Seattle-based Madrona Venture Group has led a $4.4 million funding round for Animoto, a Web software startup based in New York that lets people automatically create professional-quality videos and slideshows from photos and music. Other investors in the round include Seattle-based Amazon, Palo Alto, CA-based SoftTech VC (run by Jeff Clavier), and Bruce Livingstone, the founder of iStockphoto.
The current round includes an undisclosed amount of financing already announced in May 2008, from Amazon and angel investors. Before that, Animoto had raised a $600,000 seed round from friends and family. So the company has raised an even $5 million since it was founded in 2006.
There’s a lot more to the story. The lead investors in the deal are from Seattle, but that’s only part of the local connection. It turns out that “based in New York” doesn’t really do justice to the roots of Animoto. The company was started by four friends who went to Bellevue High School in the Seattle area: Brad Jefferson, Jason Hsiao, Stevie Clifton, and Tom Clifton (the latter two are brothers). Jefferson, who is now Animoto’s CEO, went on to school at Dartmouth College and got his start as an intern at Bellevue, WA-based Onyx Software, where he began working full-time in 1998, and quickly moved up the ranks.
“He was a rock star,” recalls Onyx founder and Dartmouth alum Brent Frei, now with Bellevue-based Smartsheet. “He’s super smart but very humble. It’s amazing the things he does right naturally.” Frei notes that Stevie Clifton was also a superb Onyx intern. “They have assembled a fantastic team,” he says. (Interesting note: Jefferson was the only one of the four founders who didn’t play in an indie rock band around Seattle—he was more into sports.)
Jefferson got promoted at Onyx in 2000 to run a services team in San Francisco. There, he was roommates with Hsiao when Onyx was acquired by M2M Holdings in 2006. Jefferson opted for the severance package, and the very next day, Hsiao pitched him on the idea of Animoto. The basic concept was an online service to make it easy for people to create “animated photos” to capture the mood of events like weddings and graduations in customized slideshows. Animoto’s software creates moving slideshows that match the beat and feel of the accompanying music you select. A hip-hop track will make the picture movements and transitions fast and edgy like an MTV video, while a classical piece will make the slideshow more staid and elegant.
Animoto finished its first working prototype in December 2006, and started getting user feedback over the next few months. At the time, the company used a traditional hosting provider, but it couldn’t handle huge spikes in traffic. “As I started running the numbers, it was, ‘Oh crap, if we’re successful, we’re gonna fail,'” Jefferson says. So Animoto talked to Amazon Web Services about hosting its applications and data, and spent several months enhancing its product and “pushing everything into AWS,” he says, just in time for public beta trials in August 2007. “It was really a good decision from a capital expenditure perspective. From Day One, we were able to scale to the world.”
Meanwhile, Jefferson was sowing the seeds of future venture investment, even if he didn’t
