15Five, a startup that has built a platform to encourage employees and managers to give feedback to each other, is today announcing a new round of funding: it has raised $2.2 million in a “Seed 2” round.
As with its first round in January 2013, 15Five has again attracted the attention of a host of interesting investors: Point Nine Capital and Matrix Partners, leadership guru Simon Sinek and JustFab’s Adam Goldenberg participated in this round. (The first seed round investors was a large group that included Richmond Global, 500 Startups, Yammer Founder David Sacks, USTREAM founder John Ham, Jason Calacanis, ex-Mashable editor Ben Parr’s Dominate Fund, Sincerely CEO Matt Brezina, and Khosla’s Ben Ling.) This latest funding takes 15Five’s total funding to $3.8 million.
HR software has developed something of a groan-worthy reputation in the working world: it’s often difficult to use well, and often is not used at all. So it comes as no surprise that the new crop of performance management companies that are coming up — in addition to 15Five they include BetterWorks, which I wrote about last week — hold themselves at arm’s length from the HR label.
“One of the most common misperceptions of 15Five is that we’re HR software, but it’s actually very rare that HR buys 15Five,” says David Hassell, its CEO and founder.
But while that may take away what seems like an obvious target customer, it’s opened the door to a new kind of customer, and a new way of conceiving of how to get workforces communicating better with each other — and specifically how to help managers get a better sense of what their reports are doing, and for employees to feel like they are being heard.
A typical customer is a manager, executive or CEO, who uses 15Five as a feedback platform to drive the growth, performance and success of their teams and organization as a whole, Hassell says. The platform is constructed in a way that encourages users to log in daily, but with enough flexibility built into it that it can prove effective even if a person only has a few minutes to use it.
The company has picked up 1,000 businesses as customers to date, with a strong leaning to the tech sector. That’s for a few reasons. The first is that tech companies are more inclined to be early adopters of other tech products; the second is that they are in 15Five’s natural geography (its headquartered in SF); and the third is that the very solitary nature of a lot of tech workers, situated as they are with their heads fixed on screens and working crazy hours, often means that they don’t stop and communicate very well with each other.
This was partly how Josh Hannah, a general partner at Matrix and now a board member at 15Five, was first introduced to the company:
“One of my investments is JustFab and Adam Goldenberg [the CEO] called me to tell me that the tool was fantastic and that I should take a look,” he says. “Adam told me, ‘It turns my average managers into good managers.’ Then I found out that several other of my portfolio companies were using it, so I took a look. I found the product very powerful. it’s deceptively simple but if you can make it simple and effective so much the better.”
 
When you have a product that seems to breed engagement, the temptation these days seems to be to ramp it up with even more functionality. But this isn’t the route that 15Five is taking. Up to now, 15Five has raised very little money as Hassell has embodied the idea of a lean startup. This latest round will be used first and foremost not to invest in building out the platform or product, but in hiring more sales and marketing talent to grow its business before it takes that next step of expanding its own functionality, or adding an API or integrating with others that would do this:
“Given all that that and the trajectory we’ve been on, I believe we can continue to grow quite significantly as a standalone product,” he says. “That said, there are a number of very interesting integrations we’re definitely considering.”
Image: Flickr
