It’s is easy to become complacent and think we’ve seen and heard from every company that is building software for small and medium-sized businesses. Today’s news of a company called Webflow securing $140 million for a Series B round is one of those moments that shook us out of our complacency.
We’ve been covering the space for a long time and have never heard of Webflow. Clearly, the 100,000 (and counting) companies that are building their web presence on Webflow have heard of them. And its new funding round puts the company’s valuation at $2.1 billion.
Brothers Vlad and Sergie Magdalin and Bryant Chou founded Webflow in 2013. According to Crunchbase, the company has raised a total of $214 million dollars to date. Webflow positions itself as a platform that “empowers designers to build professional, custom websites in a completely visual canvas with no code.”
This makes a lot of sense from a positioning perspective. After all, few marketers — large or small — have much interest in learning to code. Interestingly, one of the investors in the latest round is CapitalG, which funded by Alphabet (Google). From what we’ve witnessed with the reseller space at Google, they’re betting big on disintermediation.
Webflow says more than 2 million users hanging off of its 100,000 customers. Our quick assessment of their pricing packages suggests ARPU is probably in the $180 to $240 per month range. This would put them in similar territory as companies such as Squarespace, Thryv, GoSite, and many of the agencies that resell web presence to the millions of small and medium-sized businesses.
Time to Accelerate Growth
As we’ve heard from other companies in the space, the pandemic has triggered a sense of urgency among the millions of small businesses that were previously reluctant to adopt new technologies in order to adapt to the changing demands of the modern consumer.
Here is what CEO and co-founder Vlad Magdalin said on this point. “There was a huge rush of businesses that we mainly think of as physical — that invested in digital.”
According to the Crunchbase story, Webflow plans to use the new money for new hires, acquisitions, and new features. Webflow currently has 225 employees (55% of them working remotely). By comparison, two of Webflow’s biggest competitors, Squarespace and WordPress, each has more than 1,100 employees.
Webflow is frugal. It apparently hasn’t even used all of its $72 million Series A raise. The company says it is cash flow positive. What this all suggests is that Webflow feels like the window is now open to use its stored powder to greatly accelerate its customer acquisition and product plans.
We’ve said for a long time, small business customers want simple, yet powerful solutions. That means whatever is on Webflow’s roadmap will have to be easy to use. And it will need to integrate seamlessly into the customer’s existing software solution.
The notion that Webflow would be expanding its product roadmap to offer additional value to enterprise companies feels like a tall order. Webflow probably counts some large enterprise companies as part of its customer base. But the company’s real expansion will likely have to come from the SMB market. If this is true, we’d expect Webflow to consider acquiring SMB SaaS companies with meaningful customer counts that can be accretive to Webflow’s 100,000 existing customers.