SendGrid gets $21M in capital, led by Bessemer

Deliverer of cloud-based email solutions plans goes after enterprise market and London expansion

With more and more enterprise companies turning to the cloud for services, SendGrid, a cloud-based provider of email services, hopes to piggyback on that trend by helping them deliver their emails. 

SendGrid announced Tuesday morning that it's raised $21 million in a Series B round of funding, led by Bessemer Venture Partners, with existing investors Foundry Group, Highway 12 Ventures, SoftTech VC, 500 Startups and Bullet Time Ventures also participating. The round is the newest capital infusion since SendGrid raised $5 million in April 2010, which followed its first round of $750,000.

The new funds will be used to "scale what's working, expand facilities and hire a lot more engineers," said Jim Franklin, SendGrid's CEO, in an interview.

Franklin, who joined SendGrid last spring, said expansion will come in many forms. Firstly, the company is targeting Europe for its expansion plans, and may open up offices in London. Additionally, the company also plans to expand its target market to include enterprise customers. While the company has fairly large start-up companies using its services, like Foursquare, Pinterest and Airbnb, the company's sweet spot is high-tech start-ups that are under 10 employees and under two years old. They typical subscription service payment is $79 per month, said Fanklin.

"To date, we've been a pull market, as developers talked amongst themselves" said Franklin. "[Now] we want an outbound sales effort" to go after larger companies. One way to get into the enterprise market is through its just-announced partnership with Windows Azure, Microsoft's enterprise-grade cloud platform for building and hosting Web applications.  

Keeping its lead

Since launching in 2009, SendGrid has expanded rapidly. It's now sending 100 million emails per day and 2.6 billion emails were sent in December. It currently has 37,000 customers, up from 12,000 at the end of 2010. It's this growth that's requiring new funding to scale.

But there's also a new competitor to watch out for. Amazon has a competing service and a ready distribution platform with all of its start-up customers using its Web Services platform. Even though Amazon is a threat, Franklin, now armed with new funds, says Amazon's offering is "pretty thin' and its presence has only helped create "free marketing awareness of our category." That said, it doesn't hurt to have fresh funds to remain competitive. 

"The reason we’re bulking up with Bessemer is we want to be in a good position to maintain our lead," said Franklin.

SendGrid also has relationships with RackSpace, SoftLayer and Heroku, which re-sell their services. The majority of SendGrid's business, however, comes from word-of-mouth marketing from one start-up developer to another, said Franklin.

While Franklin says he sees SendGrid scaling to support 10x more emails, the growth opportunity for the company also comes from offering additional services to its clients, such as expansive analytics around the data collected or putting in dynamic targeted advertising links in the emails. There are products in the pipeline, he said, without getting into too much detail. But suffice it to say, SendGrid has a new cash pile and is seeking engineers. If there are engineering teams out there with expertise in email technology and a complementary product to sell to SendGrids' client base, SendGrid will likely be very interested in an acquisition. "There are challenges hiring great email engineering talent," Franklin said. "This is available through acquisitions."

(image source: joelgoldstein.com)