'Our Velocity is Blowing the Doors Off'--Hootsuite Sells $20 Million Stake to OMERS Ventures

By Erin Griffith , written on March 29, 2012

From The News Desk

Hootsuite has hit the venture big leagues. The three-year-old, Vancouver-based social enterprise company announced a $20 million secondary sale to OMERS Ventures, marking one of the largest Canadian VC transactions in the last ten years.

It's more impressive when you realize Hootsuite had only raised $1.9 million in VC funding and $3 million in debt. That Series A round happened in 2009. The young company's valuation is now north of $200 million.

Specifics of who is selling what have not been disclosed. Existing investors include Blumberg Capital, Hearst Ventures and angel investor Geoff Entress.

Hootsuite has been killing it lately: The company started last year with zero revenue. It launched its first paid product and, by the end of the year, hit a $10 million run rate, founder Ryan Holmes told me.

The company is profitable, and, this year, plans to top $70 million in revenue.

Hootsuite's user growth has steadily climbed, too. It took the company two years to get to its first million users. It took eight months to get to its second million and six months to get to its third. The company expects to hit six million users this year. "Our velocity is blowing the doors off," Holmes said.

The company uses a freemium model. The vast majority of its users--just under four million--don't pay for Hootsuite's social media management tools. The 60,000 that do cough up cash in the form of a monthly fee; clients include include NBA, Pepsico, Fox, Time Inc. and The Martha Stewart Show. Paid accounts start at $5.99 a month and enterprise accounts start at $1000 a month.

The company often gets lumped in with the likes of Buddy Media, Wildfire, Vitrue or Radian6, as well as Hearsay Social and Sprout Social. From an RFP perspective, that's correct, Holmes says. But what he wants to build is the SalesForce of social. Hootsuite's strategy is different. I presume his peers, on whatever level they may compete, would have a similar response. Social enterprise is on fire; there's room for everyone for now.

SalesForce itself is making a big push into social, but Holmes believes Hootsuite will beat it to the punch. "Groups that start with DNA around specific technologies ultimately win," he says. "It's hard to change a big moving ship, and SalesForce monetizes around sales CRM."

The company's next move to is take on Yammer. Hootsuite has plans for tools that facilitate internal conversations in the same way its tools facilitate external conversations over social media platforms. "We want to help teams work together and empower internal communications," he said.

OMERS Ventures is part of Canada's $55 billion pension fund, OMERS. While most public pension funds passively invest their capital in funds managed by professional moneymen, the guys up north have become particularly aggressive with direct investment deals on both the venture and private equity fronts.

So while we Americans are busy debating on blog posts which of our many startup scenes is the best, an enthusiastic, ambitious Canadian has joined forces with an aggressive, deep-pocketed investor to take down some of our biggest success stories. Watch your backs accordingly.