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NS1 brings open-source service NetBox to the cloud

New York City based startup NS1 got its start providing organizations with managed DNS services to help accelerate application delivery and reliability. With its new NetBox Cloud service that is being announced in preview today, NS1 is expanding its services into a new area beyond DNS. 

It can often be a challenging task for a network administrator in an enterprise to understand where all the networking infrastructure is and how it’s all supposed to be connected.  That’s a job for an emerging class of enterprise technology known as Infrastructure Resource Management (IRM) that NS1 is now jumping into. TechCrunch profiled NS1 in a wide-ranging EC-1 series last month. The company provides DNS as a service, for some of the biggest sites on the internet. DNS, or domain name system is about connecting IP addresses to domain names and NS1 has technology that helps organizations to intelligently optimize application traffic delivery. 

With its new NetBox Cloud service, NS1 is providing a managed service for NetBox which is a popular open source IRM tool that was initially built by developer Jeremy Stretch, while he was working at cloud provider DigitalOcean. Stretch joined NS1 as a distinguished engineer in April of this year, with NS1 now supporting the open source project.

Stretch recounted that at one point during his tenure at DigitalOcean he was using Microsoft Excel spreadsheets to track IP address management. Using a spreadsheet to track IP addresses doesn’t scale, so Stretch coded the initial version of NetBox in 2015 to address that need. Over the last several years, NetBox has expanded with additional capabilities that will now also help users of NS1’s NetBox Cloud service.

Stretch explained that Netbox’s role is primarily in modelling network infrastructure in an approach that provides what he referred to as a “source of truth” for network infrastructure. The basic idea is to enable organizations to model their desired state of their networks and then from that point they can draw in monitoring to verify that the operational state is the same as the desired state. 

“So the idea of this source of truth is that it is the actual documented authoritative record of what is supposed to be configured on the network,” Stretch said.

NetBox has continued to grow over the years as a popular open source tool, but it hasn’t been particularly accessible to enterprises that required commercial support to get started, or that wanted a managed service. The goal with the new service is to make it easier for organizations of any size to get started with NetBox to better manage their networks.

NS1 co-founder and CEO Kris Beevers told TechCrunch that while Stretch has done a solid job of building the NetBox open source community, there hasn’t been a commercial service for NetBox. Beevers said that while NetBox has had broad adoption as an open source effort, in his view there are a lot of enterprises that will want commercial support and a managed service.

One key theme that Beevers reiterated time and again in the Extra Crunch EC-1 series is that NS1 is very experimental as a business, and that same theme holds true for NetBox. The primary objective for the initial beta release of the NetBox Cloud is all about figuring out exactly who is trying to adopt the technology and learning what challenges commercial users will face. Fundamentally, Beevers said that NS1 will be actively iterating on NetBox Cloud to make sure it addresses the things that enterprises care about.

“From the NS1 point of view, this is just such a compelling open source product and community and we want to drive barriers to adoption as low as we possibly can,” Beevers said.

NS1 was founded in 2013 and has raised $118.4 million in funding, including a $40 million Series D which the company closed in July 2020.

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Gatheround raises millions from Homebrew, Bloomberg and Stripe’s COO to help remote workers connect

Remote work is no longer a new topic, as much of the world has now been doing it for a year or more because of the COVID-19 pandemic.

Companies — big and small — have had to react in myriad ways. Many of the initial challenges have focused on workflow, productivity and the like. But one aspect of the whole remote work shift that is not getting as much attention is the culture angle.

A 100% remote startup that was tackling the issue way before COVID-19 was even around is now seeing a big surge in demand for its offering that aims to help companies address the “people” challenge of remote work. It started its life with the name Icebreaker to reflect the aim of “breaking the ice” with people with whom you work.

“We designed the initial version of our product as a way to connect people who’d never met, kind of virtual speed dating,” says co-founder and CEO Perry Rosenstein. “But we realized that people were using it for far more than that.” 

So over time, its offering has evolved to include a bigger goal of helping people get together beyond an initial encounter –– hence its new name: Gatheround.

“For remote companies, a big challenge or problem that is now bordering on a crisis is how to build connection, trust and empathy between people that aren’t sharing a physical space,” says co-founder and COO Lisa Conn. “There’s no five-minute conversations after meetings, no shared meals, no cafeterias — this is where connection organically builds.”

