In a current venture funding market that can only be described as giddy, Cloudinary Ltd. is an outlier.

The company, which makes a cloud-based media management platform, has never taken outside investment yet today it is announcing its first acquisition and an annual revenue run rate that exceeds $100 million, up from $80 million six months ago.

It’s not that executives at the 11-year-old firm, which was founded in Israel and is now headquartered in Santa Clara, California, have anything against venture investment. “The moment we need external funds we will bring them in,” said co-founder and Chief Executive Itai Lahan (pictured). “We’re just extremely lucky that up till now every need was paid for by existing customers.”

The lure of venture capital has been especially tempting over the past year. Crunchbase says global venture investment exceeded $643 billion in 2021, nearly doubling the $335 billion invested in 2020. The research firm says 586 new unicorns – or companies whose market capitalization exceeds $1 billion — were minted last year compared with 167 the previous year.

Managed growth

Cloudinary’s example shows that a company can be successful without go-for-broke growth objectives. Like many software startups, its product business grew out of a consulting practice. The founders needed a media management platform but couldn’t find a commercial product that met their needs.

“We built Cloudinary to help solve that gap,” Lahan said. “We realized that this was something we would have paid a lot of money for.”

Co-founders Lahan, Nadav Soferman and Tal Lev-Ami made the wise decision to launch the software business as a separate division early on. Early sales were almost entirely by word-of-mouth. “We had paying customers almost from day one,” Lahan said. “We were the right people to sell the product because we built it.”

The company was profitable almost from the beginning and has limited its investments to areas with reliable returns. “We are profitable, but the goal is not to be profitable but to use all the funds we have to grow,” Lahan said. “There is something within us that needs to see that good return. It’s not just throwing cash around.” That hasn’t stopped the firm from reaching 8,500 customers and 1 million developers.

Creative financing

Cloudinary has taken outside investment indirectly for several years but in a way that doesn’t give up control of the company. Its employee stock option program grants shares to employees who then have the freedom to sell it to an external investor designated by the company every two years. Investors can thus participate in the growth of the business but don’t get substantial voting power or a seat on the board of directors.

In a press release announcing that it has surpassed the $100 million run rate mark, Cloudinary referred to itself as a unicorn even though it has never announced a valuation. But that could change soon. “We are almost closing our next secondary round for employees and there will be some external valuation at that time,” he said, implying that an announcement could come this year.

With the acquisition of Indivio, Cloudinary aims to expand its footprint in the marketing field with a platform that marketers can use to customize video campaigns at scale. The six-person firm provides dynamic templates and content that marketers can use to create such assets as live web pages and personalized videos based on individual customer data.

“A user can design a template in Adobe and then a marketer can connect it to a product catalog to customize the visual elements, whether motion graphics, callouts, dynamic pricing or messaging,” said co-founder and CEO Josh Dorward, who will become managing director of Cloudinary’s newly formed Video Creative Automation business line. All of Indivio’s employees will join the acquiring company.

Photo: Cloudinary