The archive · Developer & Business Tools · Financial decision · 2008–2015
Stack Exchange bet developer trust pays via recruitment; a16z led its $40M Series D
A16Z led Stack Exchange's $40M Series D: 80M monthly users, recruitment already two-thirds of revenue, international launches next.
Stack Exchange
What the business is
Stack Exchange runs Stack Overflow and a network of programmer-focused Q&A forums with 80 million monthly users, monetizing that audience through Stack Overflow Careers recruitment services and advertising.
Starting capital：$40M Series D led by Andreessen Horowitz, announced 2015-01-20, bringing disclosed total funding to $70M; existing investors Union Square Ventures, Spark Capital, Bezos Expeditions and Index Ventures also participated.
How it started
Stack Exchange was founded in 2008 by Joel Spolsky, who was CEO and co-founder at the time of the round. By January 2015 it operated Stack Overflow and a host of other programmer-focused forums, and Spolsky said the company had come to dominate getting answers the way GitHub dominated social coding and version control.
What happened
On 2015-01-20 the company announced a $40M Series D led by Andreessen Horowitz, with Union Square Ventures, Spark Capital, Bezos Expeditions and Index Ventures participating, bringing total funding to $70M. Spolsky said about two-thirds of revenue came from recruitment services via Stack Overflow Careers — which he argued developers trusted more than a LinkedIn he called overrun with contingency recruiters — and one-third from advertising such as Microsoft marketing Azure. The money was earmarked to build out recruitment and to launch Japanese, Russian and Spanish versions. He would not disclose valuation, but said it was high enough that Stack Exchange was no longer a likely acquisition target and positioned it for an IPO or private equity deal.
No ending yet — it is still running.
Background
Stack Exchange, the New York startup founded in 2008 by Joel Spolsky that operates Stack Overflow and a network of programmer-focused Q&A sites, announced a $40 million Series D led by Andreessen Horowitz on 2015-01-20. Union Square Ventures, Spark Capital, Bezos Expeditions and Index Ventures joined the round, putting the company's total disclosed funding at $70 million. Spolsky said the company would not disclose its valuation but that it was high enough to make Stack Exchange no longer a likely acquisition target, positioning it for either an IPO or a private equity deal.
By then the business was already monetizing its position in the developer community: Spolsky said about two-thirds of revenue came from recruitment services via Stack Overflow Careers, where programmers list profiles and companies post developer jobs, and one-third came from advertising such as Microsoft marketing Azure to the same technical audience. He argued developers put more credibility in a careers site attached to forums they already spent time on than in LinkedIn, which he described as overrun with contingency recruiters: 'Developers have come to trust us.'
The funding was to double down on both lines of business, with recruitment specifically called out, and to expand internationally with versions in Japanese, Russian and Spanish. Spolsky framed the company as complementary to Hacker News and GitHub rather than competitive — programmers use the sites for different things — and said Stack Exchange had come to dominate getting answers just as GitHub dominated social coding and version control.
What has to be true
- Developers already spend their time on Stack Overflow, so a careers product inside that trusted environment had a distribution and credibility advantage over LinkedIn's recruiter-filled market.
- Recruitment monetized the audience far better than advertising: two-thirds of revenue by January 2015, which is exactly the business the round was structured to scale.
- International expansion into Japanese, Russian and Spanish attacked the same programming audience in under-served languages rather than diluting focus into new verticals.
- Keeping the Q&A moat — dominance in answering questions — was the strategy, which is why Spolsky compared Stack Exchange's hold on answers to GitHub's hold on social coding.
What can be applied
Dominating a niche creates trust that transfers to higher-value services: developers using Stack Overflow became the recruitment product, the two-thirds-of-revenue business a16z funded.
Aftermath
As of 2015-01-20 Stack Exchange had taken its $40M Series D led by Andreessen Horowitz, bringing total disclosed funding to $70M, with recruitment services already generating about two-thirds of revenue through Stack Overflow Careers. Spolsky said the valuation made the company no longer a likely acquisition target and positioned it for an IPO or private equity deal, though he gave no timing; the disclosed use of funds was to build out recruitment and launch Japanese, Russian and Spanish versions.
Sources
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