Ramen or Roast Beef? Jeff Schrock and Geoff Nuval on DevHub’s Rise to Profitability
Investor Jeff Schrock calls Seattle-based EVO Media a “ramen profitable” startup. Co-founder and CEO Geoff Nuval calls it “roast beef sandwich” profitable. Two guys, two spellings of the same first name, two different food analogies. But the message is clear: these guys are hungry.
Call it what you want, EVO Media is turning a profit some six months after launching DevHub—a free Web publishing platform that helps companies and individuals manage and monetize niche websites—and after going through a strategic downsizing. The company, founded in late 2007, had raised money from Monster Venture Partners and prominent angel investors including Alex Algard, John Cunningham, and Geoff Entress.
But early this year, EVO realized it would not be able to raise a favorable round of venture funding. So what did it do? Focused on getting revenue. Schrock, a tech entrepreneur-turned-executive-turned-investor (he co-founded Seattle-based Activate before his time at Yahoo, RealNetworks, Monster Venture Partners, and now Intel Capital), has overseen the company through this formative period as its chairman. (See more on DevHub in this TechFlash piece.)
The story goes back to the fall of 2007, when Nuval, a Stanford grad, moved to Seattle from Silicon Valley, where he had worked at Lehman Brothers Venture Partners, doing mobile and Internet investments. He had been introduced to fellow EVO co-founders Daniel Lee Rust (a tech expert) and Mark Michael (a sales expert) through his assistant at Lehman, a childhood friend of theirs. Rust and Michael were running a Web development shop for startups, but together with Nuval, they conspired to make a Web platform for themselves—one that customers could use to create sites. “The chemistry was awesome, the idea was compelling enough,” Nuval says. “I threw as much stuff as I could into my SUV and drove up here.”
Schrock met the team in early 2008, and was duly impressed. “One of the investment themes of Monster Venture Partners was capital-efficient development of technology businesses,” he says. “The founders here, they had a lot of the attributes I really admire and look for in startups. They were young, aggressive, intelligent, hard-working, and they had this set of tools and a balanced skill set. They figured out a way to turn blank domains into real working websites.”
It was a way to lower the cost of creating websites and content, Schrock says. WordPress had done something similar for blogs, but there was still no built-in way to make money from those sites. So Nuval and his team focused on tools for building and managing commercial sites. They raised $250,000 in 2007, led by Monster Venture Partners, and followed that up with $575,000 from angel investors in the summer of 2008. By the end of the year, the company was up to 12 employees as it pushed to get its DevHub website-editing platform ready for prime time.
Then, tough times hit. “As we were running out of that capital, we were getting ready to get venture [funding], and the global financial crisis hit,” Schrock says. “We had financing options available, but they weren’t that attractive to the founders.”
So they decided to cut staff early this year—down to six full-time employees—and made a push to become cash-flow positive. It was a difficult move, but with its flagship product complete in February, the company no longer needed a big team. “They made personal sacrifices,” Schrock says. “Now they’re coming out the back end of it, and business is stronger. I’d say they’ve skipped a few meals. Now, it’s not lobster and tenderloin yet, but the ramen is pretty good. It’s ramen profitability, and they’re working their way up to pepperoni pizza.”
DevHub makes money by hosting niche websites and connecting them with big partner sites like Amazon, InfoSpace, Superpages, Priceline, and CareerBuilder. Publishers generate revenue by sending customers to those sites, and they share those revenues with DevHub. Nuval says hundreds of thousands of websites have been created on the platform, of which less than 100,000 are “really quality sites.” But the company is on its way to 900,000 unique visitors this month, maybe more, across its network of websites, which include e-commerce, real estate, music, and video sites. “The magic DevHub has created is matching up the best kind of advertisement to a very targeted community,” says Schrock.
And it seems to be paying off. July was the company’s first profitable month, and with August looking good so far, DevHub hopes to be profitable for this quarter—and beyond. “We turned the corner when we needed it,” Nuval says. He attributes the turnaround not just to cutting costs, but also to “major growth in our network.”
Much work remains, of course. In addition to signing new partnerships, extending its network of publishers, and introducing premium features for some customers (like radio stations), Nuval and his team want to create an online community of publishers who can mix and match website features and help each other get to revenue faster.
It’s still very early, and the DevHub team seems pretty focused on its long-term success. That could still mean taking venture funding down the road. “We would look for more funding for growth. If we found the right guys and the right valuation, we’d be open to it,” Nuval says.
As Schrock puts it, “It’s definitely not time to raise the ‘mission accomplished’ banner.”