Contentful this morning announced a $175 million Series F round of capital, led by Tiger Global, valuing the unicorn at around $3 billion. Contentful, formerly known as a UI-free content management system (headless CMS), now views itself in a broader light. More simply, Contentful provides customers with a service that will deliver images, words, and other content to their applications and websites around the world, quickly.
According to the company, Tidemark and Base10 Advancement Initiative were added to its cap table in the round, which also saw participation from previous investors. Prior to the round that Contentful announced today, its most recent fundraising event was an $80 million Series E led by Sapphire Ventures in June 2020.
PitchBook data indicates that that round was raised at a roughly $550 million valuation, while our reporting at the time of the company’s Series E includes the tidbit that “a Contentful spokesperson [told TechCrunch] that [the company was] approaching a $1 billion” valuation. Split the difference and it’s clear that Contentful’s new valuation is a multiple of what the company was worth a year ago.
But before we dig into metrics and results — or really a lack thereof — let’s take a minute to chat through Contenful’s business.
What does it do?
Sloan explained Contentful by analogy, saying that as Twilio served the communications market and Stripe the payments space, Contentful wants to handle the world’s digital content. Yes, we’re talking APIs (application programming interface). Contentful has a handful of core APIs that allow for reading and writing content to its data buckets and making content available at the right time.
In more practical terms, Contentful doesn’t want to help companies build apps. Other companies are rather good at that. Instead, it wants to help customers’ apps load their in-app content very quickly, regardless of where their users are. You can now better understand the modestly aspirational Stripe and Twilio comparison; Contentful wants to take a piece of a developer’s workload, in this case delivering digital content to controlled applications, abstract it and deliver the functionality as an API. So as developers could simply use Twilio to make text messages appear around the world without coming to terms with global telephone providers, Contentful customers can avoid having to think about content delivery networks (CDNs) and global bandwidth for their content.
Now that we have a reasonable grasp of what Contentful does, let’s talk about growth:
No, that’s not an errant space. Contentful’s CEO declined to share essentially anything concerning its business growth, aside from that when Contentful raised its Series E it was around an “inflection point” for the company. This irked me a little; we know that the company had a good 2020 and likely a good 2021 thus far. Why? Because Tiger didn’t invest in a $175 million round at a new, higher price for Contentful on the back of mediocre results.
To his credit, Sloan was willing to explain why his company decided to avoid sharing growth information. Per the CEO, when a company discloses pieces of growth data over time, folks will go back when they go public and compare data to claims. And, he added, given that definitions can change, sharing can be more bother than it’s worth. There’s some truth to this: Some startups will claim profitability, for example, only to gently backpedal and explain that what they meant was really adjusted EBITDA, say, or positive operating cash flow.
The solution, of course, is for growth-stage startups to share GAAP-ready data with the media when they want our attention. After all, Contentful is aiming toward an IPO and is probably already learning to get its books in proper order. GAAP results are possible! And to be fair to Contentful, many startups decline to share useful data about their performance when courting media attention, often at the request of their investors; that we journalists of the world have to then deal with other investors complaining to us that the media is too fixated on funding rounds as progress points is a distinct, if closely related, matter.
Why do we think that Contentful is targeting an eventual public debut? Because companies tend not to raise nine figures at 10-figure valuations if they are hoping for a quick exit. The unicorn is now too expensive for anyone but the largest tech companies to buy; ergo it intends to go public. And, yes, we would go back and check claimed results against historical GAAP data in its S-1 if we were able to. That’s research! And fact-checking!
Gripes aside, Sloan shared employee growth expectations in a broad manner. Contentful is around 600 people today, split between its hubs in Denver, Berlin and San Francisco. Over the next two years, it intends to double (or a bit more than double) that headcount. Pull out your pencils and come up with your own revenue guesses based on that. The correct answer is present-day ARR somewhere between $75 and $75 million. Good luck.
Looking ahead, Contentful sells to three main customer buckets, per its CEO: midmarket customers, enterprise customers and venture-backed startups that intend to get big. Given that all of those are either pursuing digital transformation work or are digitally native, we presume that Contentful’s market will remain fertile for some time. That implies a winsome total addressable market for the company to sell into, implying ample future growth opportunities. Let’s see what it can get done with $175 million more.