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Startups

Website Builder Webflow to Exceed $200 Million Valuation in New Funding

Website-design software maker Webflow is expected to raise at least $20 million in new funding led by venture firm Accel at a pre-investment valuation of more than $200 million, according to a person briefed on the deal.

Initially backed by startup fund Y Combinator, Webflow is one of a class of software companies that develops tools to help startups and other businesses simplify corporate tasks such as creating a website.

The Takeaway
Webflow, a website-design software maker that is raising at least $20 million at a valuation of $200 million, is one of a class of software companies that develops tools to help startups simplify corporate tasks such as creating a web site.

At the same time Webflow raised money, existing shareholders were expected to sell more than $20 million worth of stock in a so-called secondary transaction, this person said. The deal prompted interest from other investors: After Webflow agreed to a deal with Accel, another venture capital firm, Benchmark, signaled its interest in investing, said two people familiar with the matter. Webflow stuck to the original deal, one of these people said.

The San Francisco–based company, which has said publicly that it has posted a net profit for several years, first targeted website builders such as Wix and Squarespace and content management providers like WordPress. It offered designers tools to build websites without needing to write their own software code. Since then it has added an offering for e-commerce sites, in a move aimed at taking business from Shopify. The company’s founders had no comment for this article, and a spokeswoman for Accel did not respond to a request for comment.

The person familiar with the deal said Webflow had “annual recurring revenue” of $20 million, which is the revenue expected to be generated over a 12-month period from existing paying subscribers. A corresponding figure from a year ago couldn’t be learned, but Webflow co-founder and CTO Bryant Chou has said the company generated about $10 million in revenue in 2017. Webflow has around 100 employees and charges between $144 to $432 per year to host websites people create with its tools, depending on how advanced the sites are.

Along with Mr. Chou, Webflow was co-founded by Vlad Magdalin and his brother Sergie Magdalin, who immigrated to Sacramento from Russia in 1991 after their parents sought asylum in the U.S. It aims to simplify the development of websites by giving “the power of coders” to designers who don’t have technical skills. Customers use Webflow like they would Adobe Photoshop in a Web browser, by clicking and dragging images, animations and headers to create a page, Sergie Magdalin said. Behind the scenes, Webflow generates corresponding software code, such as Javascript or HTML. Previously, the two processes were often separate, with a designer creating pages on Photoshop and a software engineer writing the code for the design.

After working on early versions of Webflow from 2005 to 2008 but failing to turn it into a business, Mr. Magdalin previously tweeted that he gave up for several years before resuming his work in 2012. 

Vlad and Sergie Magdalin applied to Silicon Valley startup accelerator Y Combinator in 2012, but were rejected. A few months later, Vlad Magdalin wrote that he was “a few weeks from being essentially bankrupt” after his daughter had unexpected surgery. 

Then, in March 2013, he posted an early version of the product to Hacker News, the online discussion board for engineers, run by Y Combinator. The post was a “last-ditch attempt to show a proof-of-concept to the world before going back to our old bosses to ask for our jobs back,” Mr. Magdalin wrote five years later.

It worked. The post convinced 25,000 people to sign up to use Webflow, he said. The Webflow team then reapplied to Y Combinator and was accepted, joining the hundreds of companies, including Airbnb, Dropbox, Stripe and Notion, among others the accelerator has funded. 

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Some of Webflow’s employees work remotely, spread out across more than a dozen countries, Mr. Magdalin has said. At some point before Y Combinator, Webflow was part of a Chinese-backed startup incubator in Silicon Valley, Hanhai, according to Hanhai’s website. It is unclear whether Hanhai holds equity in Webflow.

Before the latest funding, Webflow has said it raised about $3 million from Khosla Ventures and Vaizra Investments (now called Rainfall Ventures) and its clients included Dell and a plethora of small agencies that create websites for their customers.