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Percolate Raises $9M from GGV and First Round Capital

Today social content creation SaaS platform Percolate announced its $9M Series A round of financing from GGV CapitalFirst Round Capital, and existing angel investors.  Read PandoDaily’s coverage of the financing here.

Social media is a category we have been investing in aggressively for several years now (examples include Buddy Media, YY, Social Touch and Meilishuo), and although the market has already seen some big outcomes (Facebook IPO, Buddy Media acquisition, Instagram acquisition), it is still very early in the market’s development.

So, why Percolate?

At a high level, the basics.  Terrific team; the founders (Noah and James) are deeply respected as emerging thought leaders in the space, and have spent many years working with top agencies and brands around the world.  They’re smart, hungry and have an amazing reputation in the industry.  Awesome business; Percolate has a unique software (SaaS) platform utilized by 30 of the world’s leading brands – companies like American Express, General Electric, Diageo and Samsung.  Many of Percolate’s users are fanatical about the platform – it is not uncommon to hear quotes like “I couldn’t scale our social presence without it.”  Enormous market; Gartner famously projected earlier this year that CMOs will spend more on technology than CIOs by 2015, noting that IT budgets make up 3.6% of revenue in large corporations while Marketing budgets are roughly 9%.  While social media makes up a relatively small percentage of spend today (<10% for most marketers, according to AdAge), it is highly likely to increase in the next few years.

At a more micro level, a few thoughts specific to Percolate:

1) The traditional model of brand advertising is being turned on its ear by social media.  Before social media, brands were content to create ad campaigns a few times per year and push those campaigns in front of consumers on a regular basis across a variety of mediums (print, tv, billboards, etc.).  That model doesn’t work across social media.  Consumers simply won’t tolerate a brand Tweeting the same message 7 times per day (or Instagramming the same photo, etc.).  Social requires constant creation of new and engaging content.  Marrying traditional brand content with social is known as “stock & flow,” and Noah, James and the Percolate team are all over it.

2) The market is evolving quickly.  It took social media pioneers Facebook and Twitter roughly 5 years to reach 100 million users (4.5 and 5, respectively).  It took Instagram 2 years.  In markets like China, we see companies like YY growing even more rapidly.  In markets that change rapidly, conditions favor the smaller, more nimble players.  Companies like Percolate are able to launch products, iterate, and embrace new areas like mobile before the large incumbent technology vendors (Oracle, SAP, etc.) have even begun to understand customer demand – much less build these capabilities into their legacy platforms.

3) The upstarts are garnering real budget.  We’ve met with quite a few marketing software providers in the past 6 months, and are continually amazed at the amount of money being spent by Marketing organizations (not IT) on technology – validating Gartner’s hypothesis.  I asked one top 10 global brand marketer how he justified the dollars being spent ($10K+/mo. in that case).  “It’s an impulse buy,” he responded.  “We spend hundreds of millions of dollars each year on marketing.   An extra hundred thousand for technology that improves our performance dramatically is a no-brainer.”  $100K per year won’t get Oracle excited, but for the upstarts it’s meaningful, and when that customer expands to additional brands and additional geographies, the annual contract value (ACV) can rise significantly.

We’re excited to back Noah, James and the team at Percolate.   Social media is a massive shift in the way brands engage with consumers – on a global basis.  Given the trends I outlined above, we think Percolate has a strong chance to create a terrific company that will make waves in the industry for years to come.

By the way – Percolate is hiring great people all over the country!

Updated 11/16 – financing coverage:

GigaOM “Percolate Helps Brands Act Like They’re People on Social Media”

Business Insider “Now THIS is the Right Way to Start a Company”

PandoDaily “Percolate Goes Big With Series A”

AdAge “Percolate Raises $9M Series A to Help Brands Create Content”

BetaBeat “Turning Brands Into Microbloggers”

AllThingsD “Twitter Tutorials for $10,000 a Month”

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