How Flatfile raised its $50M Series B

If you’re a daily active Product Hunt user, you probably know Flatfile. The company has built a strong audience amongst the Product Hunt community with its platform that facilitates data exchange and data onboarding. That’s a fancy way of saying Flatfile works to make data importing easy — a generally painstaking task whether it’s being handled by a marketer using a CRM, an AI engineer uploading data, or a Fortune 500 company managing hundreds of thousands of data points.

Our editorial team has been following along with Flatfile’s rapid growth (not just because they’re an advertiser, but indeed they are) through its launches and Series A, from which co-founder Eric Crane shared his 6 lessons on fundraising. Now Flatfile’s annual recurring revenue has reached $5 million (projected by Flatfile’s founders to double over the next 12 months) with enterprise customers like Spotify, AstraZeneca, and Square.

I followed up with the team to talk about their recent Series B — $50 million led by Tiger Global with participation from Gradient Ventures (the AI-focused fund from Google) and Workday.

Here’s what you’ll find in my conversation with co-founder David Boskovic:

This interview has been edited for clarity and flow. (And of course, I've skipped past all of our chatter about the best restaurants in Denver).

You're absolutely right. [Early stage fundraising] is about vision, product-market fit, and the conceptual possibility that this company will win. Fundraising early was about me telling investors why I as a founder believed this was right, sharing the stories from customers, and sharing our product innovation. Everybody's indexing on a very low success rate. As you start getting later, you start getting indexed a little bit more on the public markets.

With the public markets performing very well, Series Bs over the last few years have been a bit early with IPOs extending well beyond them. Now Series B's have been incredibly affected by the change in the public market. The price is much more controlled by the market than it is by opportunity.

That's a very different type of fundraising. Going into a Series B, it doesn't really matter if I think this is the best thing in the world (and you should think this is the best thing in the world) but what matters is how the metrics line up next to the public market because that's going to determine the multiples and interest in the business. Now, this is a Series B, not a series F, so it's not entirely IPO-controlled. There are still a few more rounds before we IPO and that's understood, but it is certainly much more influenced by that.

Right now, anybody who's at this stage of business has to absolutely be paying attention to the economics and I think that wasn't the case a year ago. This was a different type of fundraising for me. I described it to another veteran as trying to catch a falling knife because I felt like every week, things were dropping. People are going from 5% on their portfolio to negative 30%.

But with Flatfile, we've been top decile in terms of growth, we've done far better than that 3x or 2x everybody wants to see. That’s given us an enormous amount of opportunity, even in a bear market. That said, as we race forward from here, the responsibility for the business to produce absolutely great metrics is what matters more than top-line growth. If I had raised $50 million a year ago, I might currently be encouraging the team to spend a lot more money to produce revenue. Right now I care more about the unit economics of everything. I think that's what the board and the market care about because ultimately we have to produce a company that's appealing to the public markets.

That’s the operations side. On the fundraising side, it just took more elbow grease, it took more conversations, and just so much more work. Everybody was anxious. Investors are anxious and doubling in. The partners too are definitely paying a lot more attention to these deals and putting everything under a fine tooth comb. And Flatfile, as a top-performing company, clearly passes all that. But still, the amount of tension was very different than the last couple of rounds. There was an enormous amount of anxiety, but here we are on the other side of that with money in the bank, four years of runway, and plenty of time to meet the new requirements of the market.

The rate of growth, in any world, is still an incredibly important index in an investor's willingness to suspend disbelief on the future. With a slow-growing business, you want to index much more on the realities of the world. With a fast-growing business, you'd have much more of an argument to speculate on that growth continuing. So for Flatfile, that was something that we really had in our pocket — the ability to demonstrate incredibly rapid growth over a short period of time, from some of the largest customers, with incredibly good retention across our customer base. If you start looking at that, you definitely come out swinging.

