PicMonkey is already a successful startup, boasting more than 25 million monthly users and hundreds of thousands of paying customers from 190 countries who visit the photo-editing site each day. But the company wants more — its vision is to be the top online photo brand in the world for many years to come.
Now, it has the financial backing and intellectual support to achieve that goal.The 3-year-old company today announced a $41 million investment from Spectrum Equity, a Bay Area-based private equity firm whose portfolio includes SurveyMonkey, Prezi, Lynda.com, Ancestry, and more.
The funding will help accelerate product development, sales, and marketing for PicMonkey, an online tool that allows users to edit photos, create collages, and design graphics.
Equity terms of the deal were not disclosed, but the 32-person team will stay intact and continue working out of its downtown Seattle office. PicMonkey CEO Jonathan Sposato wouldn’t say whether he’ll remain CEO of the company, only noting that he’s “really looking forward to continue being involved in this partnership.”
Sposato, who previously helped start another photo-editing tool called Picnik that was sold to Google, said that the funding from Spectrum will help the profitable company “get us to where we need to be faster.”
“They will accelerate us to reach our full vision,” Sposato said.
[Editor’s note: Sposato is GeekWire’s investor and chairman.]
Sposato provided the initial financial backing for PicMonkey when co-founders Justin Huff, Brian Terry, Charlie Whiton and Lisa Conquergood— all former Picnik employees — launched the service in April 2012. He noted that the deal with Spectrum wasn’t a matter of PicMonkey running out of options — quite the opposite, actually.
“We could have done anything,” he said. “Since we had a lot of options and we wanted to go after some of these opportunities as soon as possible, partnering with a private equity firm — in this way and with this particular firm — is just a fantastic way to get there.”
Private equity firms typically take a majority stake, using capital and connections to accelerate businesses. In the case of Spectrum, the firm targets growing, profitable, later-stage tech-enabled businesses, like PicMonkey. Sposato declined to say what percentage Spectrum took in the PicMonkey deal.
The initial connection to Spectrum was somewhat serendipitous. Spectrum Senior Associate Ethan Choi first discovered the service from his wife, a blogger who was looking for online design tools and stumbled upon PicMonkey.
“She loved how intuitive it was,” Choi said. “Anyone without graphic design experience can hop in there and get going without any training. It’s so simple, but also powerful — that really differentiates it from a lot of the other products out there.”
Choi eventually got in touch with Whiton, PicMonkey’s COO and co-founder, and the two sides started discussing a potential investment. Spectrum, a 20-year-old firm with offices in San Francisco and Boston that raised a $1 billion fund last year, then began a thorough analysis of PicMonkey’s business, competition, and potential for growth.
Spectrum Managing Director Pete Jensen said that PicMonkey provides a “great experience” for users.
“We are big fans of the broader trend of these software-as-a-service tools which are bringing great power and functionality to people who previously had to buy expensive, packaged software and invest countless hours to get up to speed,” said Jensen.
Sposato said he liked Jensen and Choi — who will join PicMonkey’s board and have “very active” roles — from the get go and immediately realized what Spectrum could bring to the table beyond a financial investment.
“There is a tremendous amount of learning that PicMonkey can glean from other companies through the tutelage of Spectrum,” Sposato said. “They have a lot of other hugely successful companies in their portfolio.”
Sposato’s first foray in the online photo industry was with Picnik, an editing site he helped launch ten years ago that was similar to PicMonkey. Picnik was averaging 60 million unique views a month when Google took notice and acquired the company in 2010 for an undisclosed sum.
But over the next two years, it became clear that the Picnik business was an area of low priority for Google. While Picnik continued to operate as an independent service, the Picnik-turned-Google employees allocated more time to projects like photo-editing on Google+. Eventually, Google closed the lid on Picnik — part of a broader move by Google CEO Larry Page to focus the company on bigger priorities.
Terry and Huff, two original Picnik engineers, still had tons of expertise in the photo-editing space. There were also millions of Picnik users left without their favorite online photo editor. And after a stint at a big company, they had the startup itch.
So the pair, along with Whiton and Conquergood, launched PicMonkey as a brand new photo-editing service in April 2012 as Sposato took on a chairman role.
Since 2012, more than 1.7 billion images have been created and edited in PicMonkey.
Sposato found himself in a familiar situation over the past several months, fielding inquiries from a variety of potential investors or buyers. But now he had the entire Picnik-to-Google experience under his belt.
“Selling to a big strategic company is really exciting,” said Sposato, who also sold Phatbits to Google in 2005. “But I do know what that is like.”
Sposato said it is difficult to compare the financial outcomes of the Picnik and PicMonkey deals, but added that, generally speaking, it is “much better if you sum it all up.”
The CEO said he liked how this particular private equity deal was structured, with Spectrum demonstrating a certain level of commitment to help grow PicMonkey, which took no outside funding since its creation until today.
“I was very interested in having a private equity deal align with the ultimate goal of PicMonkey, which is to go really, really big,” he said.
[Editor’s note: PicMonkey CEO Jonathan Sposato is GeekWire’s investor and chairman].