Organizations should be concerned, Gatheround maintains, that as we move more remote, that work will become more transactional and people will become more isolated. They can’t ignore that humans are largely social creatures, Conn said.

The startup aims to bring people together online through real-time events such as a range of chats, videos and one-on-one and group conversations. The startup also provides templates to facilitate cultural rituals and learning & development (L&D) activities, such as all-hands meetings and workshops on diversity, equity and inclusion. 

Gatheround’s video conversations aim to be a refreshing complement to Slack conversations, which despite serving the function of communication, still don’t bring users face-to-face.

Image Credits: Gatheround

Since its inception, Gatheround has quietly built up an impressive customer base, including 28 Fortune 500s, 11 of the 15 biggest U.S. tech companies, 26 of the top 30 universities and more than 700 educational institutions. Specifically, those users include Asana, Coinbase, Fiverr, Westfield and DigitalOcean. Universities, academic centers and nonprofits, including Georgetown’s Institute of Politics and Public Service and Chan Zuckerberg Initiative, are also customers. To date, Gatheround has had about 260,000 users hold 570,000 conversations on its SaaS-based, video platform.

All its growth so far has been organic, mostly referrals and word of mouth. Now, armed with $3.5 million in seed funding that builds upon a previous $500,000 raised, Gatheround is ready to aggressively go to market and build upon the momentum it’s seeing.

Venture firms Homebrew and Bloomberg Beta co-led the company’s latest raise, which included participation from angel investors such as Stripe COO Claire Hughes Johnson, Meetup co-founder Scott Heiferman, Li Jin and Lenny Rachitsky. 

Co-founders Rosenstein, Conn and Alexander McCormmach describe themselves as “experienced community builders,” having previously worked on President Obama’s campaigns as well as at companies like Facebook, Change.org and Hustle. 

The trio emphasize that Gatheround is also very different from Zoom and video conferencing apps in that its platform gives people prompts and organized ways to get to know and learn about each other as well as the flexibility to customize events.

“We’re fundamentally a connection platform, here to help organizations connect their people via real-time events that are not just really fun, but meaningful,” Conn said.

Homebrew Partner Hunter Walk says his firm was attracted to the company’s founder-market fit.

“They’re a really interesting combination of founders with all this experience community building on the political activism side, combined with really great product, design and operational skills,” he told TechCrunch. “It was kind of unique that they didn’t come out of an enterprise product background or pure social background.”

He was also drawn to the personalized nature of Gatheround’s platform, considering that it has become clear over the past year that the software powering the future of work “needs emotional intelligence.”

“Many companies in 2020 have focused on making remote work more productive. But what people desire more than ever is a way to deeply and meaningfully connect with their colleagues,” Walk said. “Gatheround does that better than any platform out there. I’ve never seen people come together virtually like they do on Gatheround, asking questions, sharing stories and learning as a group.” 

James Cham, partner at Bloomberg Beta, agrees with Walk that the founding team’s knowledge of behavioral psychology, group dynamics and community building gives them an edge.

“More than anything, though, they care about helping the world unite and feel connected, and have spent their entire careers building organizations to make that happen,” he said in a written statement. “So it was a no-brainer to back Gatheround, and I can’t wait to see the impact they have on society.”

The 14-person team will likely expand with the new capital, which will also go toward helping adding more functionality and details to the Gatheround product.

“Even before the pandemic, remote work was accelerating faster than other forms of work,” Conn said. “Now that’s intensified even more.”

Gatheround is not the only company attempting to tackle this space. Ireland-based Workvivo last year raised $16 million and earlier this year, Microsoft  launched Viva, its new “employee experience platform.”

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DigitalOcean says customer billing data accessed in data breach

DigitalOcean has emailed customers warning of a data breach involving customers’ billing data, TechCrunch has learned.

The cloud infrastructure giant told customers in an email on Wednesday, obtained by TechCrunch, that it has “confirmed an unauthorized exposure of details associated with the billing profile on your DigitalOcean account.” The company said the person “gained access to some of your billing account details through a flaw that has been fixed” over a two-week window between April 9 and April 22.

