GO
Loading...

How a dorm blog snared $79 million in VC funding

Tapping away on the computer in his dorm room at University of Maryland, Anthony Casalena wasn't planning to start a business when he began writing the code for what would become Squarespace's website-building software in April 2003.

The computer science student—who taught himself to write code as a teen growing up in Northern Maryland—was simply trying to post his own blog. Frustrated that there wasn't a one-stop solution that made it easy for him to put up a stylish-looking site using a template or to quickly tackle tasks, like adding an image gallery, he began creating a system like this for himself. At that time, programs like WordPress were just coming onto the scene. The only way to build the type of blog he wanted was by patching together a hodgepodge of existing software.

It was only after a friend offered to pay Casalena a couple of hundred dollars to use the software that the college student realized that there might be a market for what he created—and began turning it into a business. "It was a triggering feeling," recalled Casalena.

Anthony Casalena, founder and CEO, Squarespace
Source: Squarespace
Anthony Casalena, founder and CEO, Squarespace

By January 2004, Casalena began selling access to Squarespace, advertising it by using Google AdWords. He had gotten a $30,000 cash infusion from his father, also named Anthony, to pay for a server. Thanks to positive word of mouth, the site picked up traction.

Today Squarespace, headquartered in New York City, has grown to 285 employees and is "well into the tens of millions" in revenues, said Casalena, 32. Casalena estimates that Squarespace signs up about 1,000 new customers a day. This past winter, the company aired its first Super Bowl commercial, which uses a zany horror theme to convey the challenges of putting up a website. It will spend about $40 million a year on advertising, Casalena said. Users, who range from consumers to corporations like Cisco that publish blogs, pay for plans ranging from $8 to $24 a month to run and host sites on Squarespace.

Read MoreGoing viral on a limited ad budget

Investors are paying attention. On April 15, Squarespace announced it raised a $40 million round of venture capital from the investment firm General Atlantic. That followed an earlier, Series A round in 2010, led by Index Ventures and Accel Partners, in which Squarespace raised $38.5 million. After introducing a modernized version called Squarespace 6 in July 2012 and adding e-commerce capabilities for users' sites in early 2013, Squarespace has, according to Casalena, seen dramatic sales growth. That is despite competition from all sides, now that players such as GoDaddy, Web.com and Weebly offer website-building solutions of their own. He runs the company at break-even, reinvesting profits in growth.

"The company is in one of my favorite states: a balance between good design, good engineering, good customer care and good marketing," Casalena said. "Lopsided entities can only grow to a certain size."

"The company is in one of my favorite states: a balance between good design, good engineering, good customer care and good marketing. Lopsided entities can only grow to a certain size."

Without years of business experience behind him, Casalena had to teach himself how to build a company, step by step. Staying an extra year in college to work on Squarespace, the young entrepreneur realized he needed to create a billing platform so he could charge customers to use it and took two months to tackle that. Then he realized he needed to tackle challenges like hosting Squarespace and creating an advertising campaign.

Looking back at the very hands-on strategy he used, Casalena said, "It's bumbling through everything, in a way. It's a very organic approach, looking at what is working and what is not. It is approaching things with `I don't know' and just trying things. When you're younger, you don't have much scar tissue from being burned by trying things."

With no historical data about customers to guide his decision-making in the beginning, Casalena learned to trust his intuition when, for instance, he had to decide whether or not to put $500 from his tiny marketing budget into a Google AdWords campaign.

Read MoreBillionaire's plan to harvest the moon

"You are just acting on your gut instincts a lot," he said. "You put a couple of hundred bucks into Google AdWords and get three customers and do the math. You're like, `I have to make my money back. Do we really think they'll ever upgrade—yes or no?' You can't run a test on it. You don't have enough people coming in. A lot of it is flying blind. In that kind of environment, it takes you longer to learn lessons. Things move slowly. Sticking with your convictions is really difficult."

But Casalena never deviated from his overriding belief in the power of design. From the start, he made it a point to offer customers sophisticated templates that don't have a bland cookie-cutter vibe.

"When we put a design template out there, our designers look at real customers' sites using that template," he said. "We remove templates from our store all the time that we don't think are good enough."

Although Casalena loves solving tech problems himself, he realized gradually that to grow Squarespace, he had to step back from doing that and focus on leadership—trusting his team to solve engineering and design challenges.

"I think the hardest thing for anyone who likes making things, as a business scales up, is to realize you're making a company now," Casalena said. "You can't go back to just being a programmer. I can't solve all of my problems sitting in front of the computer."

Read MoreAs celebrities conquer crowdfunding platforms, critics give thumbs down

To give himself a creative outlet outside of his role as CEO, "I still have my little hack days on weekends to play around with code and stay in touch with programming," Casalena said.

At Squarespace, he is focused on leading his team.

"Some of the problems I face today are social and communication," he said. "Those are all new and difficult. Being okay with that is one of the hardest things. Computers are easy in a lot of ways. They just do what you tell them to do. People generally don't like that."

Hiring carefully, with a constant eye out for people who share his appreciation for design, has helped him.

Read MoreSteve Case peers into the future of the Internet

"The important thing is finding people who are more naturally aligned with you so it is not this big fight, where I want to do things one way," he said. "I hope everyone here appreciates the value that design can bring to communication."

To make sure employees stay true to the company's original vision, he encourages them to build products they would want to use, just as he first did when he began creating Squarespace. He believes that approach, rather than one that is driven mainly by market research data, results in products that spark customers' passion.

"If you make it for yourself, you have to be in the customer's position," he said.

To spark the creative process, he allows employees time to work on open-ended projects.

"Sometimes you can't put deadlines on things," he said. "If you play around with things, you can sometimes discover new building blocks that will build up into things you wouldn't have discovered before."

The trick is balancing creative goals with growing the company.

"This is a business. We have to make money. We don't have to make it in the short term. We have to do it in the long term and have to have discipline. Squarespace was never this art project where it was all about design at the expense of everything else."

Lessons learned:

Sometimes, a winning business plan's origin story can come out of personal need—and pet peeves. (There might be more frustrated people out there looking for the same solution than you ever knew existed).

"Bumbling" your way to success and using intuition is OK, especially when you are young and more open to failure.

The best leaders learn to recognize when a startup has become a proper company—stepping back and delegating is a key to sustaining momentum.

A founding concept—like good design—needs to be kept in mind at all stages of company evolution, but it should never override the need to develop a competitive market strategy.

Symbol
Price
 
Change
%Change
GOOGL
---
CSCO
---

Featured

Latest Special Reports

  • To kick off our year-long anniversary, we created a list of top leaders, icons and rebels.

  • An era of innovation dominated by secretive corporate labs is ending. Time for you to help crowdfund the future.

  • CNBC and Institutional Investor host the 4th Annual Delivering Alpha Conference.