Contentful Raises $175M Series F Funding - TechCrunch

Contentful Secures $175 Million in Series F Funding

This morning, Contentful revealed a new round of funding, totaling $175 million in Series F capital. The investment was spearheaded by Tiger Global, resulting in a company valuation of approximately $3 billion.

Contentful, initially recognized as a UI-free content management system (headless CMS), has since expanded its vision.

Essentially, Contentful offers a service designed to efficiently distribute content – including images and text – to websites and applications globally.

New and Existing Investors

The company announced that Tidemark and Base10 Advancement Initiative joined its investor base during this funding round.

Existing investors also participated in the Series F financing.

Contentful’s previous fundraising effort was an $80 million Series E round, which concluded in June 2020 and was led by Sapphire Ventures.

Valuation Growth

Data from PitchBook suggests the Series E round was completed at a valuation of around $550 million.

At the time of the Series E, a Contentful representative indicated to TechCrunch that the company was nearing a $1 billion valuation.

Considering these figures, Contentful’s current valuation represents a significant increase compared to its worth just one year ago.

Understanding Contentful’s Core Business

Before delving into specific performance indicators, it’s important to understand the fundamentals of Contentful’s business model.

This overview will provide context for evaluating the company’s growth and future prospects.

Understanding Contentful's Core Functionality

TechCrunch recently interviewed Steve Sloan, the CEO of Contentful (formerly with Twilio and Bessemer), and Brian Spittler, their communications lead (previously at Podium), to gain deeper insights into the company’s offerings.

Sloan described Contentful using an analogy, positioning it as a provider of digital content in the same way Twilio serves the communications sector and Stripe handles payments. Essentially, Contentful focuses on APIs – application programming interfaces – offering a suite of core APIs for both reading and writing content to its data storage and ensuring timely content availability.

Contentful’s primary goal isn’t to assist companies in application development, as other firms excel in that area. Instead, it aims to accelerate content loading speeds within customers’ applications, irrespective of user location. This clarifies the comparison to Stripe and Twilio; Contentful seeks to streamline a developer’s workload by abstracting the delivery of digital content to applications through an API. Just as developers can leverage Twilio for global text messaging without directly managing telecommunications infrastructure, Contentful allows clients to bypass the complexities of content delivery networks (CDNs) and global bandwidth concerns.

Having established a foundational understanding of Contentful’s purpose, let’s now consider its growth trajectory:

Contentful’s CEO refrained from disclosing specific details regarding the company’s business growth, only stating that it reached an “inflection point” when securing its Series E funding. This lack of transparency was somewhat surprising, considering the company likely experienced positive performance in both 2020 and 2021, which prompted Tiger Global’s $175 million investment at a higher valuation.

Sloan did, however, explain the rationale behind the company’s decision to withhold growth data. He argued that publicly released growth figures can be scrutinized and compared to initial claims during a potential IPO. Furthermore, he noted that evolving definitions of metrics can render such comparisons problematic. There is validity to this point; some startups may initially claim profitability, only to later clarify that they were referring to adjusted EBITDA or positive operating cash flow.

The ideal solution, according to Sloan, is for growth-stage startups to share GAAP-compliant data with the media when seeking coverage. Contentful, with its aspirations for an IPO, is likely already preparing its financial records accordingly. GAAP-compliant results are achievable! It’s also common for startups to avoid sharing detailed performance data at the behest of their investors, a situation that often leads to complaints from other investors regarding media focus on funding rounds.

What leads us to believe Contentful is planning a public offering? Companies generally don’t raise nine-figure sums at ten-figure valuations if they anticipate a swift acquisition. The company’s current valuation makes it too expensive for most large tech firms to acquire; therefore, an IPO is the likely path. Should Contentful proceed with an IPO, we would certainly analyze its historical GAAP data as presented in its S-1 filing for accuracy and consistency.

Despite the reluctance to discuss financials, Sloan did share insights into employee growth plans. Contentful currently employs approximately 600 individuals across its offices in Denver, Berlin, and San Francisco. The company intends to double, or slightly exceed doubling, its workforce over the next two years. Consider this information when formulating your own revenue projections; a reasonable estimate for the company’s current annual recurring revenue (ARR) falls between $75 and $85 million.

Looking forward, Contentful’s customer base is segmented into three primary groups: midmarket businesses, large enterprise clients, and venture-backed startups poised for significant growth. Given that all these segments are either undergoing digital transformation or are inherently digital, Contentful’s market prospects appear promising, suggesting a substantial total addressable market and continued growth potential. The impact of the additional $175 million in funding remains to be seen.