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HootSuite Raises $165M In Series B Funding

Social media management startup HootSuite recently announced the finalization of a whopping $165 million in Series B funding in a round led by Insight Venture Partners with additional participation from Accel Partners and OMERS Ventures. HootSuite is one of the five vendors initially selected by Twitter as Ads API Partners to enable customers to manage advertising campaigns from within the HootSuite platform instead of logging into Twitter. Additionally, HootSuite uses its dashboards and analytics to enable brand management across other social networks such as Facebook, LinkedIn, Google+ and Foursquare. The company recently announced revenue growth of 300% for Q2 of 2013 in comparison with Q2 of 2012, over 7 million users worldwide and integration with 56 applications.

As a result of the investment, Jeff Lieberman, Managing Director of Insight Venture Partners, Ryan Sweeney, Managing Partner at Accel and John Ruffolo, CEO of OMERS, will join HootSuite’s board of directors. HootSuite’s finalization of Series B funding builds upon previous funding rounds of $1.9M and $20M that brings the total funding raised by HootSuite to $187M. The funding will be used for global expansion that includes hiring resources in Latin America and Europe. The investment may also be used to finance strategic acquisitions in the social media management, dashboards and analytics space. In an interview with TechCrunch, HootSuite CEO Ryan Holmes noted that the funding round takes the pressure off the company to prematurely evolve into an IPO or an acquisition.

HootSuite is currently “cash flow neutral” and, according to Ad Age, charges “enterprise clients anywhere from five figures annually up to the high six figures.” A recent article in Business Insider by Jim Edwards estimated that HootSuite’s revenue is anywhere between $50 million and $200 million based on some back of the envelope calculations that include the data point that the company has 246 Fortune 500 customers as noted by CEO Holmes in an interview with Bloomberg. Since HootSuite’s revenue is a fraction of Twitter’s advertising revenue, Edwards intuited that it would not be unreasonable to conclude that Twitter’s advertising revenue is on the order of $1 billion. As rumors of Twitter’s IPO proliferate and Facebook’s share price passes its initial IPO price, the industry should expect HootSuite to consolidate its early traction in the Twitter and Facebook advertising space. The company’s roster of customers includes PepsiCo, Fox, Sony Music, the National Hockey League (NHL) and Thermo Fisher Scientific Inc.

10 Things You Should Know About Zynga and Its IPO

Zynga, the social gaming company founded by Mark Pincus in 2007, hopes to raise $1 billion in an IPO that follows upon the heels of the LinkedIn and Groupon IPOs of the last few months. Zynga’s IPO is expected to offer 10 percent of its shares to the public at a valuation of $20 billion. Here are ten things you should know about Zynga and its July 1 S-1 filing.

1. Unlike Groupon, Zynga is profitable. The company reported $90.6 million in profit in 2010. In Q1 of 2011, Zynga reported an $11.8 million profit. Zynga’s 2010 revenues were $597.46 million. For the first quarter of 2011, its revenue was $235.42 million.

2. Zynga’s IPO features three categories of shares: Class A, B and C. Class A shares will be issued to public shareholders. Class B and C shares belong to senior executives and investors. CEO Mark Pincus owns all of the Class C shares. Pincus made almost $110 million by selling a percentage of his class B shares back to Zynga last March.

3. Zynga’s investors include Kleiner Perkins Caufield & Byers, Union Square Ventures, DST Global, Institutional Venture Partners (IVP), Foundry Group, Avalon Ventures, Google, Reid Hoffman, Peter Thiel, Andreessen Horowitz, Tiger Global and Kevin Rose. Key investors own the following percentages of Class B Shares: Kleiner Perkins Caufield & Byers owns 11%; IVP, Foundry Ventures and Avalon Ventures each own 6.1%; DST Global owns 5.8% and Union Square Ventures takes claim to 5.5%.

4. Zynga is the biggest developer of Facebook applications such as CityVille, FarmVille, Mafia Wars, Words with Friends and Zynga Poker. The company has 60 million daily active users on Facebook and more daily active users than the next 30 Facebook social game developers combined.

5. Zynga has the top two games in the word category for the Apple App Store for iPhone.

6. Zynga has 2000 employees that serve 148 million unique monthly users in 166 countries. Players create 38,000 virtual entities per second and spend 2 billion minutes a day gaming.

