By Nathan Beckord
Sometimes a company comes up with an idea that seems so self-evident in hindsight (Oh, of course – that makes sense!) that it’s almost surprising to learn that the product hasn’t been the industry standard for years. Product management platform Product board is one of those companies.
After raising more than $260 million with a total valuation of $1,725 billion, it’s clear that investors see Productboard’s value. But that was not always the case. Co-founder Hubert Palan tells me he made the mistake early on of pitching investors who just didn’t “get it.”
He spent quite a bit of time convincing VCs with no product background that there was a market for a platform similar to Jira or Salesforce, designed specifically for product managers. Platforms like Jira are essential to the task management process of developing apps and web functions, such as coding, testing, and other aspects of technical delivery.
“But product management is not project management,” says Hubert. “It is about understanding who the customers are and the pain points they have.”
Before Productboard, there was no end-to-end platform for the entire product management lifecycle. Product teams often relied on a patchwork of spreadsheets and workarounds to incorporate things like customer, design, and manager feedback into their processes. A better product management system allows startups to “reduce risk throughout the delivery process,” Hubert adds. “And end up building the right things… not wasting years of our lives building things no one needs.”
Rest assured, that’s it not Product board. Here, Hubert shares his top tips for raising capital, whether you’re the next startup unicorn or not.
How to raise capital for your startup
1. Know what you really need when raising capital
Productboard was not an overnight success. Hubert and his co-founder, Daniel Hejl, founded the company in 2014, but only debuted the platform TechCrunch’s Disrupt Startup Battlefield September 2016.
And the road to unicorn status is paved with quite a few rounds of fundraising. Most of the founders I speak to have not gotten as far as a Series D, or raised $260 million. “It is a large number,” says Hubert. “But to me the absolute number is almost irrelevant, because it is, What’s the chance?”
The opportunity is, of course, huge. The product management space is wide and Productboard is quickly becoming essential for businesses large and small, especially those with distributed teams. That’s why Silicon Valley was terribly interested when Hubert and Daniel found VCs that understood Productboard’s value: Dragoneer Investment Group and Tiger Global led the Series D, while previous rounds included funding from Bessemer Venture Partners, Sequoia Capital, Kleiner Perkins, Index Ventures and Credo Ventures.
Hubert says whether you’re raising a series A or D, the basic concepts of fundraising are the same. You need to ask yourself questions about what you really need: mostly cash? A great board member with experience in a specific market or a specific skill set? Someone who can help you attract the best talent to build your team?
“Optimize for your goals,” he says. “Spell it out clearly.”
By the time Hubert and Daniel founded Series D last year, Productboard needed capital to help the company scale. It had already grown to about 400 employees (there are more than 500 today) serving more than 6,000 clients, including household names like Disney and Volkswagen, major startups like Zoom, legacy institutions like JPMorgan Chase, and “lots and lots of small clients” .
2. #IYKYK: Find investors who understand your value
Before Productboard became the hottest tech startup in Silicon Valley (as well as the Czech Republic, where Hubert and Daniel built their first tech team), it found a champion in Ilya Fushmana former partner at Index Ventures and former head of product at Dropbox.
Ilya was one of the first VCs who, having a shared product manager background, “understood the pain point,” Hubert recalls. “I didn’t have to explain to him what product management was. There was no time spent on that – it was much more about something like, How are you going to solve it? What evidence do you have?”
With Ilya’s backing, Index Ventures co-led Productboard’s $1.3 million seed round in 2016 (with Credo Ventures and Spread Capital’s participation).
Lesson learned? Don’t waste time educating investors who don’t understand the problem your startup solves. “There are people investing in the space who understand the problem. Find those people,” says Hubert. “You want to go the easiest route, the fastest route.”
That’s why it’s critical to research and identify your ideal investors. Hubert took a “segmentation approach” in this step, creating a spreadsheet that included each company’s characteristics, its partners, its reputation, and even its logo. He noted whether a company or VC had previously invested in a similar space. But he warns founders to be wary of anyone who may have invested in a competitor. Reputable investors will quickly self-exclude themselves from closing a deal that represents a conflict of interest.
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3. Gather momentum among venture capital investors
When raising later rounds, Hubert asked his investor, senior advisors and mentors to review that spreadsheet with him. He asked them to sort of rank those companies based on how well they knew them, whether they had worked with them before, and how well they were a good fit for Productboard.
“Later on, I had some incoming interest because we were already familiar,” says Hubert. But before being approached, Hubert asked his network — professors at the University of California, Berkeley, where he earned his MBA, and friends in the industry — for introductions. Before the initial talks with investors, he often did not provide any digital information: “I just showed up and talked to them about what we do, without any map. . . just paint the vision. That allowed him to gauge interest and compatibility without spending time on a formal pitch.
Each round got easier and easier. After Kleiner Perkins led Productboard’s Series A investment in 2018, the startup became a well-known entity in the VC community. Sequoia and Bessemer agreed to share their Series B round after fundraising became what Hubert tactfully calls a “highly competitive situation.” Representatives from a team of interested investors “appeared in our hallway and said, ‘We’re not leaving until you sign our terms.’ They literally left for the night, but were there again at 6am the next day.
(Readers: If you walked into the offices of a venture capital fund and told them you weren’t leaving until you got a term sheet, you’d probably get arrested. But I think it’s cute when VCs do it.)
4. Build a dream team and stay away from the jerks
A startup is only as strong as its team, and Hubert emphasizes the importance of hiring great people.
“Take the time to lead people back and learn who they are,” he says. He recommends asking investors to introduce you to potential team members alongside fellow VCs. They can be an introduction to someone who has “went through a rough patch” who has proven their mettle, or even people from a company that has gone bankrupt – “investments that didn’t work out,” Hubert adds. “The best investors will be happy to introduce you.”
It could even be a CEO fired by the investor, he notes.
“But was it for the right reasons? Was the investor reasonable and empathetic about the situation? It is the investors’ job to protect the investments and do the best for the company, which could be to fire the CEO or founder. . . But if you are militant, unfriendly, ignorant, not empathetic type of person. . . that says something,” he says.
“And I found people like that even at the top firms, I dug up stories and thought, ‘Well, I really don’t want to work with That person,” he adds.
Fundamentally, investors are people too, with interpersonal disagreements and opinions that you may not agree with. “Your ability to resolve these differences and opinions is critical,” says Hubert, who advises founders to choose their partners wisely — and work to nurture those relationships.
“Sometimes people raise the money and then they see the investors once at the board meetings,” he says.
Instead, Hubert recommends, “Get texting basics.” Even involve them in things [even if] you don’t really need the input. . . just bring them there with the intention of building the relationship. Especially now in this crazy, “distributed” world – how much time do you actually spend together? You have to engineer it. But it pays off. Because then when things get tough, when you really need in-depth advice. . . you know them and you can rely on them. It’s all a matter of trust.”
Article is based on an interview between Nathan Beckord and Hubert Palan on an episode of the How I raised it podcast.
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