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Acquia raises $8.5 million series C

Exciting news today! We are announcing that Acquia closed $8.5 million in Series C funding. Combined with our Series A funding and our Series B funding, this brings our total funding to $23.5 million USD.

In the last year, our business grew by more than 300% and we went from 30 to 70 full-time employees. Drupal Gardens grew from 0 to 25,000 sites, we added 100 enterprise customers to Acquia Hosting, and our support business has in excess of 550 customers. Drupal itself now powers more than 1% of the web.

I sometimes joke that Acquia is 3 startups in one; our support business (Acquia Network) is similar to RedHat’s business model, our managed cloud hosting business (Acquia Hosting) is similar to EngineYard or Heroku, and Drupal Gardens is like Wordpess.com, Squarespace or Clickability except that it is all based on Drupal. The good news is that each of these 3 product lines are doing really well. As a result, we had a lot of interest in the round and saw another large increase in valuation.

We weren’t sure if we could go any faster but we just found the turbo button. We are going to use much of the capital we raised in our Series C round to:

  • Help grow Drupal and expand the market for Drupal in the enterprise world. We'll continue to contribute code and user experience design, sponsor and organize events, promote Drupal in the enterprise, and provide leadership in various areas of the Drupal project. We're dedicated to raising the tide for everyone in the Drupal community.
  • We’re going to grow our engineering team and increase our investment in our products; Acquia Network, Acquia Hosting, Drupal Gardens and Drupal Commons. In future blog posts, I'll start to share more details around my vision for Acquia and how everything we do fits into a bigger picture.
  • Accelerating the growth of our world-wide operations by hiring sales, marketing and technical staff in different parts of the world. A startup is a search for a scalable, repeatable business model. We found a couple, and now is the time to put the pedal to the metal. In early 2011, Acquia will expand to Europe.
  • Continue to build a global partner ecosystem to help organizations create killer web experiences.

Acquia’s growth is a testament to the growth of Drupal worldwide. Acquia wouldn’t have made it this far without our customers, our partners and our friends. Thank you!

I plan to write more about the process of raising money, what it means to work for a venture backed start-up and lessons learned in starting a business in the Open Source world. If you have questions, feel free to ask them in the comments and I'll do my best to answer them.

Series c

3/5 of the Acquia team celebrating our Series C funding.

On business models for Drupal distributions

The fact that thousands of developers use Drupal to make money building websites for their customers has resulted in thousands of modules being created and hundreds of events being organized around the world. When I started Drupal, I wasn't aware of the importance of such a commercial ecosystem. Looking back at 10 years of working on Drupal, it is an important lesson learned. If I were to start a new Open Source project (I'm not!), the ability to build out a large commercial ecosystem would be one of the criteria that I'd look for. Disruptive innovations change entire industries, not just tools. Not every Open Source project lends itself to that.

I'm repeating myself, but if we want Drupal to be relevant longer term, one of the things we need to do is "make Drupal distributions work". Drupal distributions allow us to compete with a wide range of turnkey solutions as well as invent new markets. The number of different distributions we could build is nearly unlimited. From what I can tell, Drupal is the only Open Source content management system that is actively encouraging its community to build and share distributions. We have a very unique opportunity in front of us -- distributions can be a game changer.

But what does it mean to make Drupal distributions work?

We've began work on Drupal distributions during the Drupal 4.6 era based on our experience with CivicSpace (a distribution for political campaigns). Drupal 5 was a big milestone as we introduced a web-based installer with support for install profiles. We made incremental improvements to install profiles in the Drupal 6 release, and it wasn't until Drupal 6 that we saw a number of great Drupal distributions emerge: OpenAtrium (an intranet distribution), Acquia Drupal (a convenience distribution for site builders), OpenPublish (a distribution for online publishers), Pressflow (a distribution with performance and scalability improvements) and more. Finally, with some of the install profile related improvements in the upcoming Drupal 7 release and the fact that we can build and host distributions on drupal.org, I expect to see many more distributions going forward. In summary, we evolved the underlying technology over the course of 5 years and might have reached a point where our vision of install profiles can really come to live.

But ...

While we made a lot of progress on making distributions feasible from a technical point of view, we have yet to figure out the business model around Drupal distributions. Building and maintaining a high-quality Drupal distribution is no small task. It is also different from contributing a module. While writing a module is often billable, maintaining a Drupal distribution is arguably less so. In other words, can we build a successful commercial ecosystem around distributions so that we'll see hundreds, if not thousands of high-quality distributions, flourish?

