Using Venture Cap Intelligence As A Performance Indicator

During the last few weeks, I have been monitoring news about Klout, the company that provides social media analytics to measure an user’s influence across their social network.  In October 2011, the company changed its algorithm that calculated users’ scores.   The change resulted in the decrease Klout scores.
Below are some of recent articles that have been published regarding Klout.

Although the “not too pleasant” feedback from users (present and past) may serve as weak signals for Klout, at the end of the day, competitors should consider the company’s ability to raise capital for future initiatives as one performance indicator.

Using venture capital intelligence from the CrunchBase, TechCrunch, VentureBeat and a various news sources,  here’s a look at Klout’s funding history along with its competitor, Empire Avenue to benchmark its track record regarding funding.

(Please Note: The time frame of January 2009 to November 2011 was considered for this exercise.)

Klout

Figure 1 is a screen capture of a segment of the Milestone profile on Crunchbase that  lists the three rounds of funding for Klout.

Figure 1: Crunchbase Profile For Klout Regarding Funding

 

 

 

 

 

 

 

 

 

The image lists that the company obtained venture capital in the amount of $10 million between July 2009 and April 2010. (The amount of seed money was obtained from angel investor, Nova Spivack).   In addition, the company added Max Rayner as an investor in September 2011.

During the same time period of the injections of cash, Klout was able to:

  • change the algorithm to the application (Announced October 2011)
  • add Charles Dudley as Product Designer ((Announced October 2011)
  • appoint  Don Hoang as Director of Business Development (Announced in September 2011
  • obtain 2000 API users (Announced in April 2011 – “Klout Hits A Milestone With 2000 API Users”)
  • appoint Philip Hotchkiss as Chief Product Officer (Announced in October 2010)

According to the article, “Klout raising new $30M round at a $200M valuation“, the company is due to receive another influx of cash to continue competing in the relatively new  social media influence sector.  It is interesting to see that the venture capital firm, Kleiner Perkins Caufield Byers has a strategy and fund to “accelerate a new wave of applications and services that enhance and extend the social online experience“.

Empire Avenue

Empire Avenue is a stock market simulation game that allows individuals and businesses to measure and benefit from their online influence across blogs and social networks.  The firm has received two rounds of funding between August 2011 and August 2010 in the total amount of $1.4 million.  With the funding, the company planned on  the following:

  • ramping up hiring and expand its platform, including a focus on growing sales of virtual goods and currency (Announced in August 2011)
  • adding Foursquare and Instagram as sources of further metrics used to calculate a user’s influence and stock value (Announced in August 2011)
  • enhancing marketing efforts and product development, including the impending launch of its rewards and advertising programs  (Announced in August 2010)

Prior to the $200,000 seed investment, the gaming site was able to launch in February 2010 with 10,000 individuals as beta users.

The venture capital firms behind the second round of financing include Crosslink Capital, with contributions from iNovia Capital, TriplePoint Capital and BioWare.   The article, “Why Edmonton startup company Empire Avenue attracted venture capital“, provide insights into future motivation into additional funding due to the link between Empire Avenue’s management team and BioWare.

Conclusion

While controversy may affect how a product and a company maybe perceived, it is essential that certain performance indicators must be considered by competitors.  Although a company’s bottom line is a good place to start, the ability to raise funding from the ultimate stakeholders cannot be overlooked.   Venture capital intelligence  can unveil aspects of future strategies that can assist in understanding where a company is going despite of changes that may anger consumers; but at the same time, they may make investors quite content.

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Intelegia is a boutique consulting firm in Montreal, Canada that understands the need to be innovative and strategic in a business landscape that’s evolving at an incredible pace. The firm delivers social media strategies to efficiently engage with stakeholders in economic development, business to business and business to consumer segments. It assists clients by defining and executing sustainable social web strategies that will allow their brand message to stand out in a competitive environment where target audience engagement is a must.

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