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This Software Startup Raised $45 Million To Make Life Easier For Product Managers

He now runs one of Silicon Valley’s buzziest software startups. But four years ago, productboard CEO Hubert Palan couldn’t even convince his own mother that his company was going to work out. “She’s always been my biggest supporter,” Palan says. “But she was like, could you think about doing something else?”

Palan persevered with productboard, a startup that makes software for product managers to manage the development of new features and products. And now with new investors – and a lofty valuation – he’s hoping to set a new standard for how businesses in tech and outside of it design, improve and make their stuff.

Productboard announced on Wednesday that it had raised a $45 million Series B funding round from investors led by Sequoia Capital and Bessemer Venture Partners. According to a source with knowledge of the raise, the funding values the San Francisco- and Prague-based company at $350 million post-investment.

As Palan puts it, productboard (the company styles itself with a lowercase “p”) emerged from the lack of a centralized, focused place for product managers to organize and share their work. Tools like Atlassian’s Jira software had made it much easier for engineers to code and develop new programs, web features or apps. But Palan, himself a product manager by trade, was used to commiserating with friends in similar roles that how such engineering projects incorporated customer, design and manager feedback — all integral steps to product management— was usually through stitched-together spreadsheets or docs. “Engineering tools help you build faster, but they don’t figure out what is right to build,” Palan says. “It’s like a car feature that can help you drive faster, but they don’t tell you if you’re about to drive off a cliff.”

Founded in 2014, productboard started slowly. Palan had moved to California’s San Francisco Bay Area in 2007 after working in his native Czech Republic as a consultant in Prague, studying product while at the Haas School of Business at the University of California, Berkeley before working as head of product at a startup called Maestro Market. Briefly returning to Prague after he couldn’t get his visa renewed in 2010, Palan joined a bigger tech company, GoodData, to return to San Francisco, where he spent more than three years as a vice president of product management.

Palan synced up with cofounder Daniel Hejl in an unusual way: through Facebook. While still at GoodData in 2013, he posted to the social network that he was looking for an engineering-background cofounder for a startup – but, unable to quit his job due to his visa situation, he included a fib: that he was “asking for a friend.” Hejl replied that he’d meet the friend, only to discover the ruse. For months, the two worked on their product in relative obscurity. The goal, Palan says, was to build something that could sell itself, entirely through word of mouth. But it took longer than they expected, and for more than two years, until they raised a small seed investment of $1.3 million led by Index Ventures and Credo Ventures in Europe, they did so with growing doubts.

Productboard’s founders kept costs low by limiting its their own salaries and by building their engineering team in Prague. While remote engineering offices are becoming increasingly popular in Silicon Valley – especially with investors – Palan says the move then was more about who was willing to join. “it’s not like I was looking for an army of mercenaries,” he says. “When you’re building a startup you need to find people who are crazy enough to join you, and who appreciate your passion.” After a lengthy test period, the company launched at TechCrunch’s Disrupt Startup Battlefield in September 2016.

Other tech companies and startups proved early adopters, but productboard and its investors say the company is now used by more traditional businesses like car insurance company Metromile, with more than 2,500 customers overall. Its popularity with other startups has made it a known entity to venture capital firms in recent years, with Kleiner Perkins leading its Series A investment in July 2018. Before Sequoia and Bessemer agreed to share its Series B, Palan says he was being staked out by would-be investors who would turn up in the productboard lobby and ask for unscheduled meetings.

Whatever headwinds may face high-burn or consumer companies in Silicon Valley in the continued fallout of WeWork’s collapsed IPO, demand for companies like productboard with high capital efficiency and easily trackable growth within customers remains high, says Andrew Reed, an investor at Sequoia who is joining productboard’s board of directors. That helps explain what was a high price tag for investing in productboard now: a $350 million post-money valuation off of annual recurring revenue of not much more than $8 million last year, according to a source with knowledge of the deal, but tripling sales growth. “There should not be product managers that haven’t heard of productboard,” says Reed.

With the money, productboard will invest in traditional growth areas for an enterprise software company, such as sales and marketing, and in hiring for other areas in its offices in San Francisco, Prague and Vancouver. The goal, says Bessemer’s Byron Deeter, is to build a new “system of record” like Salesforce is for salespeople (or how many journalists depend on Slack).

The company’s CEO says productboard will continue integrating with more other tools and will add automation to make it easier to incorporate live feedback not just from colleagues throughout a company, but from its customers, too. “We’ve gone from engineering-led, to sales-led, to product-led companies,” Palan says. “You need to understand customers’ needs super well, or you don’t get a second chance.”

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