The wonderful world of wikis

A year ago, wikis were on the fringe and having a hard time being taken seriously by anyone other than engineers, who have long used the collaborative technology to join forces on designing software and writing code.

No longer. Today, wikis are gaining legitimacy in the view of VCs and a broadening base of users. And you need look no further than an acquisition and two fresh fundings totaling $9.25 million to find evidence of the shift.

Two weeks ago, search giant and arbiter-of-promising-technologies Google announced it was acquiring Silicon Valley-based Upstartle, a four-person operation that came together last year. The bootstrapped company’s product, Writerly, is a free browser-based word processor – still in development – that allows users, such as co-workers, to collaborate on documents that reside on the Internet and that are sharable with anyone approved by users.

The deal’s terms were not disclosed by Google, which reignited rumors that it plans to take on Microsoft’s Office productivity suite with the move.

Three days earlier, on March 10, Jimmy Wales, the founder of the popular online nonprofit encyclopedia, Wikipedia, announced that he, too, has just raised money: $4 million from Bessemer Venture Partners for Wikia, a for-profit venture that Wales started in 2004 and whose aim is to nurture freely hosted, ad-supported wiki communities.

Some of the Wikia communities up and running concern science, science fiction, and sexuality, although users are welcome to start a wiki community around anything they like.

The $4 million is more than four times the amount raised by Wikipedia, which held three fund-raisers last year and brought in $730,000.

Both Wikia and Wikipedia use instant user updates.

Yet the most surprising wiki funding of all was a $5.25 million infusion for Seattle-based Wetpaint, a wiki service that, like Wikia, hopes to bring together like-minded people wanting to create online communities around those topics that most interest them.

Wetpaint, staffed by 11 people, is launching with content in six areas that it believes will appeal to many users – such as dogs, cancer and the Xbox 360. Wetpaint is organized in such a way as to encourage people to conduct searches on subtopics, including “Becoming a Dog Owner,” and “The Cutest Dogs In the World.”

Frazier Technology Ventures and Trinity Ventures invested in WetPaint’s Series A round. The company’s focus will be on advertising, says Len Jordan, a general partner at Frazier, and a new member of WetPaint’s board.

“When you have websites that are focused on particular subjects, the value of advertising is substantially higher,” Jordan says. “You can do cost-per-click keyword ad targeting that’s substantially more interesting than general news/sports, clicks.”

Belated investor interest in wikis isn’t surprising. Unique visitors to Wikipedia have jumped from 6.2 million to 21 million over the last 14 months, according to Nielson/NetRatings. Also, an increase in high-speed Internet connections, the rise of technologies such as Ajax that make the collaborative process more seamless, and the growing number of people glued to their PCs every day makes the case for wikis much more persuasive.

Many investors already see that enterprise applications of wikis are gaining traction.

SocialText, for example, a company selling wikis with “enterprise-strength requirements,” has 400 customers, 20 of which are Fortune 500 companies, according to CEO and founder Ross Mayfield. The company hosts its services, charging $95 per month for 20 users, and sells a $9,995 appliance to keep a company’s wiki deployments behind a firewall. SocialText has raised $4.6 million in funding so far, including investments from Draper Fisher Jurvetson (DFJ) and SAP Ventures.

It took the company four years to attract it, though. Until DFJ and SAP gave it $4 million last summer, SocialText was running on the $600,000 it raised in 2002 from the Omidyar Network and individual investors, as well as its revenue, which the company would not disclose.

Meanwhile, JotSpot, founded by Excite c-co-founder Joe Kraus, is also maturing, which investors have doubtless noticed. The company, which raised $3.25 million from Mayfield Fund and Redpoint Ventures in 2004 when it was founded, unveiled two new hosted wiki applications earlier this month – a class reunion tracker and a bug reporter – both of which sit atop JotSpot’s hosted wiki platform.

JotSpot also recently introduced Tracker, a collaborative spreadsheet tool for Microsoft Excel Users. The company plans to offer advanced functionality to enterprises, which, it is hoped, will advance beyond the $10 monthly subscriptions that they pay for JotSpot’s more basic service to “spending $10,000 a year on the high end,” Kraus says. “It’s better than spending $30,000 a year” for enterprise-class software that accomplishes the same thing.

“JotSpot is setting out to address specific business problems,” says Peter O’Kelly, research director at enterprise IT research consultancy Burton Group. “So is SocialText, and these companies are definitely gaining traction. Burton Group spends a lot of time with systems architects within enterprises, and it’s almost to the point now where wikis and SocialText and JotSpot are synonymous.”

“I absolutely imagine that 18 months from now, these wiki companies will be case studies of how to do business in the Web 2.0 age,” O’Kelly says. “These are very smart business people who understand the different channels for reaching their customers.”