A year after raising $20 million from investors, Portland data management startup Hydrolix has pulled in another $35 million.
This Series B round was led by existing backer S3 Ventures and included existing investors Nava Ventures, Wing Ventures, AV8 Ventures and Oregon Venture Fund. The company, which started in 2018, has raised a total of $68 million to date.
“We still have half the money from the last round,” said co-founder and CEO Marty Kagan. In fact, it was existing investors that suggested the company go out for another round now based on a “combination of the trajectory since the Series A, (which) has been super positive, but there is concern around market uncertainty at the end of the year.”
The fourth quarter of an election year might not be the best time to raise, he added. So plans to raise a round at the end of this year or beginning of next were scrapped.
In the last 11 months the company, which was a Startup to Watch in 2021, has grown tenfold, said Kagan. The company has gone from two customers and two trials to 100 customers and 80 trials. That kind of growth is interesting to investors but hard to keep up with, he said.
“I can’t hire customer success engineers fast enough,” he added.
With this latest round Kagan intends to bring on those positions as well as site reliability engineers. A year ago, the company had 26 employees and now it has 65 employees. Kagan expects to be at 90 employees by the end of the year.
The team is distributed globally. The Portland headquarters, which is in the co-working space Kiln, has about 10 employees.
Hydrolix software is in the data management space. The product is aimed at a growing customer pain point: The increasing cost of data storage and querying that data.
Hydrolix is focused on company data that doesn’t change, such as logs for observability of how software is working. Typically, as a company’s data gets bigger, it needs to build bigger clusters to store the data and it eventually becomes untenable to store everything.
At the same time, machine learning and AI training requires more and more data. As a result, IT departments are facing calls from finance departments to cut costs and save less data while product departments want more data.
“We can satisfy both,” said Kagan, based on how the Hydrolix technology handles information.
“As an operator and investor, I have experienced the challenge of exploding data volumes across multiple companies,” said Aaron Perman, partner at S3 Ventures, in a written statement. “With accelerating growth in channel and customer relationships across some of the largest enterprises, we're excited to invest in a product and team that is poised to lead a rapidly growing market.”
The fast growth seen over the last year has been driven by the company’s new partner program. Instead of selling directly to customers, the company started selling to channel partners in infrastructure managed services or security managed services, said Kagan.
While direct sales were seeing nine-month sales cycles and a 30% conversion rate, the partner sales cycles were 30 days with a 70% conversion rate, he said.
The main sticking point for direct sales was tied to regulation requirements around privacy and information security that would involve many different layers within customer companies. By selling through partners, Hydrolix comes under already vetted contracts as an add-on service, said Kagan.
The Hydrolix team trains the sales teams of these partners — which now total around 780 salespeople — and they in turn sell it to companies as part of their platforms.
“We realized we don’t want everyone to buy (Hydrolix) but we want them to buy something powered by Hydrolix,” Kagan said. “This is transformational for businesses to build on a more cost-effective platform.”
For the remainder of the year, Kagan said the team is focused on filling in gaps in their customer success operations and boosting sales success rates. Next year, the focus is scaling since they have a repeatable sales model. The team will also continue to develop the product and ecosystem.
