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Why Microsoft and HubSpot Invested in PandaDoc

Clayton ChristensenProfessor at Harvard Business School, was the first to explain the theory of disruptive innovation. He described it in his book The Innovator’s Dilemma as to create new markets by discovering new categories of customers. And the dilemma he shed light on in his book was deciding between retaining a profitable, existing market or investing in rising, new markets. That’s where the funding announcement with PandaDoc comes in. PandaDoc, a San Francisco, CA-based Digital Transactions Management (DTM) solution provider, reeled in $15 million with a series B round of funding led by Rembrandt Ventures Partners, with participation from Microsoft Ventures, HubSpot, EBRD, and Altos Ventures.

“We are very excited about this funding round, as we could not have asked for better partners,” stated PandaDoc CEO Mikita Mikado. “Closing our Series B is a testament to the work of our whole team, the quality of our customer service and our innovative software. Our business has grown immensely over the past two years, and the capital raised will allow us to serve even more customers.”

Founded in 2013 by CEO Mikita Mikado and Sergey Barysiuk as a free and premium SaaS platform, PandaDoc provides organizations with Digital Transactions Management (DTM) solutions such as document templates, data merge, building, editing, executing, tracking documents, and e-signature smarts, while integrating with leading CRMs, as well as ERP, payment, cloud storage and other systems. The platform is designed to converge different tools from disparate business software and mold them into a single offering.

Even though PandaDoc is a 6-year-old startup, it has grown in leaps and bounds. To date, PandaDoc had raised $20 million in total funding from investors. Since its launch, the company has boasted more than 6,000 paying accounts and helped organizations “accelerate the way they transact”. More importantly, businesses that run on PandaDoc are consistently reporting higher close rates, bigger deals, shorter sales cycles, full compliance and other improvements that relate to the final stages of the buying cycle.

PandaDoc is, of course, not the only player in this space but in the recent years, every player has started specializing in a different aspect of the DTM tools so they differentiate themselves from one to another. One of the most popular providers, heavily backed DocuSign for instance, has begun to focus more on e-signature smarts whereas PandaDoc has been specialized more in business development, quotes and proposals management. That being said, they also operate in comparable fields as well. According to its CEO, the differentiating factor of PandaDoc’s offering is that the entire process is digital.

When it comes to the company’s intentions to utilize the funds, CEO Mikita Mikado expects the Series B investment to help PandaDoc accelerate its growth with heavy investments in the Sales, Support, Development and Marketing departments. They also plan to expand their product features and functionality significantly; keeping a focus on the SMB market, while broadening its footprint for more roles and functions of an enterprise.

Why Did HubSpot Invest in PandaDoc?

The partnership between these two was expanded last month when PandaDoc announced that its document automation platform is available natively, within HubSpot CRM, making it the first HubSpot partner to build on the cloud-based marketing and sales software company’s new CRM Extension API. In fact, PandaDoc’s employees, including their CEO, shot a hilarious mini-documentary to announce their integration partnership with HubSpot by using a dating analogy. From the marketing perspective, I found this a genius idea, because it is a six-year-old startup and needs to increase brand awareness so it can entice big investors in the tech industry that can provide the company with enough financial power for its expansion. Considering a document automation platform is not a sexy product, thinking outside the box to overcome that marketing barrier alone tells so much about the company’s dedication and commitment to what they do. Here’s the video that I am talking about, please, don’t judge me if you don’t find it as hilarious as I did, after all, there's no accounting for taste:

Now, lets’ paddle back to the reasons why the investment in PandaDoc makes sense for Hubspot. First, they already have an enhanced native integration that enables HubSpot CRM users to close deals with better quotes, proposals and contract management processes without leaving the HubSpot user interface. This integration is also part of the HubSpot Connect program where users can install applications like PandaDoc without ever leaving the platform. Having a suite of tools like PandaDoc is imperative for CRM platforms in today’s B2B marketplace where high expectations of the B2C market are bleeding into. Well, after all, behind every B, there is a C, and business professionals are also looking for a friction-less way of transacting online, just like consumers making online transactions on Amazon or other e-commerce sites.

Sharing the same point, Bradford Coffey, Chief Strategy Officer at HubSpot, wrote in his article: “The B2C side has led the way with some great companies like Shopify democratizing e-commerce technology and making it easier for retailers of all sizes to sell. Outside of document signing, the B2B side hasn’t made nearly the same progress - but it should. That’s the opportunity PandaDoc is tackling. We’re excited and honored to be working with them towards that mission.”

Why Did Microsoft Invest in PandaDoc?

By now, as you all know, Microsoft acquired LinkedIn last year for $26.2 billion, with an aim to integrate the most popular professional social network with its cloud-based product line, including its CRM platform, Dynamics 365. Since then, Microsoft has been consistently revamping its Dynamics. As being a formidable challenger to the market leader Salesforce, the tech titan has been playing catch-up. To that point, last year it announced a partnership with PandaDoc that works with Salesforce and other CRM tools.  So the participation of Microsoft Venture in this most recent funding is the extension of that partnership.


The partnership between these two enabled users to build a quote quickly from a library of approved custom content and pricing information that updates automatically for them as the numbers change. Due to the direct link to Dynamics, users can add recipient information right from the database and track quotes they’ve sent automatically in the customer record.
In the face of stiff competition in the CRM market, these types of tools are paramount. In fact, Salesforce acquired quote-to-cash vendor Steelbrick for $360 million, including $60 million in cash to be able to offer quote-to-cash and CPQ capability in-house instead of through partners such as Apttus, an enterprise configure-price-quote product provider, whereas Oracle provides its CPQ cloud product. So as you see the trend here, investing in CPQ capabilities makes sense for Microsoft so its Dynamics can keep up with other leading CRM platforms.

"PandaDoc puts into action our desire to help organizations drive efficiency, reduce cost and improve productivity," said Leo de Luna, managing director at Microsoft Ventures. "We see great value in the PandaDoc platform and believe the company's technology will raise the industry standard for digital transformation." 

My POV

This news represents a great success for PandaDoc, the funding is a reasonable investment from both of the HubSpot and Microsoft perspectives. Considering the story between Salesforce and SteelBrick where Salesforce Ventures first appeared as one of the backers with “substantial participation” in SteelBrick’s funding and then, bought the platform in order to provide the quote-to-cash capabilities in house, I’m wondering if PandaDoc and Microsoft will follow the same suit. I guess, there is only one way to find out: Stay tuned!

Venus Tamturk

Venus Tamturk

Venus is the Media Reporter for CMS-Connected, with one of her tasks to write thorough articles by creating the most up-to-date and engaging content using B2B digital marketing. She enjoys increasing brand equity and conversion through the strategic use of social media channels and integrated media marketing plans.