A $17 Million Round We All Missed

By Kym McNicholas , written on August 27, 2012

From The News Desk

Most start-up founders would bend over backwards for coverage.  So I was a bit surprised when a former NCAA championship gymnast raised $17 million in funding late last year, and not only didn't do cartwheels, but kept it a secret -- until now.

“It didn’t make sense for us to be distracted with hype, especially, when it wasn’t important to our partners at the time,” explains Dan Gill, co-founder of Huddler, a company that makes software that modernizes online forums.

Gill and older brother Ted Gill, his co-founder, didn’t even announce the launch of their company until a year after they’d already started serving customers. They didn’t rely on media to get the word out. They picked up business the old fashioned way, knocking on doors and cold calling.

The Gill brothers also stalked online forums and message boards focusing on product information and reviews that were using the two top online forum software products, vBulletin and PhP. They asked customers of their competitors to switch to their free software, which would help with search optimization, sharing on social media sites such as Facebook and Twitter, and better monetization. Huddler makes a percentage off increased revenue to the customer sites.

Although customer is happy with the switch to Huddler, it can't directly attribute its monetary gains and increase in monthly visitor count to switching over to Huddler. Editor Peggy O'Mara, on the otherhand, says, "One of the most dramatic changes we've seen since switching over in November 2010 is our huge growth in unique visitors from 750,000 to 3 million."

Huddler powers 31 sites and fields 24 million unique visitors monthly. It has been increasing revenue quarter over quarter and is on track for profitability in 2013. It has the ability to do so, if it continues to modernize message boards. But it has its sight set much higher.

While phpBB and vBulletin are competitors, in that Huddler migrates sites from those platforms, it's not a licensing business. So Its real competition is actually other digital media companies competing for user and market mindshare. And Gill respects the competition.

Gill says, "I think that Matt Sanchez and his team at SAY Media are doing a great job of investing in technology and marketing solutions that help expedite marketers transitions to digital."

SAY Media sites reach more than 400 million users worldwide. Huddler has a long way to go. That's not enough to scare Gill into scaling fast and grabbing for media time. Perfecting their model and pleasing each customer, one at a time, is the executive team's focus.

Wise choice, especially since US Bureau of Labor Statistics research shows that about six in 10 businesses fail within four years of operation due to poor execution. More specifically, according to a Startup Genome report, 74 percent of start-ups fail because of premature scaling.

So, Huddler’s executive team is simply being cautious as they attempt to compete against a company more than 16 times Huddler's size. Whether or not they can compete is a big question no one can truly answer. "It’s nearly impossible to make the judgment in advance—How do you tell in advance if an executive can scale?"

That's according to a blog post, The Scale Anticipation Fantasy, written a couple of years ago by Andreessen Horowitz co-founder and general partner Ben Horwowitz, (who's also a PandoDaily investor.)

But NEA believes in Huddler's team and prospects. The investment firm led the company’s first round of $5 million, and came back late last year for a second time with Matrix, for Huddler’s Series B, bringing its total raise since inception to $22 million.