VentureBeat

Socialtext, the early wiki company, has raised $9.5 million in a third round of financing.

Socialtext is one of a number companies loading delivering “social software” to large companies, helping employees collaborate in real-time on documents in ways they haven’t done in the past. It has recently expanded beyond mere wikis, or Web pages that multiple people can edit at the same time, and now offers multiple social networking tools, such as social bookmarking, where employees bookmark online documents that they can share with their colleagues.

Socialtext also named a new chief executive, Eugene Lee, who replaces founder Ross Mayfield.

The company is going up against players like Jive Software, which recently raised $15 million from Sequoia Capital.

Gartner recently concluded that no company has stolen a leadership position within the social software sector. However, it placed Socialtext close to the so-called upper right “magic quadrant,” making it one of the leading start-ups in the same league as large companies Microsoft,  IBM and BEA (see chart below). 

Other wiki players include Jot (now owned by Google), PBWiki, Wetpaint and Wikia. However, they are consumer focused, and don’t sell to large companies.

Socialtext says it has 4,000 customers, including Nokia, Basf, USA Today and Ikea.

The company isn’t profitable yet. It employs 50 people in Palo Alto, Calif.

The round was led by DFJ, SAP and Omidyar, all previous investors. Previous investor Intel Capital did not reinvest.

Wetpaint, the Seattle start-up that lets people build Wikis — or sites where multiple people can edit the same pages — has raised $9.5 million to grab more market share.

The move comes after Google bought popular Wiki site, Jotspot, last year and closed that company to new users. VentureBeat tried out various Wikis last year, and found Jotspot the most intuitive. Wetpaint is easy to use, but we didn’t like the loud advertising present on the site — so passed on using it. But with Jotspot gone for now (presumably, Google will relaunch it in some fashion), and players like Socialtext increasingly focused on selling its wiki software to company users, Wetpaint is among the more convenient Wiki softwares for individual projects.

The question is whether $9.5 million is really necessary for a software that is so cheap to make and distribute. It had already raised $5.25 million (past coverage here).

Wetpaint told VentureBeat its users have generated more than 150,000 Wikis in six months, and that the company has struck partnerships with big media companies. AOL, ABC, CBS, American Express Publishing, T-Mobile and HTC have created community sites for their active users, though it’s uncertain how lucrative these deals will be.

Accel Partners, backers of Facebook and Glam, two other sites that rely on advertising for their business model, led the new investment. Existing investors Trinity Ventures and Frazier Technology Ventures joined the investment.

Updated

Web 2.0 start-up activity is hot, and here’s the latest data.

Venture capitalists invested $455.5 million into Web 2.0 companies in the first three quarters of the year, more than twice the amount invested over the same period last year.

This comes from the latest survey by Dow Jones VentureOne, which continues to do the best research on the Web 2.0 area. It gets help from accounting firm Ernst & Young.

Overall, more than $1.63 billion has been invested so far this year into 198 “consumer technology” companies headquartered in the U.S., but 79 of those companies were classified as “Web 2.0.” (See our earlier story here, for VentureOne’s definition of Web 2.0 — scroll to blue quote box)

Notably, the group finds investment valuations have remained fairly steady for Web 2.0 companies over the past two years. But it contradicts the moaning we hear from VCs and individual angel investors about how high valuations have become. (See chart at very bottom of the post; note that the valuations don’t include the angel rounds).

Below are charts outlining where the investments are going, and listing the biggest recipients and investors.

Btw, Intel Capital should be moving up the list as a big investor, based on the recent announcements it has made. We heard that Intel Capital’s Eghosa Omoigui, who has had his ear to the ground attending all the Web 2.0 conferences and parties over the past year, internally floated the idea of looking at an investment in YouTube back in March, but that the idea didn’t get much traction internally. Too bad. Intel is still one of the largest venture capital investors overall.

Intel yesterday also announced it is distributing SuiteTwo, an integrated Web 2.0 software suite for small and medium sized companies, in a hosted or self-hosted format. The package includes Socialtext (wiki software), Six Apart’s Movable Type (blogging software), Newsgator (RSS reader) and Simplefeed (RSS distribution).

It has wrapped them into a single sign-on software, through direct sales from Intel, but also via partners like Dell and NEC, Intel Capital’s Robert Rueckert told VentureBeat in a briefing Monday. Cost will be from $150 to $200 per seat per year.

SpikeSource, a company that helps integrate software, has guaranteed the suite works on Novell, Linux or Microsoft operating systems, and that they run on Intel servers.

(Update: We’ve confirmed with Intel has invested in all five of these companies — Socialtext, Six Apart, NewsGator, Simplefeed; however the amount remains undisclosed).

(Update II: To clarify, Intel has made equity investments in Six Apart and SpikeSource, but has only signed warranty deals with the other companies, essentially giving Intel the right to purchase equity if they meet certain performance guidlines.)

Valuations of Web 2.0 deals:

(Updated: Corrected PBWiki seed amount and added reference to Seraph investor)

Here’s the latest news on the Google bull in the Silicon Valley china shop:

Google unveils a Gmail application via your mobile phone — Phone must be Java enabled. It lets you get Gmail directly, bypassing browser.

Socialtext launches second round of Wiki Wars — After Google buys the wiki company Jot, competitors in the wiki industry scrambled to respond. Chief among them is Socialtext, which took issue with our earlier statement that it is struggling. Socialtext’s chief executive Ross Mayfield has since offered users of JotSpot’s wiki sever product, the JotBox, free migration over to Socialtext for a year. Jot, for some reason, had discontinued the JotBox, which serves large companies. Mayfield wouldn’t comment on his revenue traction. He did say, though, that this is “round two of the Wiki Wars.” (For background, we wrote an article two years ago about the Wiki Wars, featuring heavily backed Jot against the more frugal Socialtext — that original story is now long gone behind Merc’s archive wall). Mayfield has launched a number of products and redesigns recently. He says there’s plenty of room for multiple players, citing Gartner prediction that 50 percent of large companies will be using wikis by 2008. He’s aggressively hiring in engineering and sales, he adds.

PBWiki is here too! — We also heard from the guys at PBWiki is in San Bruno. They’re just three guys in a single office and host 130,000 wikis, which they claim is the biggest wiki hosting service. David Weekly, Ramit Sethi and Nathan Schmidt are all Staford guys in their 20s. They’ve taken $350,000 from Seraph (an
angel group), Chris Yeh (Symphoniq) and Ron Conway (prolific angel investor).

The Google binge machine timeline — Here’s an Ajax chart of Google’s acquisitions through time. You’ll have to scroll down to the blue table, and then start dragging the map.

Google Base 2? — Google Blogoscoped has the scoop on the latest Google classifieds project.

Google co-founder buys a place in New York — Don’t know who, or why.

UTube sues Youtube — This news has been widely covered, but as usual, Techdirt has good perspective.

Speculative stuff about bribery on YouTube deal –Lots of people pointing entrepreneur Mark Cuban’s blog on dubious stuff that went down between Google, YouTube and the music labels right before the GooTube acquisition, and some are calling it bribery. We didn’t point to it initially, because even the original anonymous source says some of it was based on speculation (if that’s not a warning signal, don’t know what is). But it has appeared everywhere, so we point to it too.

Google launches sponsored videos — You produce a video, Google gives you a cut of the revenue from ads appearing beside the video. Google kicks it off with the latest Diet Coke and Mentos video.

Google flexes political muscle, funds Republicans & everyone else — Details here.