Not long ago, visitors at San Francisco startup Weebly would step into its office only to spot one of the company’s co-founders stepping out of the shower.
That’s what happens when your office is a two-bedroom apartment in North Beach, where the then 21- and 22-year-old founders ate, worked and only occasionally slept. David Rusenko, Dan Veltri and Chris Fanini built a website creation business in their living room and often didn’t go to bed until 6 a.m.
Four years later, the co-founders have apartments of their own, and they shower at home. and despite its low profile, the company that started as a class project in college has become a serious business.
At 7.5 million users, Weebly doesn’t have the size or visibility of platforms like Tumblr (more than 25 million blogs) or WordPress (about 54 million). But Weebly, which tries to make it cheap and easy for businesses to create their own websites, now powers 2 percent of the Internet, according to research firm Netcraft.
It also has something that services like Tumblr, which has yet to offer a paid version, can only envy: profits. While the founders would not discuss their finances in detail, they say they became profitable in 2008, barely a year after they raised an initial $650,000 of funding.
They did it using a “freemium” model, giving away most services at no cost but charging for additional features.
“There’s not that many companies that take a small angel round and become profitable and don’t need to raise any money after that,” Rusenko said.
The trick, Rusenko said, was to work aggressively to keep costs down in early years – hence the living-room office.
It’s an approach popular among companies founded by Y Combinator, the Mountain View startup boot camp. Founded by Silicon Valley entrepreneur and sage Paul Graham, Y Combinator provides promising entrepreneurs with seed funding in exchange for a small stake in their startups.
Largely unknown
In just six years, Y Combinator has funded some of the Web’s fastest-growing businesses, including Reddit, Dropbox, Airbnb and Scribd. last year, Y Combinator cloud-computing start-up Heroku was bought by Salesforce.com for $250 million in cash and stock, the incubator’s biggest success to date.
But as Y Combinator peers like Dropbox and Airbnb have reached billion-dollar valuations, Weebly remains largely unknown to consumers.
In part that’s an effect of the founders’ desire to stay small: despite significant user growth since 2007, Weebly is run by a team of just 13 people, in a space only slightly larger than the Penn State dorm room where founders conceived it. Fanini, the chief technical officer, still works in a closet.
But that’s about to change: Fueled by an acceleration in Web growth, Weebly is expanding both in workforce and real estate. Next month it will move into new offices in Jackson Square, where it will occupy 11,000 square feet – up from the current 1,400. It also plans to double its number of employees in the next year.
“It’s going to be a really nice upgrade,” Rusenko said of the new space. “We can support hundreds of employees and still be profitable. But we’re focused on staying lean, mean and productive.”
Still, the company recently raised a new round of funding – its first since the initial investment. Rusenko wouldn’t divulge the size of the investment from Silicon Valley heavyweight Sequoia Capital, but said it was part of a strategy to initially take the company public.
Weebly became profitable in a space crowded with competitors that also produce mostly free, drag-and-drop website creation tools: SnapPages, Wix and Webnode are among the similar offerings. Another competitor, San Francisco’s Yola, has raised $25 million in venture funding pursuing many of the same customers.
Chasing big target
They’re all after a big target: the market for hosting services is $5 billion annually.
At the same time, Weebly’s founders say much of the potential market remains untapped. About 2 billion people have Internet connections, they say, and yet there are only around 300 million websites.
Veltri, the chief operating officer, says that 51 percent of businesses still don’t have a Web presence.
“We think that will change a lot,” he said. “There are a lot of ripe opportunities to convert existing businesses that have websites they’re not happy with onto a much better platform.”
Rusenko sees a future where everyone has multiple sites.
“Powering 2 percent of the Internet seems great,” he said. “But how can we grow the Internet by an order of magnitude? That’s an ambitious goal, and we want to focus on that goal.”
This article appeared on page D – 1 of the San Francisco Chronicle
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