The email said customer billing names and addresses were accessed, as well as the last four digits of the payment card, its expiry date and the name of the card-issuing bank. The company said that customers’ DigitalOcean accounts were “not accessed,” and passwords and account tokens were “not involved” in this breach.

“To be extra careful, we have implemented additional security monitoring on your account. We are expanding our security measures to reduce the likelihood of this kind of flaw occuring [sic] in the future,” the email said.

DigitalOcean said it fixed the flaw and notified data protection authorities, but it’s not clear what the apparent flaw was that put customer billing information at risk.

In a statement, DigitalOcean’s security chief Tyler Healy said 1% of billing profiles were affected by the breach, but declined to address our specific questions, including how the vulnerability was discovered and which authorities have been informed.

Companies with customers in Europe are subject to GDPR and can face fines of up to 4% of their global annual revenue.

Last year, the cloud company raised $100 million in new debt, followed by another $50 million round, months after laying off dozens of staff amid concerns about the company’s financial health. In March, the company went public, raising about $775 million in its initial public offering. 

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Olo raises IPO range as DigitalOcean sees possible $5B debut valuation

It’s a busy day in IPO-land: Olo has raised its IPO range and DigitalOcean is giving us a first look at what it may be worth when it debuts.

That Olo raised its IPO price is not a huge surprise, given the software company’s rapid growth and profits. In the case of DigitalOcean, we have more work to do as its approach to growth is a bit different.

Let’s explore both companies’ pricing intervals through our usual lens of revenue multiples, market comps and general SaaS sass. We’ll do this in alphabetical order, which puts the cloud infra company up first.

DigitalOcean’s IPO price range

According to its S-1/A filing, DigitalOcean expects its IPO to price between $44 and $47 per share. The price range is a coup for the company’s private investors, who as recently as the company’s 2020 Series C paid about $10.59 each for the company’s shares. Andreessen Horowitz is going to do very well, having led the company’s Series A at a per-share price of just more than $2. IA Ventures, which led DigitalOcean’s seed round, according to Crunchbase, paid just $0.26 per share back in the 2012-2013 time frame. That’s going to convert well.

In valuation terms, the company’s simple share count post-IPO will be 105,303,340, or 107,778,340 if its underwriters purchase their option. At $44 to $47 per share, DigitalOcean is worth $4.72 billion to $5.07 billion, including shares designated for its underwriters.

The company’s fully diluted valuation is higher. At midpoint, Renaissance Capital estimates DigitalOcean’s diluted valuation is $5.6 billion. That works out to a little under $5.8 billion at $47 per share.

Taking a look at DigitalOcean’s Q4 2020 revenue of $87.5 million, the company closed last year on a run rate of $350 million. Or a revenue multiple of 14.5x at the upper end of its nondiluted valuation, and around 16.5x at the upper bound of its diluted worth.

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DigitalOcean’s IPO filing shows a two-class cloud market

This morning DigitalOcean, a provider of cloud computing services to SMBs, filed to go public. The company intends to list on the New York Stock Exchange (NYSE) under the ticker symbol “DOCN.”

DigitalOcean’s offering comes amidst a hot streak for tech IPOs, and valuations that are stretched by historical norms. The cloud hosting company was joined by Coinbase in filing its numbers publicly today.

DigitalOcean’s offering comes amidst a hot streak for tech IPOs.

However, unlike the cryptocurrency exchange, DigitalOcean intends to raise capital through its offering. Its S-1 filing lists a $100 million placeholder number, a figure that will update when the company announces an IPO price range target.

This morning let’s explore the company’s financials briefly, and then ask ourselves what its results can tell us about the cloud market as a whole.

DigitalOcean’s financial results

TechCrunch has covered DigitalOcean with some frequency in recent years, including its early-2020 layoffs, its early-2020 $100 million debt raise and its $50 million investment from May of the same year that prior investors Access Industries and Andreessen Horowitz participated in.

From those pieces we knew that the company had reportedly reached $200 million in revenue during 2018, $250 million in 2019 and that DigitalOcean had expected to reach an annualized run rate of $300 million in 2020.

Those numbers held up well. Per its S-1 filing, DigitalOcean generated $203.1 million in 2018 revenue, $254.8 million in 2019 and $318.4 million in 2020. The company closed 2020 out with a self-calculated $357 million in annual run rate.

