Pinterest has raised $200 million in additional funding in a round that valued the company — which is widely seen as best positioned to improve discovery of content on the web — at $5 billion.
What that means is Pinterest essentially added $1.2 billion to its valuation between its current funding round and the last round, where it raised $225 million at a $3.8 billion valuation in October last year. In that same time span, Pinterest rolled out its new search engine, Guided Search, and also began testing its advertising products through Promoted Pins. The current funding round comes from its existing investors: SV Angel, Bessemer Venture Partners, Fidelity, Andreessen Horowitz, FirstMark Capital, and Valiant Capital Partners.
Arguably, as Pinterest launches its first monetization products, this will be one of the riskiest points of the company’s existence. Raising money does make sense as a way to minimize risk if its first monetization products don’t pan out, though according to several industry watchers there is already a lot of excitement around Promoted Pins. And, naturally, a heavily-watched startup like Pinterest probably has to pay a lot of money to its employees to ensure they don’t get picked up by other tech companies.
In particular, the launch of Guided Search — a sort of visually oriented search engine that is more like a flow chart than the kind of keyword search that Google specializes in — has been an event investors in the company have been salivating over since the company began gaining traction. Search wasn’t even on the company’s road map until December last year, according to Pinterest designer Jason Wilson — so the billion-plus valuation jump in such a short time span makes a bit more sense.
That’s a hefty sum to add to its war chest, considering Pinterest had prior to the round $564 million. Still, raising money — especially when the company is able to with no revenue — helps startups like Pinterest attract high-quality talent and make acquisitions, such as its acquisition of visual search engine VisualGraph. The round also did not include a secondary (industry parlance for a funding round where employees and investors can sell their shares to other investors) which arguable implies a level of confidence in the company internally and amongst its investors.
Pinterest is widely considered in the investor community to have the best crack at helping users discover things — whether it’s video, products, or even locations — on the web. That has natural commerce applications, too, if advertisers are able to place certain products in front of the right people at the right time. For example, a pin for a Darth Vader outfit from a costume shop might be promoted in a search for “halloween,” according to the company.