Dubbed the "next Buddy Media," Percolate goes big with Series A

By Erin Griffith , written on November 14, 2012

From The News Desk

The sad truth of covering tech is that most of the cool stuff we write about will fail. Take Loosecubes, which announced its closure yesterday after raising $7.8 million just five months prior. Most of the companies we cover don't even make it to that large Series A round.

That fact makes it all the more satisfying when you see a company you've been following start to spread its wings. Percolate, a social SaaS platform focused on helping brands produce better content, is one of those companies. After a year and a half, the startup has blossomed to 28 employees, with around 40 Fortune 500 clients. Today, it's announcing a Series A round of funding worth $9 million, led by GGV Capital with participation from existing investor First Round Capital.

Previously the company raised a $1.5 million seed round from Lerer Ventures, First Round, SV Angel, Transmedia Capital, Rick Webb, Advancit Capital, Dave Morin, Josh Spear and Neu Venture Capital.

To be clear: raising a big round of funding doesn't automatically equal success. The opposite sometimes -- a big round with a healthy valuation is an albatross, or a debt, that the company has to live up to. Lucky for Percolate, the company isn't in any danger of sudden collapse in the near future. It's has been profitable or break-even throughout the entire year, even as it's grown from six employees to 28, co-founder James Gross says.

That's because the company is rapidly adding subscribers to its platform. Percolate helps brands execute social media strategies and native advertising in a way that's more authentic and effective than the "Happy monday!" offered from condescending corporate brand pages. The company is designed to help brands figure out what to say to the followings they've carefully amassed on Twitter, Facebook and Tumblr. Yesterday Percolate announced it was part of the "A-List" group of developer partners with Tumblr, a platform that Gross says is increasingly becoming as important as Facebook, Twitter and Pinterest for brands to maintain.

The company plays in a hot space -- marketing enterprise software for social media has already undergone its first big wave of consolidation with the rapid-fire sales of Buddy Media, Wildfire Interactive and Vitrue. The challenge for a company dubbed "the next Buddy Media" by its investors is to first scrappily compete with the original Buddy Media and its peers, who now have access to armies of salespeople and resources from their new parent companies, Salesforce, Google and Oracle. Percolate's founders would say they don't compete with these platforms because, unlike Buddy Media's software tools that basically facilitate brand publishing on social media sites, Percolate helps brands actually create compelling content. But to industry observers and even Chief Marketing Officers buying this software, they all kinda fall into the same bucket.

Which brings us to Percolate's second big challenge: Convincing the marketing departments of big brand advertisers to spend money on software. It's very different for a media planner who's spent their career buying space or airtime from Yahoo or NBC to begin spending money on enterprise software. The shift is no secret -- Gartner's now-famous study stating that chief marketing officers will spend more than chief information officers by 2017 has drawn a ton of investor attention to marketing enterprise companies like Percolate. But the ad world moves slowly. "We're shifting from creating a TV commercial every three or nine months to creating a Tweet every three or nine minutes," Gross says. "Its a fun challenge but its also daunting for marketers who don't think like technology buyers."