7. “Substantially all” of Zynga’s revenue derives from the Facebook platform. Any decisions made by Facebook that adversely affect Zynga’s gaming operations would have significant repercussions on its revenue stream.

8. Zynga sees its market opportunity in the context of: a) the growth of social networking; b) a culture of the “App Economy” whereby developers have access to social network platforms; and c) A “Free-to-Play” gaming culture that allows users to play games for free, thereby attracting a broader set of users and a richer ecosystem for social interaction within the gaming environment.

9. Zynga cites its cloud based technology infrastructure as one of its core strengths. Zynga uses Amazon’s EC2 platform as a testing stage for its applications before migrating them to its own cloud based infrastructure. The company’s cloud based infrastructure carries with it the ability to provision “tools have enabled us to add up to 1,000 servers in a 24-hour period in response to game demand,” according to its S-1 filing.

10. Notable challenges Zynga foresees include its dependence on Facebook, the small percentage of players that are responsible for company revenue, the challenge of developing quality games for mobile platforms and non-PC platforms more generally, and the difficulty of recruiting and maintaining world class talent.

Company Profile: Joyent and Application Virtualization

Joyent is a cloud computing vendor based in San Francisco. Founded by David Young (CEO) and David Hoffman (Chief Scientist) in 2004, Joyent is an Infrastructure as a Service vendor whose business model targets large scale enterprises, particularly in the online gaming space. Joyent has created its own technology stack called SmartDataCenter that it either licenses to third party customers or uses to deliver cloud computing services directly to customers such as LinkedIn, Kabam and the Gilt Groupe. Unlike other cloud computing vendors, Joyent takes virtualization a step further than hardware virtualization by virtualizing its cloud computing operating system over a pool of hardware resources that guarantees applications access to hardware resources. Because Joyent’s cloud computing operating system is virtualized, every application that operates on its SmartOS platform has access to its entire fleet of servers, with the result that customers need not create procedures for provisioning additional server resources as necessary. Applications on Joyent’s SmartOS platform are de facto deterritorialized across Joyent’s collective pool of hardware resources.

Joyent’s website describes its application virtualization as follows:

The SmartMachine has been designed to be very transparent to the underlying operating system, Joyent SmartOS. SmartOS uses this visibility into the SmartMachine to provide all SmartMachines with as-needed access to a pool of all available resources on a single piece of hardware while still providing each SmartMachine with minimum guaranteed access to resources based on a pre-established fair share schedule. This transparency also allows the underlying operating system, Joyent SmartOS, to identify underutilized resources and use them to provide enhanced application performance management. In normal operating conditions, all RAM and CPU resources are either directly used by applications, or are being used by the operating system to optimize disk I/O and provide other performance enhancements to the SmartMachines.
Source: “Joyent: Application Virtualization Hosting”

Joyent’s claim here is that the virtualization of the SmartOS operating system on which all of its applications run enables it to maximize productivity by identifying “underutilized resources” that can in turn be deployed to enhance “application performance management.” A series of third party benchmarking tests by the IMS company claimed that Joyent SmartMachines, Windows Virtual Machines and Linux Virtual Machines outperformed its Amazon EC2 server counterparts. Specifically, the IMS company claimed that Joyent SmartMachine’s disk I/O, Linux Virtual Machine CPU and Windows Virtual Machine disk I/O were faster than the corresponding Amazon EC2 machine by factors of 14, 5 and 2 respectively. Everyone in the cloud computing space knows that benchmarking tests are notoriously difficult to appraise, but Joyent’s willingness to position itself directly against Amazon EC2 in both press releases and company webinars speaks volumes about its confidence to execute.

Joyent’s CTO Mark Mayo attributes its performance to its application virtualization design: “Most people have resigned themselves to painfully slow disk I/O in the cloud,” Mayo noted. “But these results demonstrate that they don’t have to settle for mediocrity. Joyent’s cloud architecture uses lightweight virtualization that doesn’t impose overhead on I/O, so SmartMachines are as much as 14 times faster than Amazon’s EC2 machines.”

Performance marks one of many factors to consider when choosing a cloud computing vendor, but the IMS Company’s results nevertheless beg the question of whether Amazon’s market share leader position has compromised the performance and speed of its EC2 product offering. Conversely, cloud customers will need to consider whether Joyent has the capacity to accommodate more and more enterprise customers that are likely to strain an infrastructure that already supports computationally intensive applications from customers such as Kabam, Social Gaming Universe and Neverbug Entertainment and ZooLife.