Strategy Blog: Viget Labs

In August of 2005, Seth called me and asked if we’d help build Squidoo, which we were proud to do.  More than two years after the beta launch, the site continues to grow, and now has over 300,000 pages of user-generated content, with 1,000 more being added every day.  In last week’s SquidUpdate, Seth noted that Squidoo gets nearly 6 million unique visitors per month, and roughly 12 million unique visits.  Raising money for charity was one of original goals of the site, and they’ve done that to the tune of more than $100,000.

My favorite line from the post:

“And here’s a neat tidbit: We’re profitable. We haven’t raised any VC money, and now we shouldn’t ever have to.”

By not raising venture capital, he goes on to say, Squidoo can remain attentive to their users instead of worrying about “meeting quarterly earnings targets.” It’s also forced them to run lean and stay focused.  Squidoo pulled together enough funding early-on to hire a small dedicated team and some outside experts (like Viget) to quickly launch the business.  The focus was always to get to a point of profitablity so that the business could sustain itself—not to just grow for the sake of growth.

Seth’s approach is different than a lot entrepreneurs take in the web space, especially given the renewed excitement about funding web start-ups.  Venture capital is sometimes necessary, but for many web-bases businesses, it’s just not needed.

Raising VC can often help businesses compete more effectively in a competitive space.  When Squidoo got started, there was no real competition, and they’re now “three to five times bigger” than any others.  Google’s announcement of Knol, as Seth points out, is a sincere form of flattery (though Mike thinks Knol is more Wikipedia than Squidoo).  Will Google’s participation in the space really be a boost for everyone, including Squidoo?  Or, will there be a sense in the long-run be that had Squidoo raised VC, they could be been better positioned to compete with the likes of Knol?

Only time will tell.  In the meantime, it’s refreshing to see (and be a part of) a business that’s bucking two trends in the online world: growing without VC, and turning a profit in a relatively short period of time with user-generated content.  Congrats to Seth and the team.