During its recent years of growth, DigitalOcean has managed to lose modestly increasing amounts of money, calculated using generally accepted accounting principles (GAAP), and non-GAAP profit (adjusted EBITDA) in rising quantities. Observe the rising disconnect:

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DigitalOcean raises $50M more from Access Industries and a16z

Earlier today, DigitalOcean announced that it raised $50 million more from prior investors Access Industries and Andreessen Horowitz. The capital comes after the SMB and developer-focused cloud infrastructure company raised nine-figures worth of debt back in February.

DigitalOcean is a large private company that generated revenue at a run rate of around $250 million towards the end of 2019. The company announced today that it has reached $300 million in annual recurring revenue, or ARR. (We recently added the company to our ARR club here.) That’s growth of around 20% in less than half a year, though we don’t know precisely when the company reached the $250 million mark, making it hard to calculate its true growth pace.

Critically, DigitalOcean is walking toward profitability while expanding.

DigitalOcean’s CEO Yancey Spruill told TechCrunch earlier this year that his firm would reach free cash flow positivity in the next few years, a timeline that appears to have moved up (more on that shortly). Provided that the cloud company can keep its growth pace up over the same time period, it could be well positioned for an IPO.

The new $50 million values the company at $1.15 billion, meaning it was worth $1.1 billion pre-money. DigitalOcean is not being valued like a SaaS startup today in revenue multiple terms, then, though its new valuation is still nearly double its old Series B valuation (a company spokesperson confirmed the numbers on that page).

New capital

TechCrunch wanted to know why the company raised equity capital so quickly after it had added debt to its books. The capital was surely welcome given the world’s economic condition, but the timing was worth digging into.

DigitalOcean was not “seeking additional funding,” according to Spruill, but after “reviewing our business performance and outlook with our investors at Access and a16z, they were interested in investing for our next phase of growth.” The company accepted, Spruill said.

Presumably, Digital Ocean’s quick revenue growth from a $250 million run rate to $300 million ARR played a part in the investment decision. For DigitalOcean, receiving a new, higher valuation and a monetary top-off from well-known investors may even provide a brand boost (see this article, especially in light of recent coverage the firm has attracted).

Regarding its plans for the new capital, Spruill told TechCrunch that DigitalOcean can now “better support the increase in demand we’ve seen from entrepreneurs and SMBs around the world as more businesses are transitioning to the cloud, particularly as a result of COVID.” Mark DigitalOcean down as one of the world’s companies that is seeing an uptick from the pandemic; most aren’t, but the firms that are appear to be using the moment to put more capital onto their balance sheets.

TechCrunch also wanted to know if the new capital opened new ground for the firm, or if its priorities for the new capital were similar to its preceding goals. The CEO told TechCrunch that his firm’s focus is the same, namely expanding its business.

“We remain committed to reaching $1 billion in revenue, achieving free cash flow profitability in the second half of this year and, ultimately, position DigitalOcean to be a public company,” Spruill said in an email.

That’s clear enough.

By that measure we can expect to see a DigitalOcean S-1 in the first half of 2021, if markets recover. So a16z and Access Industries (longtime investors in the company) could see a quick return for their most recent checks if current plans hold up.

The company’s release made note of “accelerating growth,” which TechCrunch wanted to know more about. How quickly is the company growing? Spruill didn’t share numbers to confirm or deny our rough math based on his firm’s public revenue milestones, but did tell TechCrunch that the company is “actively working on a number of initiatives to accelerate our revenue growth rate,” adding that these are internally dubbed “Grow Faster” initiatives.

Finally, TechCrunch was curious about the impact that COVID-19 is having on DigitalOcean. The company told us that it has “seen a modest increase in churn as a result of COVID-19,” but nothing too bad, saying that the change was “not significant” when “compared with recent trends immediately prior to the pandemic.”

On the positive side of the ledger, DigitalOcean said that its “sign up of new customers has been accelerating” and that it is seeing “increased business from some existing customers.” Adding that up for the SaaS kids: A little bit more churn, good new logo addition, and some upsell tailwinds. Overall that adds up to growth.

More when we have it, but now we’re at least set up to understand what the company does next.

