July 1, 2011

San Francisco Business Times

Webcaster Qumu reaching for market share

Corporate use of video webcasting is growing dramatically, and Qumu is planning to raise a $25 million to $40 million investment round to grab more of the market for selling the technology and services that businesses need to produce, deliver and manage video.

San Bruno-based Qumu has already shown strong growth, achieving quarterly “break-even” profitability in the second half of 2010, during which annual revenue was about $12 million. This year, revenue appears to be headed for about $24 million, said CEO Ray Hood.

“We grew 65 percent last year, 65 percent the year before and we’re on track to grow as much as 100 percent this year,” Hood said. The nearly 70-person company has raised $20 million previously, including $8.75 million in debt and equity funding last September.

Frost & Sullivan recently published a report showing Qumu to be the No. 2 vendor in market share among a dozen companies, close behind VBrick Systems of Connecticut. Also on the list were Cisco Systems, Polycom and ON24, though that San Francisco company is far more focused on virtual events and related services.

Report author Aimee Roberts said that “enterprise video webcasting” technology sales in the United States grew about 20 percent to more than $100 million in 2010. Roberts predicts national sales will top $500 million by 2017, and Polycom’s $50 million purchase of Qumu competitor Accordent Technologies in March suggests that the market is heating up, she said.

Founded in 2003, Qumu grew through the recession despite a significant number of contract cancellations in late 2008 and 2009, particularly from financial services clients, Hood said. Other sectors, including chemicals, insurance, pharmaceutical and communications companies picked up the slack, and the financial services sector has since rebounded, he said.

Qumu sells hardware and software packages — typically ranging from $350,000 to $1 million — for managing video, delivering it globally both live and on-demand, and archiving video with tools that allow for searching of content. The company also provides managed services.

Investors in Qumu have included Storm Ventures, Advanced Technology Ventures, SAP Ventures, Angels Forum, Halo Fund, and Garage Technology Ventures.

Lawrence Ragan Communications Inc., said Qumu’s platform has opened up a new revenue stream for his 40-person Chicago-based company by allowing him to affordably webcast conferences and sell digital copies of events.

“Qumu is now providing technology, software and lot of know-how to broadcast live all of our conferences to people all over the world,” Ragan said. He hopes soon to offer an online library of videos for sale through subscriptions and a la carte sales.

Melissa Webster, program vice president at IDC for content and digital media technology, said demand for video use in companies is coming from both employees and executives as they become used to having easy access to video on multiple devices in a consumer setting.

Three years ago, only a small number of executives used video webcasting to address employees — sometimes called “ego casts” — while today video has become “mission critical” for general communications, product launches, sales training, and employee learning and certifications.

The challenge is that on a corporate network, where security can be a major issue, managing video can quickly suck up bandwidth and cause serious problems, Hood said.

“Video is so large that everything else on the network quickly becomes the rounding error,” he said.