We need to figure out how to make it commercially interesting (or at a minimum, commercially viable) for organizations to invest the time and money it takes to build and maintain a distribution. If not, distributions risk being nothing more than a costly but fun lead generation tool. I don't think that is scalable. To make Drupal distributions the game changer it could be, it has to be a no-brainer for organizations to get into the game of building one. Reducing the maintenance cost through tools like Drush Make and the packaging infrastructure on drupal.org certainly helps, but is probably not enough to make distributions take off in a big way.

At Acquia, it occurred to us that we might be able to help. Many Drupal shops lack the go-to-market infrastructure that Acquia built out over the last 2.5 years (i.e. 24x7 help desk, a marketing and sales organization) and that products often need. We can help market and sell offerings around distributions (e.g. 24x7 SLA-based support, hosting, remote administration) and share the revenue with the organization actually building and maintaining the distribution. It is a well-known model in the software world (such as the game industry), and is one example of how we could try to make it commercially interesting to build and maintain distributions. For more information about this, I recommend reading Tom's blog post on the 'Software Publishing Model'.

Four Kitchens has built a business around offering consulting and support for Pressflow, the distribution they authored. Pressflow's popularity has driven demand for these services, creating a unique positioning and opportunity for Four Kitchens. Development Seed is in the early stages of rolling out their business model for OpenAtrium, one of the distributions they have created. They announced plans to offer developer support and a paid partner program as key tenets of their business model.

Of course, these are only a few examples of how we can help make Drupal distributions work. As a community, I think we need to brainstorm about this more.

Joomla vs Drupal: business models and commercial ecosystem

I just got back from CMSExpo in Chicago where I spent a few days surrounded by Joomla people. Although the CMSExpo conference started as a Joomla-only event, it has since opened up to other Open Source content management systems including Drupal, Wordpress, Plone and more. Due to its background, however, it's still heavy on Joomla, and as a result, I had the opportunity to meet a lot of influential people in the Joomla community, including a few Joomla co-founders and members of the Joomla leadership team. I'd like to share my observations, since they are relevant for all of us in the Drupal community.

In the Drupal community, today's business-model of choice seems to be providing implementation services for medium to large websites. The Joomla community, it seems, is very focused on the low-end of the market and most people make money by selling subscription services, usually either by selling commercial support for their GPL extensions or by selling access to template clubs (i.e., a collection of templates, bundled with some level of theming support). I talked to various template club owners and was surprised by the level of sophistication and adoption -- some template clubs employ more than thirty people and have answered hundreds of thousands of support questions.

But what does the future hold? The Drupal community seems to be expanding into the enterprise, whereas the Joomla community is expanding into, well ... Drupal. All the Joomla companies that I talked to at CMSExpo were in the process of taking their products and services to the Drupal market and rebranding their organizations to be cross-CMS compatible. Andy Miller, one of the co-founders of Joomla, and CEO of RocketTheme, one of the leading Joomla template clubs, has just launched a Drupal template club. Steve Burge, the founder of a training company called Open Source Training has added Drupal training to his portfolio (they delivered 100 Joomla training classes in 2009, and plan to deliver 200 training classes in 2010). The list goes on, and all this has been going on under the radar for most of us in the Drupal community -- under mine, at least.

Cmsexpo

Andy Miller, co-founder of Joomla!, and CEO of <a href="http://rockettheme.com">RocketTheme</a>. RocketTheme has about 30 employees selling templates and template support to the Joomla! and Drupal community.

Why is this happening? First, the Joomla people that I talked to believed that there was more money to be made in the Drupal world, as Drupal tends to attract larger projects. Further, the lack of Drupal template clubs is perceived as an opportunity for Joomla developers already familiar with that business model. Third, since the long awaited Joomla 1.6 release is "only" an incremental release, some people are only marginally excited about it. Contrasted with Drupal 7 and Wordpress 3.0, both of which are shaping up to be phenomenal, paradigm-shifting releases with tons of improvements and feature additions, many Joomla developers are expanding their horizons and portfolios.

All in all, this isn't a bad thing. In fact it is incredibly exciting and incredibly scary at the same time. The Joomla community expanding to Drupal could help fortify Drupal in the low-end market, which is something I want us in the Drupal community to care about a lot more. At the same time, we'll have to educate a tsunami of new community members about our values and culture to make sure that they adopt the "Drupal Way" of doing things (i.e. our culture of collaboration, sharing, passion, openness, innovation and leadership). More than ever, we'll need Drupal mentors as interesting times are ahead.