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DigitalOcean is laying off staff, sources say 30-50 affected

After appointing a new CEO and CFO last summer, cloud infrastructure provider DigitalOcean is embarking on a wider reorganisation: the startup has announced a round of layoffs, with potentially between 30 and 50 people affected.

DigitalOcean has confirmed the news with the following statement:

“DigitalOcean recently announced a restructuring to better align its teams to its go-forward growth strategy. As part of this restructuring, some roles were, unfortunately, eliminated. DigitalOcean continues to be a high-growth business with $275M in [annual recurring revenues] and more than 500,000 customers globally. Under this new organizational structure, we are positioned to accelerate profitable growth by continuing to serve developers and entrepreneurs around the world.”

Before the confirmation was sent to us this morning, a number of footprints began to emerge last night, when the layoffs first hit, with people on Twitter talking about it, some announcing that they are looking for new opportunities and some offering help to those impacted. Inbound tips that we received estimate the cuts at between 30 and 50 people. With around 500 employees (an estimate on PitchBook), that would work out to up to 10% of staff affected.

It’s not clear what is going on here — we’ll update as and when we hear more — but when Yancey Spruill and Bill Sorenson were respectively appointed CEO and CFO in July 2019 (Spruill replacing someone who was only in the role for a year), the incoming CEO put out a short statement that, in hindsight, hinted at a refocus of the business in the near future:

“My aspiration is for us to continue to provide everything you love about DO now, but to also enhance our offerings in a way that is meaningful, strategic and most helpful for you over time.”

The company provides a range of cloud infrastructure services to developers, including scalable compute services (“Droplets” in DigitalOcean terminology), managed Kubernetes clusters, object storage, managed database services, Cloud Firewalls, Load Balancers and more, with 12 data centers globally. It says it works with more than 1 million developers across 195 countries. It has also been expanding the services that it offers to developers, including more enhancements in its managed database services, and a free hosting option for continuous code testing in partnership with GitLab.

All the same, as my colleague Frederic pointed out when DigitalOcean appointed its latest CEO, while developers have generally been happy with the company, it isn’t as hyped as it once was, and is a smallish player nowadays.

And in an area of business where economies of scale are essential for making good margins on a business, it competes against some of the biggest leviathans in tech: Google (and its Google Cloud Platform), Amazon (which as AWS) and Microsoft (with Azure). That could mean that DigitalOcean is either trimming down as it talks to investors for a new round; or to better conserve cash as it sizes up how best to compete against these bigger, deep-pocketed players; or perhaps to start thinking about another kind of exit.

In that context, it’s notable that the company not only appointed a new CFO last summer, but also a CEO with prior CFO experience. It’s been a while since DigitalOcean has raised capital. According to PitchBook data, DigitalOcean last raised money in 2017, an undisclosed amount from Mighty Capital, Glean Capital, Viaduct Ventures, Black River Ventures, Hanaco Venture Capital, Torch Capital and EG Capital Advisors. Before that, it took out $130 million in debt, in 2016. Altogether it has raised $198 million, and its last valuation was from a round in 2015, $683 million.

It’s been an active week for layoffs among tech startups. Mozilla laid off 70 employees this week; and the weed delivery platform Eaze is also gearing up for more cuts amid an emergency push for funding.

We’ll update this post as we learn more. Best wishes to those affected by the news.

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DigitalOcean gets a new CEO and CFO

DigitalOcean, the cloud infrastructure service that made a name for itself by focusing on low-cost hosting options in its early days, today announced that it has appointed former SendGrid COO and CFO Yancey Spruill as its new CEO and former EnerNOC CFO Bill Sorenson as its new CFO. Spruill will replace Mark Templeton, who only joined the company a little more than a year ago and who had announced in May his decision to step down for personal reasons.

DigitalOcean is a brand I’ve followed and admired for a while — the leadership team has done a tremendous job building out the products, services and, most importantly, a community, that puts developer needs first,” said Spruill in today’s announcement. “We have a multi-billion dollar revenue opportunity in front of us and I’m looking forward to working closely with our strong leadership team to build upon the current strategy to drive DigitalOcean to the company’s full potential.”

Spruill does have a lot of experience, given that he was in CxO positions at SendGrid through both its IPO in 2017 and its sale to Twilio in 2019. He also previously held the CFO role at DigitalGlobe, which he also guided to an IPO.

