Brad Feld

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Rally Software Raises $16.85 Million

Jun 04, 2008
Category Investments

One of the many satisfying things about being a venture capitalist is being involved in a company from the very beginning that has a huge vision that it subsequently executes on it maniacally.  This is the case with Rally Software which announced today that it has closed a $16.85 million round led by Mohr Davidow Ventures.

Rally started out life as F4 Technologies.  I remember my friend Ryan Martens sitting down with me and Chris Wand around 2001 and walking us through his idea for changing the how he approached managing the software development process.  I can’t remember if Ryan used the word Agile at that time, but I remember scribbles on a white board that listed out all the different software that Ryan had used at BEA to manage his dev team and how maddening it was to try to integrate information in Word, Excel, Project, a dev workbench, a set of testing tools, and the support / QA system.  Ryan had a vision for an integration web-based system to layer on top of all of this to help support and manage the software development process.

We weren’t the first investor in Rally.  Ryan quickly raised about $400k of friends and family money.  We offered Ryan space to work out of our office which he did for a year or so as he got things up and running.  About a year after he got started, he was ready to raise a venture financing.  At the same time, his partner at his previous company – Tim Miller – was doing an entrepreneur-in-residence at a local Boulder VC firm (Boulder Ventures).  Ryan was encouraged to team up with Tim and shortly after that happened we co-led the first round VC financing with Boulder Ventures.

It has been a rocket ship from there.  Tim, Ryan, and team have created a phenomenal company that is built on two trends that have picked up massive speed in the past few years: (1) Agile and (2) SaaS.  In 2003 – while Agile was known – it was largely limited to ISVs and a few leading IT organizations.  SaaS was beginning to be talked about as’s success (and leverage from the SaaS model) became apparent.

Today’s financing by MDV marks another key moment in Rally’s history.  In addition to a large financing that should comfortably carry the company through a point where it is cash flow positive, we’ve added Bryan Stolle from MDV to the board.  Bryan previously co-founded MDV-backed Agile Software and served as CEO and later Chairman of the Board until Oracle acquired the company in July 2007 for approximately $495 million. Bryan is widely regarded as a visionary and pioneer in the product lifecycle management industry and knows Agile extremely well.

At this point, Rally is the undeniable leader in providing products for managing the software development lifecycle using Agile.  The company has come off of three years of doubling its subscription revenue and grew its active subscriber base by over 50% in Q1 of this year.  While Rally started off selling into ISVs, we are seeing rapid adoption at this point into corporate IT departments as every software development organization goes agile.

On top of this all, Rally has received huge industry validation through winning the Jolt Product Excellent Award three years in a row.  Rally also gets regularly recognized as one of the fastest growing companies and one of the best companies to work for in Colorado.

I’m immensely proud of all my friends at Rally and the opportunity to be involved with them.  If you develop software for a living, wander over to Rally Software and find out more about how to join the Agile revolution.