Crocodoc Raises Cash, Upgrades Web-based Document Review Service

7/14/10Follow @wroush

Today, many documents are not only born digital, they’re also born social. Companies like Adobe, Microsoft, and Google provide online tools where documents of many different types can be collaboratively generated and edited. The problem is that online editing is still a fragmented affair: If you want to mark up an Adobe PDF document with a group of officemates, for example, you have to use Adobe’s Acrobat. If you want to mark up a Microsoft Word document, you have to use Microsoft’s Web-based viewer. Et cetera.

Crocodoc, a small San Francisco- and Boston-based company that emerged this spring from the Y Combinator startup school in Mountain View, CA, is working on solving that problem. The first version of Crocodoc’s online service, introduced in February, allowed users to collaborate on a few types of documents such as PowerPoint files and PDFs. Today, the four-man startup debuted a new version of its free service that can handle more types of documents, including PDFs, Word documents, JPEG and PNG images, PowerPoints, and Photoshop files. Crocodoc “2.0″ also features an overhauled user interface with an improved set of reviewing and commenting tools. The virtual sticky notes that formerly plastered collaboratively edited documents, for example, have been replaced by a comment stream in the margin where revisions can be shared in real time.

The overall goal, says founder Ryan Damico, is to help users circumvent the proprietary walls between document types and collaborative editing experiences. “Adobe is only good for Adobe documents, and Microsoft is only good for Microsoft,” Damico says. “We want to be the universal tool that people use for any kind of markup and review and collaboration for documents of any type, and eventually on any platform or any device.”

Crocodoc screenshotCrocodoc, whose team consists entirely of recent MIT graduates, was originally formed in Boston in 2008 around a previous product called WebNotes. As part of the company’s evolution, it also announced today that it has closed its first major round of post-Y-Combinator angel investor funding. Damico isn’t saying how much money is involved, but he’s definitely crowing about the investors, who include prominent Silicon Valley names like Paul Buchheit (lead developer of Gmail and founder of FriendFeed, acquired last year by Facebook), Steve Chen (co-founder and former chief technology officer at YouTube), Dave McClure (former director of marketing at PayPal, now with Founders Fund), Joshua Schachter (creator of Delicious, acquired by Yahoo in 2005), and XG Ventures (a group of four ex-Googlers including Pietro Dova, David Lee, Greg Lee, and Andrea Zurek).

These are all folks Crocodoc met through Y Combinator, Damico says. “We’re really psyched,” he says. “This group has been a huge help to us already.”

Crocodoc’s small team—two of whom are setting up shop in San Francisco, and two of whom are still based in Boston—had lots of experience with the idea of annotating online documents. WebNotes was all about letting users attach personal notes to live Web pages. But true collaborative editing is a different beast, and the group had to solve “some pretty hairy technical problems” to allow users to collaborate on so many different types of documents through a single Web-based viewer, Damico says.

But it didn’t have to reinvent the wheel. “Luckily, there is a bit of a saving grace in that we are able to cross-convert between file types,” says Damico. “We are not actually creating native Doc or PowerPoint or Photoshop viewers.” Once a file is sent to Crocodoc, “We do a quick conversion process that makes it easier for us to handle all of the file types,” he says. Markups, comments, and revisions are saved in what amounts to a new layer of information on top of the original document. Collaboratively reworked files can then be exported as PDF documents, or embedded in Web pages.

To make Crocodoc flexible and easy to use, the company had to come up not just with an easy way to import and export documents, but with a highly polished user interface. In fact, much of the company’s work since the February launch, Damico says, has focused on beta testing with real users. “We had some elementary school teachers who had students submitting their homework through Crocodoc—striking out text and fixing grammar and adding notes in the margins—all the way up to graphic design shops using this for high-caliber presentations.”

Damico is careful to say, though, that Crocodoc is not a full-fledged document editor. “You can’t yet save [edited] documents as native Word or PowerPoint files,” he says. “We don’t intend this to be the place where you go to author documents, but rather to review and share comments.”

For now, “90 percent” of Crocodoc’s features are free to all users, Damico says. There is a paid “Crocodoc Pro” version of the service that provides an extra layer of security in the form of document encryption and password protection, but “we are not really pushing the Pro version at all,” says Damico.

Like many Y Combinator companies, Crocodoc is instead focusing first on building a product that people like, and plans to figure out later how to charge for it. “We want to make sure we really understand who our best users are and what their behaviors are before we add a paywall somewhere,” Damico says.

The risk there, Damico admits, is that users will become so accustomed to paying nothing that they won’t want to pony up once the startup imposes fees for some services. “But the way we look at it,” he says, “is that we learn amazing things from our users almost daily as far as how people are using this—we see use cases we never expected. Only when we have a super-deep understanding of what pain points this is solving—and what people are willing to pay for and not pay for—will it be time to discuss putting up a paywall or changing the business model.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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