911: PagerDuty gets $10.7M for IT incident alert platform

By Michael Carney , written on January 31, 2013

From The News Desk

As real as the Series A crunch is, it seems to be having a hard time slowing down the enterprise software sector. Today, SaaS-based IT alerting and incident management startup PagerDuty announced a $10.7 million funding, making it the latest in a string of high profile financings within the category.

The round was led by Andreessen Horowitz, with participation from LiveOps chairman Maynard Webb, Opscode founder Jesse Robbins and existing seed investors Harrison Metal, Baseline Ventures, and Ignition Partners. Andreessen Horowitz partner John O'Farrell has joined the company’s Board of Directors. [Disclosure: Andreesen Horowitz partners Marc Andreesen and Jeff Jordan are individual investors in PandoDaily]

“The shift to cloud-based architectures is unfolding across every area of IT,” O’Farrell says. “As expected, engineers are building and running an increasing number of ‘always-on,’ complex, mission-critical systems. Unfortunately, most of today’s largest IT organizations still rely on cumbersome manual processes and cobbled-together solutions for incident response and remediation.”

For companies that with a dynamic cloud infrastructure that oftentimes consists of hundreds if not thousands of applications and hardware components, PagerDuty is like the 911 dispatch center. In the case of errors, the platform issues alerts to IT and DevOps teams by Web notification, SMS, email, and telephone according to a custom hierarchy, in each case escalating until someone responds and takes action. Engineers can respond and take action remotely through the PagerDuty mobile platform.

The platform integrates with numerous widely used monitoring systems like Zenoss, Nagios, New Relic, Splunk, AWS Cloudwatch, and Pingdom to manage IT infrastructure components like servers, networks, databases, and web and mobile applications.

“Every big company needs a dispatch center,” Robbins says. “The only question is whether they use PagerDuty, or elect to build it themselves, and then wish they used PagerDuty.”

PagerDuty differentiates itself from competing service desk tools, such as those by WorkDay and others, through its laser focus on solving the incidents management problem. Many other systems offer a range of good enough solutions to many problems, without truly mastering one. The company also offers solutions that are applicable to small, midsize, and large enterprise organizations, while most alternatives focus only on the largest customers. This said, according to Robbins, the startup still needs to build out its outside sales staff necessary to acquire and manage more of the largest accounts.

PagerDuty graduated from Y-Combinator in Summer 2010 and has otherwise been bootstrapped until today’s financing. With only 18 employees, the startup has amassed thousands of customers across 100 countries, including Intuit, Adobe, Reuters, Dropbox, Braintree, Rackspace, Electronic Arts, Cononical, OpsCode, Heroku, and 37Signals. The company offers a free 30 day trial, and then charges $18 per month, per user for standard accounts, and $36 per month, per user for more robust enterprise accounts.

The Series A round will be used primarily to expand PagerDuty’s engineering and marketing teams. The company has yet to spend heavily on marketing, preferring instead to rely on word of mouth, as well as the always effective t-shirt giveaways and conference speaking engagements.

“Companies are shifting how they think about applications and the way they manage them,” says Robbins. “This is now a piece of critical infrastructure and PagerDuty is the best around. That two guys from Y-Combinator solved this very difficult problem, where no one had before, is an incredible story in and of itself.”