Future of Open Source Survey 2010

Like last year, I'll be attending the Open Source Business Conference (OSBC) next month, on March 17-18 in San Francisco. Also like last year, I will participate in a panel discussion led by Michael Skok (Partner at North Bridge, Acquia Board Member and personal friend). This year, I'll be in a panel with Larry Augustin (CEO of SugarCRM, VA Linux, SourceForge), Jim Whitehurst (CEO of RedHat) and Tim Yeaton (CEO of Black Duck Software) to discuss the future of Open Source businesses. The panel discussion will draw on the 2010 Future of Open Source survey so make sure to weigh in and provide your perspective on a number of important Open Source business questions. Take the Future of Open Source Survey 2010. As a reference, here are the 2009 and 2008 results.

We've also built a Drupal Gardens site to promote the survey, share articles on the Future of Open Source and facilitate ongoing discussion on the topic: http://futureofopensource.drupalgardens.com. There is also a Future of Open Source Survey twitter account that you can follow for updates.

OSBC

OSBC 2009 panel discussion. From left to right: me, Ron Hovsepian (President and CEO of Novell), John Lilly (CEO of Mozilla), Marten Mickos (CEO of MySQL). For more information about OSBC 2009, <a href="http://buytaert.net/osbc-wrapup-2009">read my wrap-up blog post</a>.

Training more Drupalistas

We need to train more good Drupalistas. Almost every Drupal company I talked to is trying to hire talented Drupal developers, but can't find any. The demand for Drupal talent continues to exceed the supply. It is, in fact, holding back Drupal's adoption.

Some of you might have read that Chapter 3 started to provide Drupal training, that Lullabot is hiring more Drupal teachers, or that OSTraining is rolling out Drupal courses. This makes me happy as it advances the Drupal ecosystem. The training business should be an important aspect of Drupal's ecosystem, and I feel it is still underdeveloped. We should be training thousands of people a month, not hundreds of people.

Why aren't we training more Drupal developers? I'd think there is a real opportunity to make money as a Drupal training business for at least a number of reasons:

  • It addresses a real problem. Because of Drupal's continued growth, people are struggling to find the Drupal talent they need.
  • Drupal is growing in the enterprise, and one can expect a strong desire to buy Drupal training in the enterprise. I wouldn't be surprised if big players like IBM, Capgemini and Accenture, will start to offer some Drupal training to their enterprise customers. This could even result in a couple of Drupal training companies being acquired.
  • A training business can be a more scalable and more lucrative business than a consulting business.
  • There is a wide disparity between those that can assemble Drupal sites versus those who truly understand the concepts and principles behind the code. At some point, parts of the market will see value in Drupal certification programs. It is a matter of time, but when it happens, it will enable Drupal training companies to build a stronger brand.

This is a problem that we need to fix. We need more world-class Drupal talent to fulfill the demand and to let Drupal reach its potential. We need a well-rounded ecosystem that provides more Drupal training.

Acquia retrospective 2009

Yesterday I shared my 2009 retrospective on Drupal along with some predictions for 2010. Today, I want to reflect on Acquia's 2009, as for obvious reasons, Acquia has been a big part of my life in 2009.

At the end of 2007, we had convinced ourselves -- and our investors -- that there was a market for Drupal support and Drupal-related products. In 2008, we built a great team and grew from two employees early in the year to thirty people by the end of 2008. After nine months, in October 2008, we finally opened our doors for business and we wrapped up the year with a couple dozen customers. 2009 was really Acquia's first year in business (i.e. revenue-bearing year), making it a very important year for us as a company. Other than delivering great support, we had to demonstrate that there was a market for Drupal support, and prove our business model by discovering many of the unknowns and validating our assumptions (e.g., average sales cycle, conversion rates, operational costs, etc). 2009 was also the year that we had to build a sales and marketing process that is both scalable and efficient.

We kicked of 2009 with a big but important change. When we opened for business at the end of 2008, customers could purchase commercial support for all the modules in Acquia Drupal, our free distribution of Drupal. We learned relatively fast that people wanted support for more than just Acquia Drupal. So, only a couple of months later, in the first week of January 2009, we announced our support for all things Drupal 6, including all modules and themes available on drupal.org as well as custom code.

Next, at a two-day management meeting early in the year, we established some very ambitious goals and shared the details publicly in our 2009 roadmap. With all these new projects, we needed additional management bandwidth in the company so Jay and I hired Tom Erickson as Acquia's new CEO. This has been one of our best decisions to date, as Tom has proven to be phenomenal at his job.

To deliver on the vision outlined in our roadmap, we had to raise more money -- no small thing given the downturn in the economy. Instead of reserving cash, Tom and I went out and raised an additional $8 million dollars in Series B funding, bringing our total funding to date to $15 million USD.

