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Dovetail raises $63M to grow its researcher-focused software business – TechCrunch

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Australian user research software company Dovetail announced today that it has closed a $63 million Series A led by Accel. The company has now raised just over $70 million in total, and it added its new capital at a valuation that it describes as “north” of $700 million.

As you can tell by the numbers, this is no ordinary Series A. Instead, it’s a late-stage investment of sorts by Accel, a venture capital firm that has a history of making large investments into technology companies that have raised little capital or self-funded until they raise, later in life, a large check.

Given that the Dovetail round is not our standard Series A fare, let’s take moment and talk through the deal, starting with the company’s early history and what’s it’s building.

Boostrapping(ish) Dovetail

TechCrunch spoke with Dovetail co-founder and CEO Benjamin Humphrey about the capital raise, turning the clock back to the start of the company itself. Per Humphrey, after a stint in the Bay Area working for a technology company, the New Zealander joined Atlassian in Australia, where he stayed for a multi-year tenure. After that, he co-founded Dovetail without the intention of raising venture capital, instead planning to build the company along the lines of Buffer and Basecamp, well-known technology firms that have pursued a more self-funded approach to growth.

The company’s focus on building software for the user research market might sound niche, but Dovetail found enough traction in its early days to scale to a team of six with around a half-million dollars in annual revenue under its own power. At that point, however, Humphrey said, venture investors were approaching the firm, so Dovetail raised a modest round of around AUD$5 million back in 2019.

One of its investors, Felicis, wanted to put more capital into the company toward the end of 2020. Dovetail, its CEO said, didn’t need the money, so it raised a seed-1 round at a valuation north of $100 million, a price indicative of the position it had in the market. (Lesson: Being profitable-ish and growing is the real startup sweet spot when it comes to fundraising.)

And that’s it, until today. Per new investors Rich Wong and Arun Mathew of Accel, Dovetail had burned only half of its total fundraising before they got the chance to invest.

Software companies don’t tend to grow sans material burn in today’s market, which means that customers were showing up to buy what Dovetail is building.

What’s Dovetail selling?

The Accel duo described what Dovetail is building as a sort of new category, namely the “system of record for user research.”

Humphrey put it in more prosaic terms, describing Dovetail’s product to TechCrunch as a productivity tool for researchers. Engineers have GitHub and designers have Figma, he said, noting that user researchers need their own software. Silicon Valley and the larger startup scene, he added, has done much work building tooling for the “D” in R&D, but far less on the “R” part of the equation.

Dovetail’s product is software that allows customers to collect user feedback data from NPS (net promoter score) surveys, audio, video and text answers, which are then tagged by teams, machine-analyzed and shared across an organization. The goal, Humphrey said, is to build a relational database for companies to store their institutional knowledge about customers so that they can make faster decisions.

As an example, he said that when a product manager (PM) leaves a company, they take with them quite a lot of knowledge. This means that new PMs will have to race around asking questions of the company to get up to speed, instead of having that knowledge stored and secure. Dovetail could help companies hold onto the data and knowledge from research, making them both accessible and more permanent.

Growth

I’m still learning about what Dovetail does, so expect more over time as we explore the research software market. But what I can say today is that Dovetail is growing like a weed. Per Humphrey, the company tripled its revenue and customers last year. All self-serve, with the company only hiring its first acount executive a few months ago. That’s actual product-led growth.

Product-led growth, the idea that one’s actual service or good will draw in customers, is essentially a rebrand of the concept of product-market fit (PMF) — or is perhaps a more pure version of what PMF should mean. Regardless, the relatively young company is looking to match its 2021 growth rate this year, per its investors — or at least get close. And that’s why it is nearly a unicorn already.

We’ll harangue Humphrey for growth data later this year, as he likely won’t be ringing our phone in the next months with new capital news.

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Identity in the metaverse: Creating a global identity system

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With the advent of the metaverse, the need for a global identity system has become apparent. There are many different ways to create an identity in the metaverse, but no single system is universally accepted. 

The challenge is usually two-fold: first, how to create an identity that is accepted by all the different platforms and services in the metaverse, and second, how to keep track of all the different identities a person may have.

There are many proposed solutions to these challenges, but no clear consensus has emerged. Some believe that a single, global identity system is the only way to ensure interoperability between different platforms and services. Others believe that multiple identities are necessary to allow people to maintain their privacy and security.

The debate is ongoing, but it is clear that the need for a global identity system is becoming more urgent as the metaverse continues to grow.

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In this article, we will explore the various options for creating a global identity system in the metaverse. We will discuss the pros and cons of each option, and try to identify the best solution for the future.

