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 it added its new capital at a valuation that it describes as “north” of $700 million.
As you can tell by the numbers, this is no ordinary Series A. Instead, it’s a late-stage investment of sorts by Accel, a venture capital firm that has a history of making large investments into technology companies that have raised little capital or self-funded until they raise, later in life, a large check.
Given that the Dovetail round is not our standard Series A fare, let’s take moment and talk through the deal, starting with the company’s early history and what’s it’s building.
Boostrapping(ish) Dovetail
TC spoke with Dovetail co-founder and CEO Benjamin Humphrey about the capital raise, turning the clock back to the start of the company itself. Per Humphrey, after a stint in the Bay Area working for a technology company, the New Zealander joined Atlassian in Australia, where he stayed for a multi-year tenure. After that, he co-founded Dovetail without the intention of raising venture capital, instead planning to build the company along the lines of Buffer and Basecamp, well-known technology firms that have pursued a more self-funded approach to growth.
The company’s focus on building software for the user research market might sound niche, but Dovetail found enough traction in its early days to scale to a team of six with around a half-million dollars in annual revenue under its own power. At that point, however, Humphrey said, venture investors were approaching the firm, so Dovetail raised a modest round of around AUD$5 million back in 2019.
One of its investors, Felicis, wanted to put more capital into the company toward the end of 2020. Dovetail, its CEO said, didn’t need the money, so it raised a seed-1 round at a valuation north of $100 million, a price indicative of the position it had in the market. (Lesson: Being profitable-ish and growing is the real startup sweet spot when it comes to fundraising.)
And that’s it, until today. Per new investors Rich Wong and Arun Mathew of Accel, Dovetail had burned only half of its total fundraising before they got the chance to invest.
Software companies don’t tend to grow sans material burn in today’s market, which means that customers were showing up to buy what Dovetail is building.
What’s Dovetail selling?
The Accel duo described what Dovetail is building as a sort of new category, namely the “system of record for user research.”
Humphrey put it in more prosaic terms, describing Dovetail’s product to TC 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 larger startup scene, he added, has done much work building tooling for the “D” in R&D, but far 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 answers, which are then tagged by teams, machine-analyzed and shared across an organization. The goal, Humphrey said, is to build a relational database for companies to store their institutional knowledge about customers so that they can make faster decisions.
As an example, he said that when a product manager (PM) leaves a company, they take with them quite a lot of knowledge. This means that new PMs will have to race around asking questions of the company to get up to speed, instead of having that knowledge stored and secure. Dovetail could help companies hold onto the data and knowledge from research, making them both accessible and more permanent.
Growth
I’m still learning about 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. Per Humphrey, the company tripled its revenue and customers last year. All self-serve, with the company only hiring its first acount executive a few months ago. That’s actual product-led growth.
Product-led growth, the idea that one’s actual service or good will draw in customers, is essentially a rebrand of the concept of product-market fit (PMF) — or is perhaps a more pure version of what PMF should mean. Regardless, the relatively young company is looking to match its 2021 growth rate this year, per its investors — or at least get close. And that’s why it is nearly a unicorn already.
We’ll harangue Humphrey for growth data later this year, as he likely won’t be ringing our phone in the next months with new capital news.
