Betaworks Is Closing On $20 Million, Its First Raise In Over Three Years

New York City-based technology studio, betaworks, home to Digg, Instapaper, Dots, Bitly, Chartbeat, and many other products and services, is raising $20 million in new capital – news that betaworks CEO John Borthwick actually broke himself via Twitter last Friday, in case you missed it. The company is raising $10 million in fresh capital, while the other $10 million was from a note, Borthwick confirmed to us via email.

In terms of the new capital, the company has closed on $4.25 million out of this larger round, which includes both old and new investors. From our understanding, the round is less about betaworks needing to raise more capital, and more about the company allowing some interested new investors in – something that was made possible by the timing with the note’s conversion.

There are several high profile new investors, sources close to the matter tell us, including Tumblr’s David Karp, Salesforce CEO Marc Benioff, Jerry Yang (Yahoo), Ev Williams (Twitter), Abdur Chowdhury (Summize founder), Dave Morin (Path), and Gerry Laybourne, Nickelodeon founder, among others.

Betaworks is also doing something with Laybourne in the kids space, which should be out in either January or February.

Previous investors from betaworks’ A and B rounds have returned, an SEC filing shows, including RRE Ventures, Lerer Ventures, Intel Capital, and White Star Capital. In addition, Paul Cappuccio and John Drzik are also listed (update: as they board members). The company had previously raised roughly $28 million, according to Crunchbase.

Betaworks, along with other outfits like IdeaLab, has long been a pioneer in the “studio model” method to building new companies. That is, the company actually incubates several products in-house, and it makes smaller seed stage investments in outside companies of around $100,000 to $200,000 apiece. The product teams inside betaworks are able to leverage a shared platform of tools, including those for data, analytics, and monetization, all of which can help services quickly build up, ship and market their products.

This allows for a more flexible environment, where failures can happen fast, thanks to the experimentation the studio model allows for.

In earlier years, betaworks made a name for itself by selling Twitter search engine Summize to Twitter, and later doing the same with TweetDeck.

This year, the company has been heavily focused on building and expanding Digg, the once leading crowdsourced and crowd-voted internet news portal, which has now returned as a fuller suite of news gathering and news reading products, including a Google Reader replacement called Digg Reader, a trending video site, a pair of native mobile applications, and more. Traffic to the new Digg has been growing steadily since its relaunch, with some reports of the so-called “Digg Effect” even making a comeback.

Digg has also grown by 600% in unique visits since its relaunch, sources tell TechCrunch, and its one-month old Digg Video vertical has seen traffic go up by 15% month-over-month.

Betaworks also made headlines for acquiring Instapaper this year, after founder Marco Arment decided the popular “read-later” service needed a new home. The addition helped betaworks increase its bottom line, too, as Borthwick said on stage at this year’s Disrupt NYC event – Instapaper alone makes roughly $1 million per year after Apple’s take, he claimed.

As for the new funding, as Borthwick himself previously noted, this is the first time the company has raised capital in over three years.

Earlier in November, the company hired former Huffington Post Media Group publisher Janet Balis as its chief revenue officer, AllThingsD reported. At the time of the hire, Borthwick gave a hint of what was to come, saying, “Phase One of Betaworks was building great companies. And Phase Two is really building Betaworks as an operating media company.”

From what we’re hearing, that means that while betaworks won’t necessarily stop its company building focus, it will be looking to further monetize its current products. In particular, that includes Digg, which runs sponsored posts; Giphy which has done joint promotions with “The Hunger Games” and Gap recently; Dots, which has 15 million installs and worked with GE on a sponsored in-game feature; and bloglovin, which has 10 million users and 15 million monthly pageviews.

More to come, apparently.

UPDATE: This post was updated shortly after publication with the list of new investors.