Option 1: A single global identity

The simplest solution to the problem of identity in the metaverse is to create a single, global identity system. This would be a centralized system that would be responsible for managing all identities in the metaverse. 

The advantages of this approach are obvious: It would be much easier to keep track of identities, and there would be no need to worry about different platforms and services accepting different identities. In addition, a centralized identity system would allow for better security and privacy controls, as well as the ability to track identity theft and fraud.

However, this approach also has several disadvantages. First, it would be very difficult to create a global identity system that is accepted by everyone. Also, a centralized system would be vulnerable to attack and could be used to track people’s movements and activities. Third, it would be difficult to protect the privacy of users in a centralized system.

Option 2: Multiple identities

Another solution to the problem of identity in the metaverse is to allow each person to have multiple identities. This would mean that each person could have one or more identities that they use for different purposes. 

One of the main advantages of this approach is that it would allow people to maintain their privacy and security. Each person could choose which identity to use for each situation, and they would not have to worry about their entire identity being exposed. In addition, this approach would be more resilient to attack, as it would be much harder to take down multiple identities than a single one.

The limitations of such an approach would be that it could be difficult to keep track of all the different identities, and there would be no guarantee that different platforms and services would accept all of them. In addition, multiple identities could lead to confusion and could make it more difficult for people to build trust with others.

Option 3: A decentralized identity system

A third solution to the problem of identity in the metaverse is to create a decentralized identity system. This would be an identity system that is not controlled by any one centralized authority but rather is distributed among many different nodes. 

This might seem like the ideal approach, since decentralization is a common theme in the metaverse. However, there are still some challenges that need to be overcome. For instance, it would need to be ensured that all the different nodes in the system are properly synchronized and that the system as a whole is secure. In addition, it might be difficult to get people to adopt such a system if they are used to the more traditional centralized approach.

One solution would be to get the nodes in the system to be run by different organizations. This would help to decentralize the system and make it more secure. Another advantage of this approach is that it would allow different organizations to offer their own identity services, which could be more tailored to their needs.

Another would be to incorporate an edge computing solution into the system. This would allow for more decentralized processing of data and could help to improve performance. It would also make the system more resilient to attack since there would be no centralized point of failure.

The best solution for the future of identity in the metaverse is likely to be a combination of these approaches. A centralized system might be necessary to provide a basic level of identity services, but it should be supplemented by a decentralized system that is more secure and resilient. Ultimately, the goal should be to create an identity system that is both easy to use and secure.

The ideal identity standards of the metaverse

Now that we have explored the various options for identity in the metaverse, we can start to identify the ideal standards that should be met by any future global identity system. 

It is no easy task to create a global identity system that meets all of the criteria, but it is important to strive for an ideal solution. After all, the metaverse is still in its early stages, and the decisions made now will have a lasting impact on its future. 

Current iterations of the metaverse have used very traditional approaches to identity, but it is time to start thinking outside the box. The ideal solution will be one that is secure, private, decentralized, and easy to use. It will be a solution that allows people to maintain their privacy while still being able to interact with others in the metaverse. 

Most importantly, it will be a solution that can be accepted and used by everyone. Only then can we hope to create a truly global identity system for the metaverse.

The bottom line on identity in the metaverse

The question of identity in the metaverse is a complex one, but it is an important issue that needs to be addressed. 

The challenges associated with creating an implementation that is secure, private and decentralized are significant, but they are not insurmountable. For one, it will be important to get buy-in from organizations that have a vested interest in the metaverse. These organizations can help to promote and support the adoption of identity standards. 

It is also important to keep in mind that the metaverse is still evolving, and the solution that is ideal today might not be ideal tomorrow. As such, it will be critical to have a flexible identity system that can adapt as the needs of the metaverse change. 

Ultimately, the goal should be to create an identity system that is both easy to use and secure. Only then can we hope to create a truly global identity system for the metaverse.

Daniel Saito is CEO and cofounder of StrongNode

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How to Eliminate Scheduling Inefficiencies in Your Business

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What do salons, consultancies, and home service providers all have in common? This question may seem like the prime setup for a joke, but there’s no punchline to look forward…

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Why You Should Start a Business Only While You Have a Job

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Opinions expressed by Entrepreneur contributors are their own.

Many people that I meet tell me that they dream of starting their own . I always ask them, “Then why don’t you?” They typically respond by saying that they have so many financial and personal responsibilities, that they can’t just quit their job to start a company, etc. Then I tell them my story …



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Related: How to Use Your Current Job to Start Your Next Business

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