A Series B financing typically happens when the company has proven its core value proposition, has demonstrated its ability to find customers, and has proven its business model. In the first six months of 2009, we grew our customer base to 250 paying customers -- demonstrating the market for Drupal support, validating our business model, and allowing us to raise that Series B funding.

We used part of the new funding to accelerate our support business and grew it to more than 400 customers by the end of 2009. We handled thousands of support requests last year. The size and type of business also grew throughout 2009 -- 2009 was definitely a turning point for enterprise Drupal adoption.

The rest of the new funding was used to build the new products outlined in our 2009 roadmap, including Acquia Hosting, Acquia Search, various Acquia Stack Installers and Drupal Gardens (currently in private alpha). We helped get the Acquia Stack Installers included in Ubuntu, Solaris, and on Microsoft's Web Gallery. Our Windows version was one of the top downloads on the Microsoft Web Gallery.

We also helped Whitehouse.gov to move to Drupal -- an important turning point for Drupal within the government sector.

As a company, we contributed back to the Drupal community by funding much of the usability work carried out by Mark Boulton, by helping with developing the Field API for core, by providing manpower and funding for some of the drupal.org redesign work, by helping with the drupal.org test infrastructure, by contributing to Drupal's Apache Solr integration, by sponsoring local and global Drupal events, by giving away free hosting, and much much more. In short, we tried to help where (I believe) Drupal needed help the most.

For a small company of our size, we had a lot of balls in the air, but we learned to juggle well. Most companies don't share their roadmaps but we did, we stuck with it, and we delivered. I'm proud of Acquia for what we did in 2009 -- it has been a great year.

As for 2010? The launch of Drupal Gardens will be a big blip on our 2010 radar. Later in January, we have another two-day management meeting to finalize our roadmap for 2010. Keep an eye on acquia.com or on my blog if you want to learn more about our plans. A lot of what we'll do will resolve around extending and improving our existing products in support of our customers, but we'll probably launch a few surprises as well. Stay tuned!

Update: Tom posted his perspective on 2009 on the Acquia blog. Good that we're on the same page. :-)

Open Government Directive and Drupal

On his very first day in office, President Obama directed all federal agencies to break down barriers to transparency, participation, and collaboration between the federal government and the people it is to serve. Last week, the Obama administration published the Open Government Directive (OGD). The directive, sent to the head of every US federal department and agency, instructs the agencies to take specific actions to open their operations to the public. The three principles of transparency, participation, and collaboration are at the heart of this directive. It could be big for Drupal, and Open Source.

The directive imposes concrete milestones and specific requirements on the federal agencies. In 120 days, each agency needs to publish a detailed Open Government Plan of their own; within 45 days each federal agency must publish at least three new high-value data sets and register those data sets via Data.gov; and within 60 days, each department must set up a page or website at agency.gov/open. The /open-website needs to outline how the agency is going to open its data, but also tools with which the public can comment on it.

Personally, I think /open makes for a brilliant convention -- I hope it will be adopted by governments and organizations all around the world.

While the path to an open government will be a long journey with many challenges beyond just picking a website technology, this could be a great opportunity for Drupal. Within 60 days, every federal agency will need to have an interactive website setup at agency.gov/open. Drupal has all the features required to implement agency.gov/open (e.g. commenting, blogging, forums, aggregation, data mashups, micro-blogging, voting, etc). Drupal is perfect to get these /open-websites up and running quickly, and makes for a great foundation to extend its functionality in the future. Plus, by using an Open Source technology, agencies can share and collaborate on both best practices and code. It is a no-brainer.

At Acquia, we'll continue to build out our government offerings and ecosystem. Although we will be announcing the full set of details of our government offering in January, highlights will include a "starter kit" for government agencies to quickly achieve their /open requirement. In addition, we have already launched a webinar series -- we kicked it off last week with a webinar that included Andrew Hoppin (CIO of the New York State Senate) and how they are using Drupal to achieve their OGD requirements. In January 2010, we will be launching our first webinar with the General Services Administration, and we will be presenting at the OGD workshop that the Department of Transportation is organizing.

The Acquia partner ecosystem will also play a key part in our efforts, from our system integration partners who will help deliver the strategy and implementation, to our technology partners, such as Alfresco, who can deliver critical components related to the OGD such as document and records management.

And while agencies hash things out, Vivek Kundra (US Chief Information Officer) and Aneesh Chopra (US Chief Technology Officer) committed that within 60 days, they will create an Open Government Dashboard on http://www.whitehouse.gov/open. (Remind that Whitehouse.gov is a Drupal site.) This dashboard will publish each agency’s Open Government Plan, together with aggregate statistics and visualizations to track the agencies' progress toward meeting the deadlines for action outlined in the OGD.

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