Vidyard, a fast-growing video hosting and analytics platform based in Waterloo Region, has raised a $6-million funding round from a slate of four Canadian and American investors.
The Series A investment will enable the two-year-old Y Combinator graduate company to step up its sales, marketing and engineering efforts in response to rapid growth that has accelerated considerably in the past six months.
The investors are OMERS Ventures of Toronto, iNovia Capital of Montreal, SoftTech VC of Palo Alto, CA and Jill Rowley of San Francisco, a former executive with Eloqua and Salesforce.com.
“It means we’re going to have a big party,” Vidyard CEO Michael Litt joked in an interview with Communitech. “No, it means that we can invest further in building out certain components of our team that have longer-term payback.”
Litt was referring specifically to marketing, and the work it will take to build the foundation for future growth in audience, traffic and customer base at Vidyard, which he and Devon Galloway founded as University of Waterloo students in 2011.
Their ambitions are big.
“What we want to do is essentially shape, build and own the video marketing category,” Litt said.
Vidyard, which makes it easy to post videos to a website and determine their effectiveness through analytics, has been working steadily toward that goal since it graduated from California-based Y Combinator, the startup world’s most exclusive accelerator program, in 2011.
In November of that year, the company raised a $1.65-million seed round from a star-studded list of investors, including YouTube co-founder Jawed Karim, Netscape co-founder Marc Andreessen and YC partner Paul Buchheit, creator of Gmail.
Despite their strong Silicon Valley connections, Litt and Galloway have consciously chosen to build out their team in Waterloo Region, where relatives are close and the University of Waterloo produces the precise type of top engineering talent they need to scale.
The growth of the company has been obvious to local tech observers, who have watched the team evolve from a one-desk pre-Vidyard operation in the Communitech Hub in late 2010, to a dozen in the Hub’s VeloCity Garage by last summer, to 16 when it moved into a nearby house on Oak Street last October, to the current “22 going on 40,” as Litt described it.
Already too big for the house after less than six months, the team is set to move again, and will soon occupy the entire top floor of a heritage brick building on King Street West, above Kitchener’s new CBC Radio and online station – an open space that can comfortably fit 60.
The extra bodies follow explosive growth in Vidyard’s business. Between last April and September, the company served one million video plays, but by October, was hosting one million plays per day. That number has since surpassed two million daily plays, Litt said.
“It’s growing exponentially,” Litt said, “and we don’t see any end to that. Pretty soon it’s going to be a million an hour, a million a minute, a million a second” as existing customers add to their online video offerings – a result of a trend in which companies increasingly employ in-house videographers, he said.
Revenue has, of course, risen along with the number of plays. In the nine months following April of 2012, Vidyard’s monthly recurring revenue grew 400 per cent and the number of customers grew 154 per cent. In January of this year alone, monthly recurring revenue outstripped the company’s total revenue for fiscal 2012, Litt said.
Marketing has been key to this growth, and was given a big boost last October when Vidyard snagged Mitch Solway, formerly of FreshBooks and Lavalife, as its VP of marketing.
In describing how the $6-million A round came about, Litt said it happened after he gave a brief pitch for Vidyard at Communitech’s first HYPERDRIVE Demo Day during Techtoberfest last October.
In the audience were John Ruffolo and Sid Paquette of OMERS Ventures, the venture capital arm of one of Canada’s largest pension funds. Later that evening, at a Techtoberfest after-party, Litt, Ruffolo and Paquette got to talking.
“They asked what they could do to get involved, and I said, you know, that they could write us a pre-emptive term sheet,” Litt said. “And so they actually came to visit the following week – and I was in my lederhosen that day [at Techtoberfest] the whole day, if you remember – and then three days after that, we had a term sheet in hand.”
Litt then followed up with some of Vidyard’s seed-round investors, who included iNovia and SoftTech, and let them know the company wanted to go with OMERS as lead investor for the A round.
“It was all because of that Techtoberfest pitch,” Litt said. “From term sheet to close was four weeks.”
In addition to the obvious space gain that Vidyard’s new location will provide to the growing team, the company’s King Street office represents a further expansion of the footprint of downtown Kitchener’s startup community, whose epicentre is the Communitech Hub.
Litt said Vidyard intends to use its new space not just as an office, but as a venue for social and artistic events, to help increase the vibrancy of downtown Kitchener and its attractiveness as a tech talent magnet.
“You just look at what’s happening in the area; I mean, new companies are emerging all over the place, every day,” he said, adding that Vidyard will maintain ownership of its Oak Street house and lease it to startups in need of space.
When the Hub opened two and a half years ago, “it was a scary area still,” Litt said, but now, with the growth of Tannery tenants like Google and Desire2Learn, and the success of local startups like Vidyard and current YC company Thalmic Labs, downtown Kitchener is increasingly attractive to well-paid tech employees.
Vidyard intends to do its part to liven up the downtown with monthly video events, a housewarming at the new location in May and an annual Halloween party, Litt said.
“It’s going to be pretty cool," he said.