For nine years, Panopto quietly built a successful video platform for hundreds of big-name enterprise and academic customers. Working with just $8 million in total investment, the Seattle-based company grew to be the largest repository of “expert learning video” in the world, while opening offices in five cities across four continents.
But now Panopto doubling down, just as competition from tech giants like Microsoft and IBM is heating up.
Panopto today announced a $42.8 million “minority growth” round led by Sterling Partners, with participation from existing investors and a senior credit facility underwritten by Square 1 Bank.
Last year, Panopto relocated its headquarters from Pittsburgh to Seattle, where it already had an engineering center. The $42.8 million cash infusion is the third-largest investment round this year for a Pacific Northwest startup, according to venture capital data provider Pitchbook. Only Kymeta ($62 million) and Alpine Immune Sciences ($48 million) ranked higher so far in 2016.
The large funding round comes nine years after Panopto spun out of Carnegie Mellon University as a small startup, using technology originally developed by co-founder and CEO Eric Burns in 1998.
Panopto first targeted universities that wanted a way to capture, store, stream, and sort through videos of lectures. A few years ago, though, the company also found demand in enterprise video content management — organizations ranging from financial institutions to appliance manufacturers that wanted a way to manage videos and slides for training, events, sales, marketing, and more.
“There’s just a huge amount of demand — every enterprise company must have a video strategy,” Burns told GeekWire this week.
Combining the two customer bases, Panopto now serves more than five million end users at businesses like Qualcomm and Tableau, and schools like the University of Washington and Yale University. It hosts two million videos on its cloud-based video platform.
“A big part of our focus is enabling end users to easily record video presentations along with a side-screen capture, or some kind of presentation material,” Burns said. “We made a tool to make it really easy, so people do a lot of it.”
The $42.8 million will be used to supercharge Panopto’s growth while fending off increased competition from large tech companies. Burns explained that there’s a “shakeout” going on in the enterprise video industry, with many smaller competitors being acquired; for example, IBM recently bought UStream and ClearLeap, while Workday bought MediaCore and Zaption.
Meanwhile, other competing companies are raising large rounds, too; Kaltura, for example, just reeled in $50 million from Goldman Sachs earlier this month.
“The market we exist in is being filtered down to only a handful of major players that are very well capitalized and have a broad product scope,” said Burns, who became CEO in 2015 after serving as CTO for seven years prior.
Then there is Microsoft, which competes with both Office 365 Video and Stream, a video service for the workplace that launched last month.
Burns, who worked on a project at Microsoft from 2005-to-2007 that eventually became the Bing search engine, said that Stream “checks off several boxes,” but isn’t as robust as what Panopto offers.
“It doesn’t do any of the important things,” Burns said of Stream. “There is no video capture tool integration; it’s hard to create content; there are no editing features; no way to search inside video timelines; no analytics to see if it’s working. The product is technically impressive, but overall, it tends to miss the mark and not be very adoptive.”
Burns also said another differentiating aspect of Panopto’s software is its search capabilities, supported by technology that can automatically recognize speech and characters within video. Burns said that video content “is only valuable if it is searchable.”
“We are far ahead of Microsoft and IBM when it comes to sophistication of video search technology,” Burns noted.
Burns said that the online video market has matured into a “third wave.” The first wave, he explained, was the arrival of companies like YouTube and Vimeo that provided a portal for free, ad-supported consumer-generated content. The next wave saw the arrival of paid media services like Netflix and Hulu.
“The third wave we see right now is the wave of private video libraries for mostly knowledge industry organizations or universities,” Burns said. “There is substantial uptick in the demand for this space and we are benefiting from that.”
Panopto employs 100 people across five offices worldwide and has around 50 employees at its Seattle headquarters and engineering hub. Burns expects to have “significant headcount growth” over the next year as a result of the funding.
“With its explosive growth in the enterprise, its dominant position in higher education, and its significant technological advantages over its competitors, Panopto is set to emerge as the leader in this multibillion dollar market,” Sterling Partners’ Managing Director Jason Rosenberg said in a statement. “We’re thrilled to partner with Eric and his team as they continue to scale.”