Instagram Backer Sequoia Capital Bets $10M on PicsArt

PicsArt, a growing mobile photo-editing system that claims almost 60 million active users a month, is moving its top brass to San Francisco so it can tap into the area’s tech talent pool and venture community.

The results so far: The company announced today that Silicon Valley venture firm Sequoia Capital is investing $10 million in PicsArt, a startup founded in Armenia that is continuing a push into the U.S. market. PicsArt offers a varied suite of image creation tools that include photo manipulation, freehand drawing, text, and layout templates that look like scrapbooking pages. The company is trying to differentiate itself from Instagram, the Sequoia-backed photo editing and sharing company sold for $1 billion to Facebook, and from the photo-related startups inspired by Instagram’s success. San Jose, CA-based Adobe (NASDAQ: ADBE) has adapted its flagship photo editing tool Photoshop for use on mobile devices, and in September it acquired New York-based Aviary, a private company that developed its own free mobile app for editing photos.

“We are enabling people to express and create,” says PicsArt general manager Wilson Kriegel. “We view that as the next generation.”

The PicsArt app is free, but Kriegel says the company has been profitable for two years due to revenues from ads, sponsorships, and sales from the store inside the app. Users can buy avatars, stickers, and special fonts to add to their images. PicsArt is also a place where people can share their art, edit it collaboratively, comment on each others’ images, follow their favorite artists, enter weekly contests, and act as contest judges.

The social aspects of PicsArt spill over into other networks such as Facebook and Twitter, where images created with PicsArt can be uploaded and discussed. PicsArt is a complement to these companies, rather than strictly a competitor, Kriegel says.

“We don’t view it as a zero-sum game,” Kriegel says.

Although PicsArt isn’t intended as a marketplace where artists can sell their work, the company is creating an environment where artists can be discovered by purchasers of graphic art, Kriegel says.

PicsArt was founded in late 2011 by CEO Hovhannes Avoyan, who financed the startup himself, at least until now, Kriegel says. The company has about 100 staffers in Europe, but is setting up a second headquarters in San Francisco.

The app has been downloaded by 200 million users, and added 50 million users over the past six months, Kriegel says. Europeans and Asians each make up 25 percent of PicsArt’s users, with about 20 percent from the United States.

With its new capital, PicsArt plans to grow its U.S. user base and continue to expand the editing system. The new features planned soon include one-to-one communication between users; support for the creation of very short video sequences, and possibly a video editing function by the end of this year, Kriegel says. The expansion could be a boon for Bay area tech workers. “We’re hiring dozens of people here,” he says.

Sequoia Capital partner Omar Hamoui, who founded the app-based advertising system AdMob, is joining PicArt’s board.

“The first generation of photo apps were based primarily on sharing,” Hamoui said in the announcement of the Series A financing round led by Sequoia. “PicsArt’s rapid, organic growth makes the case that the next era of expression will be based not only on sharing, but creativity and collaboration as well.”

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