Cheezburger's first venture financing raises $30 million
Cheezburger founder Ben Huh was caught in a flurry of meetings Tuesday after announcing that his network of humor sites raised an eye-popping...
Seattle Times staff columnist
Cheezburger founder Ben Huh was caught in a flurry of meetings Tuesday after announcing that his network of humor sites raised an eye-popping $30 million in its first round of venture financing.
The biggest meeting was after lunch, when Huh, 33, and his team gathered to discuss how to ramp up growth using the newfound cash and still preserve the 3-year-old company's culture and nimbleness.
Huh already has built a profitable media company using $2.25 million from angel investors to create a network that draws more than 16.5 million people a month and generates more than 375 million monthly page views.
Boulder, Colo.-based Foundry Group led the investment. Also participating were Avalon Ventures, SoftBank Capital and Seattle's Madrona Venture Group. It's too soon to discuss any plans for an IPO, Huh said.
"The financing aside, the size of what they've built with such limited capital, so few people, is really impressive," said Greg Gottesman, Madrona managing director and longtime fan of Cheezburger's Fail Blog. "This is a great sort of entrepreneurial story about a good local team that's done some incredible things on the media side."
Other sites in the network include Memebase and The Daily What.
It's too soon to discuss any plans for an IPO, Huh said.
"We got here because we concentrated on the next few months of what we wanted to do," he said. "We don't have strategic plans; we just have a mission we really love, which is to make everyone happy." For five minutes a day.
The company is also now officially called Cheezburger — a reference to its flagship cute-kitten site, Icanhascheezburger.com. Huh said the previous name, Pet Holdings, was just a placeholder.
Things will stay on course in part because Cheezburger has been working to decentralize its management, he said. New employees are trained to make decisions on their own, for instance, to minimize bottlenecks.
There will be plenty of new employees to train. Huh said the cash infusion will be used partly for hiring, with Cheezburger planning to more than double staffing at its Lower Queen Anne office this year. By year's end the company should have more than 100 employees, up from 50 today and 20 at the end of 2009.
Huh had considered opening editorial offices in New York and Los Angeles, but has decided to keep primary business operations concentrated in Seattle. The company is planning to hire sales reps in those cities, though.
Cheezburger has had success publishing books based on its sites. Huh said he's interested in pursuing video and TV projects as well.
Huh also plans to use the capital to buy more companies. He's looking for Web ventures with strong brands and user communities that would complement Cheezburger's network of 50 sites.
Don't expect Huh to add a flurry of new websites to the Cheezburger network, though. After a "huge binge" developing a network of sites, including the Fail Blog and The Daily What, the additions tapered off last April. Huh said scaling problems arise when you reach 100 sites, and Cheezburger is now going for quality more than quantity.
"What we're actually interested in is creating more engaging sites," he said.
But can Cheezburger stay funny as it gets bigger and richer?
Huh said yes, and he's drawing inspiration from Groupon founder Andrew Mason, who kept things irreverent as his company evolved into a major online advertising company.
"As far as I'm concerned Groupon's really a content company — they sell deals as content that's meant to be read and consumed," Huh said.
Here are edited excerpts from more of the conversation:
Q: What sort of acquisitions will you make?
A: We're going to make small bets, many of them. We're looking for things that work well within our model. It has to work within user-generated content.
Q: Will your role change?
A: No. This is what I love doing.
Q: So are you going after The Onion now?
A: The Onion and we fill very different roles. To me The Onion is a great content-production company, whereas for us, we see ourselves as a community of users who create content for ourselves. From a brand standpoint, I'm flattered we'd be compared to The Onion.
Q: Will you sell Cheezburger to a big media company eventually?
A: We're not looking to flip this thing. We're here for the long haul.
Q: Will investors put the screws on and expect a big return?
A: Not these guys.
Q: For $30 million, they'll expect something ...
A: I think they expect us to perform at a higher level.
Q: Will you use their contacts to build new partnerships?
A: I will milk our new investors for every phone number in their Rolodex.
Q: Did the funding news increase traffic?
A: No. Most consumers don't follow that sort of stuff.
Q: What's your outlook for the ad market?
A: We think the advertising market will continue to be very strong. We see no weakness in that market. It's steady growth over 2011."
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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.
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