Not only did ZergNet close their Series A: they’re working with some of the top VCs in town.
How did they do it? First, by providing a new way for publishers to grow their sites and monetize their traffic without showing a bunch of terrible sponsored ads.
Having publishing partners like Conde Nast, Time, NBC, AOL, Viacom, Warner Bros, Rodale, Wenner, Fox, American Media and most major media companies certainly helped. A lot.
ZergNet cofounder and CEO Reggie Renner talks about how he went all in until he closed funding from the best of them.
Who were your investors?
Greycroft Partners, Bertelsmann Digital Media Investments, Lerer Hippeau Ventures, and Mark Cuban.
Tell us about your service.
We are an audience development platform for content publishers. Publishers utilize our content recommendation module to reach a new audience at scale. We send millions of visits every day to publishers in our network for free.
How is it different?
Instead of showing sponsored content driven by whomever pays the most money, we show relevant, user-driven recommendations from white-listed publishers you choose to work with. We promote your content on our network in return, sending you volumes of premium visitors which ultimately generates more revenue for publishers. So instead of getting directly paid a CPM to promote ads, we offer publishers a way to grow their comScore, reach a new audience, generate revenue from the increase in traffic, and regain editorial control over their recommendations by linking to quality content.
Every single article in our entire network is manually curated by a full-time editor at ZergNet. We work directly with the publisher’s editorial team to curate content based on their editorial directions that they provide us. Since every article is hand-picked based on your input, there is no risk of anything showing up in the results you wouldn’t be comfortable with on your site.
What market you are targeting and how big is it?
There are a number of billion dollar companies involved in content recommendation. Yahoo, AOL, IAC all have offerings. and independent companies like Outbrain/Taboola are also in the space.
What’s your business model?
We are currently building our technology, distribution and relationships. This is an extremely competitive space and we are focused on winning market share as quickly as we can. After we have established ourselves in the industry, we will come out with additional paid options for publishers. Our current network will always be free for publishers and in the future, they will have the option for more premium options.
What was the funding process like?
This was our Series A, and we were very fortunate to have hit our stride as our seed funding was winding down. We were experiencing very rapid growth during the fundraising process, making everything go a bit more smoothly for us. I was also very fortunate to have someone in the industry introducing me to the top VCs in NYC. I didn’t know a single VC in NYC before starting the fundraising process for our Series A. This person started using our product for his company and then championed us around the industry. Without him, the process would have been much more difficult.
What are the biggest challenges that you faced while raising capital?
We have enormous competitors that have raised incredible sums of money and aren’t afraid to lose money on a deal to secure distribution.
This is my first company. I didn’t know a single VC outside of our seed investor.
Figuring out how to get connected to VCs and which VCs made sense to raise from was a challenge. We didn’t pitch a single California VC, as we wanted to raise from NYC based funds, which narrowed our options further.
We are pre-revenue. Many of the funds, especially the strategic media companies with funds, think we were “too early” because we haven’t turned on our revenue model yet.
What factors about your business led your investors to write the check?
We operate one of the largest content recommendation networks in the world, with a number of major media companies trying to enter the space.
We have a website that gets over 34 million unique visitors a month.
We are operating in a space where our competitors are in a “race to the bottom,” showing the lowest quality form of ads to generate revenue for publishers. We came up with a model that is much better, without resorting to showing diet pills or risqué content to be effective. Since every article in our network is manually curated by us, we will never show a single article like that on any site we work with.
What are the milestones you plan to achieve in the next six months?
50 million unique visitors a month to our website.
We currently send over a hundred million visits a month to our partners, and we want to double that in the near future.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
If you truly believe your company can make it, then go all in. Do everything it takes to put yourself out there without fear of rejection. I was an engineer in Indiana when we started our business. I didn’t know a single person who knew a single investor. I also didn’t know a single publisher who would use our service. One night, I just came to the realization that I had to put myself out there in order to make this work. I emailed every major publisher in our first market we were targeting that same night. Every single one of them ignored me. But it flipped some switch inside me and from then on I was comfortable pitching our product in front of anyone. I am by no means an expert on anything yet and I can only speak for myself, but that is the one piece of advice I would give to my former self.
Where do you see the company going now over the near term?
We are competing against very large companies for market share. This takes most of our focus, but we also are working on building more consumer-facing tools utilizing our data and editorial process. We do over 10,000 article recommendations a second across nearly every major vertical. We want to turn ZergNet.com into a more personalized destination site for people to discover awesome content.
Where’s your favorite spot to go and relax with your peers?
I walk every night with my co-founder for at least an hour to relax and talk strategy.
I am pretty boring, I don’t do much outside of work and family.