But what was really important, I think, if you're going to suspend disbelief on the multiples (which you have to), then you must believe in the size of the market. And that's where I found a lot of my energy as a founder going – compelling investors to see the size of the opportunity and how far we can go. I think that’s easier if you're building a company in a well-established space. This is where I had to work overtime because Flatfile is a category-creating business, so we have very few ways to pattern match against the other Flatiles. I found investors doing this sort of “Oh, so this is sort of like Snowflake or sort of like X.” And we had to say “Not quite. This is a new category, let me help you understand it and reason about it.” That ruled out a lot of investors who didn’t know how to reason about the category creation aspect. It relies on a lot of the due diligence we had to produce, showing the size of the market and showing the opportunity. We're producing what we're pursuing here.

Yeah, evidence. For us, against market size, storytelling is the most powerful weapon, right? “Here is a Fortune 500 company that has a $100 million problem that we serve. Go talk to the executives of this company and they'll tell you. Here’s another…” and gather companies across different industries. Because one thing that's true about investors is investors just never believe anything you say and they're always going to check your homework. So I give investors homework. I will say, “Hey, here's my perception of the market. Here's how you can check that.” And I have investors call up the CTOs of Fortune 500 companies and ask “Is this a problem?” and the deal gets closed on the answer that that person produces. And if that person produces the answer that aligns with what I'm saying, then we have the due diligence necessary to proceed with the deal.

So recognize that investors are going to do the due diligence and give them the work to go and produce the results because you can tell them anything. Founders are incentivized to spin the tallest yarns, so investors are very good at homework. It's okay to give investors work to do to go prove the market size.

At this point, if there weren't competitors, there would be a lot of reason for concern, right? Because that would generally indicate the market is smaller than we thought.

We now have five funded competitors following after us and when we started this company, there were zero. Five in three years; that shows that we’re holding fire in our hands. It’s an incredibly important responsibility to take on, and part of why the capital matters a lot for Flatfile uniquely is that we have to fight two wars at once.

First, we have to continue innovating faster than anybody that enters the market behind us. Second, we have to plow the way. We have to educate the market; we have to teach the market that this is a possibility. So category creating is its own form of expense.

Obviously, it comes with some credit. We got to create the category and begin to dominate it, but only if we keep moving faster. And at any point where you stop doing that you risk paving the way for someone else. That's something that we generally take seriously. At Flatfile, our competitors are still very far behind us in terms of product innovation, but that's only for a time. Eventually, someone is also able to solve that problem. So we focus on the innovation aspect of our business: making sure that we're shipping features weekly and regularly, and making sure we're not slipping into that sort of growth stage lull that happens where you lose that pace of shipping and innovation in favor of revenue growth.

Those are two wars that we have to fight at the same time, which requires more capital than those following us are going to have to deploy to solve the problem. The only way to maintain this leadership is to innovate and to take our product leadership seriously. That’s something that we've done since day one. As you know, my background is engineering product, my co-founder’s background is product. This is something we're well set up to continue.

Category-creating is interesting because there's a certain segment of the market that's searching for something and they don't know exactly what it is. Knowing how people search for pain versus search for solutions is incredibly important to the marketing side of it.

That's very different from the way the vast majority of marketers think. Usually, you're not the first person to talk about this problem. And usually, you will have three established ways of referring to this — “We're a better X” or “We a better Y,” “We do this faster,” etc. Someone else has given you the keywords to go after. For us, we have had to market the pain. That's how you create a category because nobody knows what the solution is. You just have to talk about the problems.

We've built some of the best leads off of Instagram, not even kidding. We've had Fortune 500 execs come in after seeing an Instagram ad or something like it. Broadly, there are captive audiences of people that generally have the problem you're selling to. This is actually where Product Hunt is incredibly valuable to us. A lot of the audience in Product Hunt are our software leaders. Broad sweeping that audience gives us incredible value should it return. We do the same anywhere we can find a captive audience of people that we think have our problem because we have to market to the pain, not to the solution. That is expensive and upfront requires an enormous amount of capital but is incredibly valuable in the long term and over time produces reward.

What's interesting is we went through a number of marketers at Flatfile early on because marketing is very different in the category-creating world. You have these attempts, but when you're a little startup it’s like you're just a sparkle in a pan nobody's looking at. So how you really build that volume is a combination of product marketing and authority that we took time to build. Ashley Mulligan is the perfect sort of combination of that and has led marketing through this last year to incredible rewards for the business. Her background is engineering, design, and product culminating in marketing. It’s incredibly rare to see that career trajectory or get that intuition bottled up into a marketer. So for category creators (and this is advice I learned later), the marketing leadership you have has got to intuit your market. Otherwise, they're just running playbooks and they don't really understand how to run those [in your situation].

