Momentum in the website world doesn’t seem to be slowing down. Along with eCommerce and a few other tech sectors, websites have proven to be “Covid-advantaged” as businesses scramble to adapt to a distanced world. The question is if this sustains or if it recedes into a “hybrid” post-Covid reality.
Meanwhile, the latest evidence of website-world spoils is Squarespace’s latest funding round. The website builder raised $300 million from Dragoneer, Tiger Global, D1 Capital Partners, Accel and General Atlantic, among others. This brings Squarespace to a whopping $10 billion post-money valuation.
The company tells Techcrunch that it will use the capital infusion to fuel growth initiatives including headcount and its product suite. The latter aligns with our ongoing analysis, as website builders continue to buy or build to expand product lines. This is mostly to drive growth as the core business (hosting) matures.
Market Forces
Drilling down on that expansion principle, one of the attributes and activities that has defined the website world lately is feature expansion. Whether by buying or building, the thought is that a broader bundle can both appeal to a wider user base and boost retention (ARR) for existing customers.
The other factor driving this trend is that web hosting — a core component of website-builders’ services — has become commoditized. This compels providers to establish new revenue streams that are adjacent to websites in order to boost margins. We’re talking everything from email marketing to social and SEO.
The thinking behind some of these moves is that expanded features can boost revenue-per-user and lifetime value. It’s all about having more tentacles that reach into business operations, thus anchoring a given vendor in SMB marketing support. That can engender a lock-in effect to drive (again) recurring revenue.
This is all to say, expect Squarespace to do just this. Beyond compelling market forces, it now has a hefty cash infusion. This could mean staffing up to develop products, or some M&A activity. The latter is sometimes a better way to accelerate time to market. Automattic has been a poster child of this move.
Arms Race
Back to the theme of website-world growth and how Squarespace fits in, its mega-round follows a few other recent market events worth noting. For one, Squarespace’s main competitor in the “WYSIWYG” website builder space is Wix. And it recently reached a milestone of its own, as the most valuable company in Israel.
Moreover, Squarespace’s news follows closely behind the mega-rollup of Newfold Digital. As we examined recently, this new entity has been forged from the combination of Web.com and Endurance International. In addition to its breadth of offerings, Newfold’s SMB-focus and legacy should make it formidable.
As all of these pieces come together, one can imagine a Game of Thrones-style battle between escalating powers. This will indeed be an arms race for features and attractive bundles, pursuant to new business, retention, and all of the factors mentioned above. We’ll watch closely as this plays out.
Meanwhile, Squarespace’s funding comes less than two months after it filed confidentiality to go public via a direct listing. It has raised $540 million since its 2003 launch and is based in New York City with more than 1200 employees globally.
