reimagining of the concept of product-market fit (PMF) – or is perhaps a more pure of what PMF should mean. Either way, the relatively young company is looking to match its 2021 growth rate this year, according to its investors — or at least come close. And that’s why it’s already almost a unicorn.
We’ll be haranguing Humphrey for growth data later this year, as he probably won’t be ringing our phone in the next few months with new capital news.