A startup founded by a couple of Orange County residents and a partner from Riverside, raised $33 million in advance of a potential initial public offering next year.

SendGrid, which has an office in Orange, raised the money in a Series D round led by Palo Alto based Bain Capital Ventures, Bessemer Venture Partners, and Boulder, Colo.­ based Foundry Group.

The company, which built a platform to reliably deliver high volumes of automatically generated emails from businesses to customers, will use the funds for product development and to bolster its balance sheet, President Isaac Saldana said. Its customers include Pandora, Spotify, Uber, Wal­Mart and Costco.

SendGrid would like to be “IPO­-ready” next year, he said. It has set a number of benchmarks to be met as executives keep an eye on IPO market conditions in the coming year.

They include hitting $100 million in annual revenue; a year­-over­-year growth rate of at least 40%; and sustained profitability, said Corporate Communications Manager Carolyn Gierer.

SendGrid expects sales of $100 million in the first half of next year, has already hit the 40% growth benchmark, and experienced its first quarter of profitability in the third quarter of this year, Gierer sad.

History

It was founded seven years ago by Saldana; Orange County resident Jose Lopez, a web architect and senior engineer; and Tim Jenkins, who serves as chief technical officer.

All three are alumni of the University of California­Riverside’s Bourns College of Engineering who went on to become software developers. Saldana hung around the electrical engineering lab at UC Riverside, where he met Jenkins, who ran the lab, and they formed a fast friendship. Saldana met Lopez after graduation.

The three began to work together on various business ideas and startups. Saldana was frustrated that emails generated from the apps he was building weren’t being delivered. He also noticed that all of his friends who were web developers were doing projects that needed an email component, but “no one was either good at or interested in doing email well,” he said.

He decided to create a cloud­ based email delivery platform to more reliably send emails. The company’s goal was to automate the sending of transactional emails, including receipts, password resets and order confirmations. SendGrid touts that its email delivery is more reliable because the company built its own proprietary mail transfer agent to ensure its platform would not experience the bottlenecks some of its competitors do, Gierer said.

In 2009 they sent an application based on the idea to Techstars, an accelerator in Boulder, Colo., that accepted the startup, and Saldana and Lopez gave up paying jobs to take on the venture full time. The company’s official headquarters is in Denver, because that’s where the majority of SendGrid’s business operations is conducted. Its corporate headquarters are in Denver because “it’s a top market to attract, motivate and retain a robust talent pool,” Gierer said. The founders remain deeply involved with Techstars as mentors, and the accelerator’s managing partner, Mark Solon, is a member of SendGrid’s board. SendGrid graduated from the accelerator in July 2009 and quickly got its first funding, a Series A round of $750,000. It followed that up with a $21 million Series B round and a $20 million Series C round. Saldana declined to disclose the company’s valuation or what he expects from an IPO.

OC Presence

He has gotten networking help from members of Newport Beach­ based early ­stage venture fund K5 Ventures who’ve introduced him to local organizations, including Tech Coast Angels, The Portal, Tech in Motion and Blackstone LaunchPad at the University of California­ Irvine.

K5 Managing Director Ray Chan said he admires SendGrid’s product and company culture.

“SendGrid has a proven communication platform,” Chan said in an email.

The Orange County office is in a historic building on West Chapman Avenue that was renovated to make space for new employees, Gierer said. It’s now 7,800 square feet, and a mix of approximately 60 engineers and support staff work there, including the founders.

SendGrid intends to hire 20 new employees in OC a year through 2019, Saldana said. It also plans to expand its OC office again in the near future.

Bullish on Email

The company has two target markets: developers and marketers. The former includes a large community of companies that build cloud­ based applications using SendGrid’s platform. The company expanded into email marketing a year ago. SendGrid’s marketing email features help marketers create and deliver email campaigns to drive engagement and business growth. Its business model involves a flexible pricing plan, based on the number of emails its business customers send per month and the number of contacts they store in SendGrid’s platform.

Saldana remains bullish on email, even as other ways businesses communicate with their customers, such as social media and texting, threaten to eclipse it.

“Email is still one of the highest ROIs there is,” he said, referring to business communication with customers. “For every dollar spent, you end up getting a $38 ROI for it…We will explore other messaging systems in the future. But I still believe that email is here for a really long time.”

His enthusiasm was validated on Black Friday, when SendGrid sent a record 1.6 billion emails. He said it typically averages about 1 billion a day on behalf of 42,000 paying customers in more than 100 countries around the world. Some of SendGrid’s competitors include Amazon SES (short for Simple Email Service) in transactional email and MailChimp in marketing email.