Smartsheet Wins Big Customers, $35M From Sutter Hill Ventures
An important aspect of the consumerization of corporate IT is the way new products are initially adopted and ultimately deployed by a large business. For many business software makers, the idea now is to get an easy-to-use tool in the hands of a few people or a small team, and let them spread it throughout the rest of the company.
Smartsheet, the Bellevue, WA-based maker of software-as-a-service collaboration tools, has just closed a $35 million funding round. The company seems to have cracked the code for that consumer-style adoption, and is now reaping the benefits in the form of larger deals with customers including Google, Groupon, and the U.S. General Services Administration.
“The majority of all those [customer] expansions happened without our hand on it,” says Brent Frei, Smartsheet’s co-founder and executive chairman. “Somebody or some set of people inside those companies found it, and it just took off.”
The new financing wasled by Sutter Hill Ventures with participation from prior backers Insight Venture Partners and Madrona Venture Group. The new capital will support hiring in areas such as enterprise sales, to better take advantage of leads (Smartsheet didn’t have any dedicated salespeople until 2012) and additional product development, including the launch of an app gallery later this month. As part of this investment, Sutter Hill managing director Jim White is joining Smartsheet’s board.
Smartsheet, founded in 2005, raised $26 million in late 2012, and has now attracted a total of $70 million.
The company was cash-flow positive last month and is growing at a triple-digit rate on annual revenue of more than $10 million, but less than $100 million, says CEO Mark Mader, declining to be more specific.
Frei says an initial public offering is “one potential outcome” for the company, which currently has 120 employees and plans to double its staff in the next year.
“Our addressable market is absolutely big enough to be a very successful public company. [The product] is quite literally useful to every person in a business,” he says.
Smartsheet is meant to feel instantly familiar to anyone used to using a spreadsheet and e-mail in the regular course of work—which describes a pretty broad swath of the modern workforce. That’s one way the company differentiates itself from the wide array of collaboration tools available today.
“We’re the only ones who said, let’s use the spreadsheet-inspired design,” Frei says.
Smartsheet layers onto that familiar interface the ability to create project-planning timelines, calendars, task lists, and reminders; embed and share a wide range of attachments, entire spreadsheets, or just parts of them inside and outside a company; link to other cloud services providers such as Google, Salesforce.com, Box, and Dropbox; and perform other functions.
Frei says that broad utility has helped drive adoption in all corners of some large businesses. The company’s stable of enterprise customers now numbers 328, a five-fold increase over the last year. It counts 42,000 total paying customers.
Smartsheet’s software is sold on a tiered subscription model. A team with three people able to create sheets and reports, with 45 gigabytes of storage, would pay $468 a year for the service.
When Smartsheet does face competition for a customer, it’s typically from software such as Microsoft Project, or a purpose-built tool used in house. Most often, Frei says, the company is replacing the status quo of e-mailed spreadsheets for project management.
There are other more modern approaches to collaboration that come at the (admittedly broad) task from different directions, such as the team task management approaches of Basecamp and Asana; scheduling tools like LiquidPlanner; cloud storage providers such as Box and Dropbox that are integrating more collaboration features; corporate social networks such as Yammer (acquired by Microsoft) and Jive Software; and online suites from Microsoft and Google.
Other aspects of Smartsheet—the product as well as the company—have been crucial to gaining support from central IT decision makers for broader deployments, says Mader. These include adherence to authentication standards and other security policies, and the ability to manage and reassign content created by individuals in the company. (This kind of compliance requirement and protection against data loss are increasingly demanded of all consumer-style apps that would ascend within a business, he says.) But, Mader adds, “The one area that we have found enterprises being most diligent on is actually not product-centric. It’s what are the processes and controls that you as a service provider offer us to ensure the highest level of security.”
He says the company has been built with those requirements in mind from the beginning—a strategy that seems to be paying dividends now.