Yeah, I think that's absolutely right. Early-stage investors and late-stage investors have served very different purposes to the business. Early-stage investors are responsible for de-risking an enormous number of decisions that the company has to make. And providing pattern matching and mentorship for the founders. Building a board that has seen it all before is incredibly important to me, and by and large rules the decisions I made around who I select as an investor. I built an incredible board from the partners of the last few rounds and I trust my board incredibly.

In going into the Series B, a lot of this becomes much more about the growth trajectory of the business. I've known John Curtius* for a few years, I've talked to him throughout the history of the business. John was already well invested in Flatfile through the LP portfolio that Tiger Global has. So it's just a natural fit to have a fund like Tiger, which has produced more unicorns than any other fund in the world, backing us for this next stage both as a supply of capital but also as a partner.

With Tiger, we've seen shifts in their public portfolio, and the jury's still out on their private portfolio. Someone asked me recently how I felt about that. My only position on this is that every investor is here to make a lot of bets and produce a few winners, and I intend to be the company that returns the portfolio for any one of our investors.

Yeah, now top-line growth isn't as much of what people are going to be indexing on; the overall economics of the business are, which I’ve talked about a bit. That shifts a bit where capital gets deployed. Overall, though, I think Flatfile sees our opportunity as taking the value we provide to a narrow set of customers and providing it to everyone. This is what our next product release is centered around.

We started our product as a button for SaaS solutions. We expanded it to an enterprise SaaS onboarding solution. If you're an enterprise company and you need to onboard your customers over a three-month period, this is great for you. But the reality is this data exchange problem is true for every business in the world. You have definitely uploaded a list of contacts into some CRM somewhere at some point in your life. One of our early customers was a small grocery store in Vermont and they only work with farmers in the state. Farmers provide data to the store so that it can operate and they had a full-time data person that only took the spreadsheets from these farmers every week and figured out orders.

Data exchange is just part of doing business. If you're a home builder, you're placing orders at Home Depot and sending over a spreadsheet. If you're a research institution trying to access new AI software, you're trying to aggregate data you collected and put it into the system. And if you're a Fortune 500, you have problems that are costing your company hundreds of millions of dollars a year. For Flatfile, it's far more than the import button and SaaS solutions that have complicated problems. For us, it's being able to build a company to serve anybody in the world. And that's where my absolute hunger (and probably audacity) as a founder comes from when it comes to market size. As a leader in the market with the capital, we have the opportunity to go after it.

We have an incredibly well-set revenue engine, great marketing, and we’re growing over the last six months well above expectations. So from here, it goes: innovate and expand the market and make sure that we're able to continue our tour of ownership here as the creator of this category.

Founders are inherently idiotically audacious – that’s like the one ingredient you must have as a founder, right? There's a belief that you can solve an incredibly large problem in the world. I think the mistakes I've made over my career have been biting off more of a problem than I can chew at any given time. I've tried to build massive products that cover an enormous spectrum, like CRMs that are finance tools and marketing tools with everything built in. It creates so much effort for so little leverage.

At Flatfile I've done something very different. I picked one incredibly small problem and focused all of our resources in this company at being the absolute – pardon my language – f*cking best at building this one problem and making sure that the people who need this get everything they can get from it. That has produced an incredibly different sort of growth trajectory.

If you've ever read The Art of War, this is one of the things I love — you have to focus your energy on a precise point to get the maximum leverage. I think for Flatfile, even with the headwinds we see in this market, one of the things that has allowed us to continue to get the valuation and funding that we have is that precise, focused message. We are focused on this one problem. We're not building a better CRM and we're not focused on 30 things; it's one thing and we're going to do that really well. And we think the market’s really big. I think focusing on that now more than ever is very important. There are founders out there building companies that are doing five things. Pick one thing and do that. Cut everything else and that is how you're going to get through because that will focus the company and your limited resources against that one problem.