Foundry Group Invests in SendGrid

by Ryan McIntyre

Today SendGrid announced that it has raised a $5m financing led by Foundry Group. Seed round investors Highway 12 Ventures, Jeff Clavier’s SoftTech VC, David McClure (via FF Angel) and David Cohen’s Bullet Time Ventures also participated in the round. Postini founder Scott Petry and WordPress founder Matt Mullenweg also participated in the financing.

SendGrid offers a powerful and flexible cloud-based transactional email platform that enables companies and application developers to easily send and receive emails to and from their users, while enhancing their email delivery rates and providing rich analytics. The SendGrid platform easily scales to handle millions of users, providing access to world-class email infrastructure services, freeing developers from the hassles of managing the complexities of email servers and technologies.

Historically, companies have sent two categories of email to their customers and/or users: bulk emails, which are typically marketing messages sent out to their entire user base, and transactional emails, which are user-specific emails that update a particular user about changes activity in his/her account, provide purchase confirmations, send password reset notifications, etc. There exists a large and mature ecosystem devoted to outsourcing and optimizing the sending of mass- marketing emails to end-users. These emails are often regarded as spam by their recipients, despite the fact that most users likely opted-in to receive such emails when they registered for an account with the website sending these messages.

Interestingly, no such ecosystem has developed around transactional emails, despite (or perhaps because of) the greater challenges and message volumes associated with supporting an effective transactional email system in-house. As an example, it is estimated that Facebook alone sends well over one billion transactional emails to its users per day. Unlike mass-marketing bulk emails, transactional emails are seldom perceived as spam by end-users, and both the sender and the receiver have a vested interest in these transactional emails arriving at their destination.

Managing a transactional email system in-house results in increased costs associated with supporting the email system, while poor deliverability rates of an application’s transactional emails can decrease user engagement, site traffic and revenue.

Most web application developers are not proficient with mail server technology or the SMTP protocol that underlies it – the expertise required to deeply understand the email technology stack is very different from the HTTP/XML/HTML expertise that the average web developer possesses.

SendGrid moves transactional email functionality to the cloud and allows web developers to access sophisticated email processing capabilities through a simple API (application programming interface) that frees the developer from having to deploy, scale or manage an email server. SendGrid’s cloud-based email services enhance transactional email deliverability and scalability, while also providing rich analytics and enhanced email capabilities without requiring the developer to write custom email-specific code.

Integration with SendGrid is simple for the developer, requiring only a change of DNS settings to redirect outbound and/or inbound email through SendGrid’s servers. SendGrid provides a free entry-level demo account that allows a developer to send up to 200 emails daily free of charge. When customers move above the 200 emails/day limit, they are required to upgrade to a paid account, with monthly charges based on volume.

SendGrid was a graduate of the Boulder TechStars Class of 2009, and Foundry Group partner Ryan McIntyre acted as a mentor for SendGrid’s CEO and co-founder Isaac Saldana throughout the summer program. Following SendGrid’s “graduation” from TechStars, the company raised a $750k seed round in late 2009. Since their launch in the Fall of 2009, SendGrid has landed thousands of customers and has delivered nearly 1.2 billion messages on their behalf.

As we observed SendGrid’s rapid customer growth, which has occurred through word of mouth and without formal sales or marketing efforts, we made an offer to invest in SendGrid, and, thankfully, they accepted our offer to lead this round. We’ve got a long history of investing in the email ecosystem, most recently via our investments in Postini (acquired by Google in 2007) and Return Path. SendGrid is in many ways architecturally analogous to Postini (and shares Postini’s simple DNS-based deployment model), but instead of serving as an inbound email filter to enterprise email inboxes, SendGrid provides its cloud-based email infrastructure in the service of application generated emails sent to (and received from) users of a web-based application.

SendGrid sits squarely in the middle of our Protocol investment theme, which subsumed our Email, RSS and Implicit Web themes. We are excited to welcome the company to the Foundry Group portfolio and look forward to working with SendGrid’s founders Isaac Saldana, Jose Lopez, Tim Jenkins and the rest of the SendGrid team to build the company into a huge player in the email infrastructure market.