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mark evans

For many startups, a key milestone is scoring venture capital.

It's one thing to raise a small seed round, but how do startup entrepreneurs get their heads around investors giving them a serious sum of money?

It was a question for Allen Lau, co-founder and CEO of WattPad, after the Toronto-based company last week announced it had raised $17.3-million from a group of investors that includes Silicon Valley's Khosla Ventures and Jerry Yang, the co-founder of Yahoo.

For Mr. Lau, the new cash is not overwhelming, it's something that gives WattPad the financial muscle to expand a service that lets users write and read books and other content, which GigaOm describes as the "YouTube of writing."

"Our focus is making sure the product is transformative," Mr. Lau says. "WattPad will be the most powerful network in the written-words domain. That is the vision for the company."

So how will WattPad spent the money?

Mr. Lau says a well-articulated plan is already in place. The company will introduce new features it hasn't been able to implement because its focus has been on strengthening the platform to handle growth. Wattpad's number of unique visitors per month has climbed 33 per cent to eight million in the past six months.

Mr. Lau says WattPad will double its number of employees to 40 from 20 within the next year. It expects to beef up its development group, and build its marketing and community management teams. It will also move into new office space, although Mr. Lau points out the company will stay in suburban Toronto rather than relocate to a funkier space downtown where many startups operate.

Money in the bank is obviously welcome news for WattPad, which was bootstrapped before raising $3.5-million last September. Mr. Lau said his company wasn't actively looking for money but there was so much interest from investors that he decided to move ahead rather than wait.

"We didn't intend to raise so much money," he explains. "We started out looking for $10-million, which would have given us two years of runway. We were approached by so many VCs that we decided to be opportunistic. Often, the best time to raise money is when you don't need it."

The $17.3-million will allow Wattpad to develop new ways to generate revenue. The company currently makes money from banner ads but Mr. Lau says he doesn't see advertising as the long-term business model. Instead, he sees WattPad selling "native" applications, in which users might pay for different services.

"I have to say, where we're at is a dream come true," Mr. Lau says. "But this is not the end game. When you raise a round with a lot of money, it's like having a fresh start. This is the next chapter, and the best is yet to come."

Special to The Globe and Mail

Mark Evans is the principal with ME Consulting, a communications and marketing strategic consultancy that works with startups and fast-growing companies to create compelling and effective messaging to drive their sales and marketing activities. Mark has worked with four startups – Blanketware, b5Media, PlanetEye and Sysomos. He was a technology reporter for more than a decade with The Globe and Mail, Bloomberg News and the Financial Post. Mark is also one of the co-organizers of the mesh, meshmarketing and meshwest conferences.

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