In his announcement, Spruill notes that he expects DigitalOcean to focus on its core business, which currently has about 500,000 users (though it’s unclear how many of those are active, paying users). “My aspiration is for us to continue to provide everything you love about DO now, but to also enhance our offerings in a way that is meaningful, strategic and most helpful for you over time,” he writes.

Spruill’s history as CFO includes its fair share of IPOs and sales, but so does Sorenson’s. As CFO at EnerNOC, he guided that company to a sale to investor Enel Group. Before that, he led business intelligence firm Qlik to an IPO.

It’s not unusual for incoming CEOs and CFOs to have this kind of experience, but it does make you wonder what DigitalOcean’s future holds in store. The company isn’t as hyped as it once was and while it still offers one of the best user experiences for developers, it remains a relatively small player in the overall cloud game. That’s a growing market, but the large companies — the ones that bring in the majority of revenue — are looking to Amazon, Microsoft and Google for their cloud infrastructure. Even a small piece of the overall cloud pie can be quite lucrative, but I think DigitalOcean’s ambitions go beyond that.

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Catalyst brothers find capital success with $2.4M from True

Over the past few years, the old language of “customer support” has been supplanted by the new language of “customer success.” In the old model, companies would essentially disappear following the conclusion of a sale, merely handling customer problems when they arose. Now, companies are actively reaching out to customers, engaging them with education and training and monitoring them with analytics to ensure they have the best time with the product as possible.

What’s changing is the nature of product and services today: subscription. Customers no longer just make a single buying decision about a product, but instead must actively commit to using the product, or else they churn.

New York-based Catalyst, founded by brothers Edward and Kevin Chiu, wants to rebuild customer success from the ground up with an integrated software platform. They have received some capital success of their own, securing $2.4 million in venture capital from Phil Black of True Ventures with participation from Ludlow Ventures and Compound.

New York has had something of an increase in founder mafias, as TechCrunch reported this weekend. Catalyst is no exception to this trend, with the Chiu brothers both working at DigitalOcean, one of New York’s many high-flying enterprise startups. Edward Chiu was director of customer success at the company for a number of years, but had a unique background in sales and also in coding before starting.

Kevin Chiu was head of inside sales at DigitalOcean . “I brought my brother on to do sales at DigitalOcean,” Edward Chiu explains. “We always knew that we wanted to start a company together, but wanted to see if we would kill each other.” The two worked together, and lo and behold, they didn’t kill each other.

Edward Chiu wanted to match the product experience of using DigitalOcean with the experience of using its internal customer success tools. Nothing on the market fit. “Given that DigitalOcean was a very technical product,” Chiu explained, “we decided to build our own tool.” Chiu thought of customer success at DigitalOcean as its own product, and his team built up the platform to improve its functionality and scalability. “We just used the tool and we loved it,” he said, so we “started to show this tool to a bunch of other customer success leaders I am connected with.”

Other customer success leaders said they wanted the platform, and “after the 20th person told me that,” he and his brother spun out of DigitalOcean to go on their own. Unlike enterprise startups in New York a couple of years ago that often struggled to find any investors, Catalyst found cash quickly. “Two weeks in we had more offers than we knew what to do with,” Chiu explained. The two said they had originally targeted a fundraise of $750,000, but ended up at $2.4 million.

Catalyst is a platform that integrates between a number of other major SaaS services such as Salesforce, Zendesk, Mixpanel and others to create a unified dashboard for data around customer success. From there, customer success managers have a set of automated tools to handle engagement, such as customer segmentation and email campaigns.

A major challenge in the customer success world is that these managers often don’t have the skills required to do advanced data analytics, so they often rely on their friends in engineering to run scripts or perform database lookups. The hope is that Catalyst’s feature set is powerful enough that these sorts of ad hoc tasks become a thing of the past. “Because we aggregate all this data, you can run queries,” Chiu explains.

Chiu says that Catalyst doesn’t just want to be a software platform, but rather a movement that pushes every company to think about how they can make their customers successful. “There are so many companies that are starting to understand that it is not something that you do once you raise a Series A, but something you do from day one,” Chiu said. “If you take care of your very first customer, they will constantly promote you and constantly promote your business.”

The company is based in Flatiron, and has eight employees.

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