Optimizely CEO Dan Siroker discusses Optimizely’s $28 million Series A funding round and the future of website optimization on Bloomberg West Live. Watch the 5-minute live interview below.
Emily Chang for Bloomberg West: Optimizely is the hottest Y Combinator start-up you may not have heard of yet. The web-testing service just raised $28 million in funding led by a Benchmark Capital, general partner and Twitter investor, Peter Fenton, joining Optimizely’s board. Opitmizely graduated from YC in 2010 and says this latest funding round makes it the third most valuable company to come out of the start-up incubator behind Airbnb and Dropbox. Co-founder, Dan Siroker, got the idea for the company when he left Google to volunteer in President Obama’s 2008 campaign and worked his way up to Director of Analytics. Optimizely’s CEO, Dan Siroker, joining me now in the studio.
So I want to talk a little bit first about why investors believe this is so valuable? In the olden days of print and broadcast you simply made an assumption based on what you thought the audience would want. You put a headline out there a certain way, a certain color, whatever. Today the web makes it possible, and you guys make it possible to change and tweak certain things so that you know if I make this headline red, for example, more people will click on it, and therefore, that’s a better way of doing things. It’s called A/B testing. Explain the power of what you’re doing.
Dan Siroker: So A/B testing is the simple idea of trying to improve your web site by running an experiment. And by showing different people who come to your web site different variations, you can actually measure which is the most likely to get them to convert into a customer. That’s the power of what we’re able to do, and we’re taking a traditional, old school marketing idea of A/B testing and bring it online.
Emily: And companies can simply do this themselves, right? Why is it you make it easy?
Dan: Yes. The difference between what we’re doing today and what we did back in the Obama campaign in 2008, is that we enable marketers to do this without relying on IT or engineering. So as a marketer you’re able to drive the process of experimentation and come up with creative hypotheses, test it with A/B testing, and then improve your web site at the end.
Emily: But companies are only scratching the surface of what’s possible, right? I mean you guys have 4,000 companies that you work with Starbucks, Disney, and many, many others. What is the potential?
Dan: Yes. The potential is really exciting because if you think about it, ten years from now people will look back at today and be shocked at how impersonal and generic and one to many we call the “web.” And in the future, if you look at companies like Amazon or Google or Facebook, they’re really pioneering the idea of using data about an individual to give them a better experience. And part of the reason we took this round of funding was to really invest in web site personalization and enable businesses to show exactly the right thing to the right person at the right time.
Emily: So you’re saying all web sites can be more personalized, not just simply the Yahoo home page, for example?
Dan: That’s right, yes. Yahoo and Amazon, they have the luxury of having 100 engineers on staff that can focus on meticulously A/B testing every part of their web site. With Optimizely we give that power to mere marketing mortals.
Emily: So you say you’re now the most valuable YC start-up after Airbnb and Dropbox. What does that mean to you?
Dan: It really doesn’t mean much. What we really focus on is delighting our customers every day. And for us, revenue is much more important than what an investor thinks we’re worth. We’re flattered.
Emily: How much are you making?
Dan: So today our annual run rate is in the tens of millions of dollars, and we’re growing at 400% per year. And so I think that’s a sign that we’re riding the wave of a much more data-driven marketing world.
Emily: It’s interesting. You guys have 68 employees, but you’re moving into a space that supports 450 employees? I mean how fast do you plan to expand? Can it really be that big?
Dan: We’re just getting started. I hope that we’ll be able to – this new lease is going to last us for at least a couple of years. We’re making sure we have adjacent space nearby in case we go bigger than 450.
Emily: How do you plan to use this money?
Dan: Our biggest investments are going to be in core infrastructure and developing personalization. We want to make web site personalization as easy and as fun as we’ve made A/B testing. And if we can do that, we can deliver a lot of value to our customers.
Emily: So what are the implications for politics? It’s interesting—You worked on the Obama campaign in 2008. President Obama and Mitt Romney both used Optimizely in 2012. How could it change in election 2016?
Dan: I think the opportunity there is to figure out what is the most important thing to show a particular user at a given time. And if you use an example, for example, ABC, which is a customer of ours. You come to the ABC videos page, you might see a different video or a different show that you might like. I might see a different show, and my mom might see a different show. And the real value is in personalizing that experience based off of the data they have about you.
Emily: So Peter Fenton joining your board, obviously a very well respected investor. What does he bring to the table for you?
Dan: We were really lucky and really flattered that a lot of investors were interested in us and thought we were onto something. And we did this thing called a, “mock board meeting” where we had investors come by our office for two or three hours and sit down with me and my co-founder, Pete Koomen, and do a board meeting. And this, for me and Pete having…
Emily: Wow! You had tryouts!
Dan: We had tryouts, and it was a great experience for us to see what a real board meeting was like. And when Peter came in, it really impressed us that even though he’s got this great experience, his approach was to ask the right questions, not to give the right answers. And so we felt like that was the kind of approach and the partner we wanted going forward.
Emily: It certainly seems like you guys are just getting started. Dan Siroker, CEO of Optimizely. Thanks so much for joining us today on Bloomberg West.
Dan: Thank you, Emily.