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Deal Radar 2008: NewsGator

Posted on Monday, Nov 24th 2008

NewsGator provides individuals and businesses with a way to communicate internally and externally via RSS aggregators for users on the web, desktops, mobile devices and email clients. Headquartered in Denver, Colorado, the company was created to give consumers a way to use content being produced through the proliferation of weblogs, which often use RSS feeds to distribute new posts.

According to the company, NewsGator differentiates itself by delivering the right content to the right people on any device at any time, instead of making consumers hunt for information, manage bookmarks, memorize URLs and check for updates. As the Internet becomes more social, RSS delivers not only content but connections. In addition to subscribing to newspaper feeds, for example, consumers can use RSS to stay abreast of collaboration and dialogue with people and networks. Other companies in the the market space are Bloglines, 37 Signals and Google Reader.

Greg Reinacker, CTO, founded the company in 2003 when he realized the potential of RSS to transform the way people consumed information. J.B. Holston, CEO and president, joined the company in 2004. Having spent over two decades of his career at the intersection of people, technology and media, Holston’s last position was president of Ziff Davis International. Prior to that he handled strategic planning and international operations at NBC and was a consultant at the Boston Consulting Group.  

NewsGator has raised $22 million so far: a $1.4 million Series A with Mobius Venture Capital in June 2004; a Series B from their previous investors in December 2004 and a a Series C led by new investors Masthead Venture Partners with previous investors Mobius Capital in April 2005 totaling $8.6 million; and a $12 million Series D led by Vista Ventures and their previous two participants in December 2007.

A Forrester Research published in April says that enterprise spending on Web 2.0 technologies will surge over the next five years, growing 43% each year to reach $4.6 billion globally by 2013.

NewsGator sells its business-to-business software which includes enterprise RSS, widgets, data services and enterprise social networking software both directly and through channel partners. It sells on-premise software through perpetual licenses and subscription and an SaaS version through annual subscriptions based on capacity requirements.

For its enterprise RSS and social networking applications, NewsGator targets companies with a large number of high-priced knowledge workers across several industries who use their services to find solutions to difficult problems. The content syndication widgets segment targets media companies. The information services segment targets organizations that feel they are spending too much on market intelligence, business intelligence, competitive intelligence and financial intelligence.

At present, NewsGator is close to profitability and has experienced significant growth each year. It has 350 enterprise customers and 1.5 million end users, not including those at enterprise customer sites. NewsGator also has had 4 million RSS feeds and 3 billion posts. Over 10 million articles per day are added to its storehouse, thereby enabling the company, through a fast-growing data services business, to challenge firms charging what it believes are exorbitant prices for information.

NewsGator penetrated its markets through an RSS/social computing brand built by guerilla PR, traditional PR and analyst relations. Its customer roster includes Reuters, AFP, The Discovery Channel and CBS. 

NewsGator is working to ramp up revenue by building sales pipelines, shortening sales cycles, increasing individual salespeople’s capacity and increasing their channels. The company has signed on eight channel partners in the last two months. As discussed on TechCrunch, in January this year, NewsGator decided to offer all its RSS readers free to consumers, thereby relying only on revenues from its enterprise offerings. By making its desktop readers available to the public, the number of users has increased tremendously as people who used other readers like Google Reader or Bloglines have switched to NewsGator.

When asked about exit plans, CEO Holston says, “I don’t think about exit at all.” The current uncertain economic climate does not allow a company to expect an acquisition. An acquisition is possible in the future, but the next couple of years are likely to experience a very slow M&A market. That said, valuations will be depressed, giving larger companies with big cash reserves reason to go out on shopping sprees, as we’ve just discussed in the case of ADP.

Recommended Readings:
Deal Radar 2008: Veoh
Technorati: Valuation without Revenue
Deal Radar 2008: Jive Software

This segment is a part in the series : Deal Radar 2008

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