Cockroach Labs, makers of CockroachDB, have been on a fundraising roll for the last couple of years. Today the company announced a $160 million Series E on a fat $2 billion valuation. The round comes just eight months after the startup raised an $86.6 million Series D.
The latest investment was led by Altimeter Capital with participation from new investors Greenoaks and Lone Pine along with existing investors Benchmark, Bond, FirstMark, GV, Index Ventures and Tiger Global. The round doubled the company’s previous valuation and increased the amount raised to $355 million.
Co-founder and CEO Spenser Kimball says that the company’s revenue more than doubled in 2020 in spite of COVID, and that caught the attention of investors. He attributed this paradoxical rise to the rapid shift to the cloud brought on by the pandemic that many people in the industry have seen.
“People became more aggressive with what was already underway, a real move to embrace the cloud to build the next generation of applications and services, and that’s really fundamentally where we are,” Kimball told me.
As that happened, the company began a shift in thinking. While it has embraced an open source version of CockroachDB along with a 30-day free trial on the company’s cloud service as ways to attract new customers to the top of the funnel, it wants to try a new approach.
In fact, it plans to replace the 30 day trial with a newer version later this year without any time limits. It believes this will attract more developers to the platform and enable them to see the full set of features without having to enter credit card information. What’s more, by taking this approach it should end up costing the company less money to support the free tier.
“What we expect is that you can do all kinds of things on that free tier. You can do a hackathon, any kind of hobby project […] or even a startup that has ambitions to be the next DoorDash or Airbnb,” he said. As he points out, there’s a point where early stage companies don’t have many users, and can remain in the free tier until they achieve product-market fit.
“That’s when they put a credit card down, and they can extend beyond the free tier threshold and pay for what they use,” he said. The newer free tier is still in the beta testing phase, but will be rolled out during this year.
Kimball says that company wasn’t necessarily looking to raise, although he knew that it would continue to need more cash on the balance sheet to run with giant competitors like Oracle, AWS and the other big cloud vendors, along with a slew of other database startups. As the company’s revenue grows, he certainly sees an IPO in its future, but he doesn’t see it happening this year.
The startup ended the year with 200 employees and Kimball expects to double that by the end of this year. He says growing a diverse group of employees takes good internal data and building a welcoming and inclusive culture.
“I think the starting point for anything you want to optimize in a business is to make sure that you have the metrics in front of you, and that you’re constantly looking at them […] in order to measure how you’re doing,” he explained.
He added, “The thing that we’re most focused on in terms of action is really building the culture of the company appropriately and that’s something we’ve been doing for all six years we’ve been around. To the extent that you have an inclusive environment where people actually really view the value of respect, that helps with diversity.”
Kimball says he sees a different approach to running the business when the pandemic ends with some small percentage going into the office regularly and others coming for quarterly visits, but he doesn’t see a full return to the office post-pandemic.