Toronto-based Wattpad, an online community revolving around the creation and sharing of free ebooks,today announced a new Series B round of funding that weighs in at $17.3 million. It’s a big round by any standard, but especially for a Canadian company from notable U.S. investors like Khosla Ventures, Yahoo! co-founder Jerry Yang and Union Square Ventures.
Wattpad may not get as many headlines as Pinterest, but it’s seen steady growth since its founding in 2006, and Lau points out that in fact, its eight million members spend a combined 1.7 billion minutes on Wattpad each month, more than users spend on Pinterest. Members contribute over 500,000 new stories each month to the site, which provides all of its content and publishing tools free to users.
“For this round, we want to put more focus on the product side, including design, engineering and product management,” Wattpad CEO and founder Allen Lau said in an interview. “Because of our traffic, because of our growth, we’ve had to put more and more effort into sustaining activities, like keeping the server running. This round will help us to hire more engineers, hire more designers and product management people, to give us more horsepower to enhance the product quicker.”
Lau said that Wattpad hopes to focus on its mobile offerings, since it considers itself a mobile-first company, and also build out its social engagement and creation tools. “Mobile is going to be one of our main focus points, and of course Wattpad is a community, a social network,” Lau said. “We’re already one of the largest social networks on the planet right now, but we want to enhance the product so that people can engage in conversation more easily, and collect the created content more easily.”
“We just raised a round from Union Square last September, and we still have a lot of money in the bank to be honest, but the traffic growth and the usage growth has been off the charts,” he said. “So we’ve been approached by quite a few investors in the last few months, but we figure the best time to raise money is when you don’t need the money.”
Lau told us that Wattpad was very selective about choosing its investors for this round, making the trip out to Silicon Valley and talking to just a small handful of potential investors before choosing their eventual partners. He said that the investors they did end up with, like Vinod Khosla of Khosla Ventures, are especially apt because they share Lau’s vision of Wattpad’s future potential, something he calls “transformative.” ”[They] can see the big picture, like ten years from now how big, how disruptive Wattpad can be,” Lau said.
Wattpad’s strength, as well as its transformative potential for the publishing industry as a whole, is its ability to not only connect people around ebooks and texts, but also to involve them in the creation process. Users can post their works as they develop, getting feedback and asking users where the story should go next. Wattpad’s creative power is obvious, but what isn’t apparent is how it will drive revenue. Lau said the focus is still on social growth, but the company has monetization plans. He cited Facebook as an example of what kind of money-making streams can be implemented when you have broad user adoption, though he didn’t get too specific about Wattpad’s plans.
As a social network, Wattpad is somewhat different in that it centers around not just social interaction, but the exchange of what essentially amounts to digital goods, in the form of ebooks. The obvious monetization option is just to allow authors to charge their readership for access, but that’s not something Lau seems keen to do, and he also says that the motivation of users on Wattpad generally isn’t making money, but instead the ability to reach a wide audience.
Investors seem not to be worried about Wattpad’s future potential from a business perspective, at least, and the network’s engagement numbers are definitely impressive. It’ll be very interesting to see what the startup can do with this new round of investment, and where it fits in to the future of online social publishing.