Proof of concept, check. Big Series B round, check. StellaService's next move? Become the Nielsen of customer service

By Erin Griffith , written on February 27, 2013

From The News Desk

The New York tech scene is young enough that, when a company finally makes the jump to what brogrammers might call "the next level," be it via funding, a major expansion, or a general explosive growth, it gets everyone buzzing.

That's what happened with StellaService last month. Suddenly the company's name began cropping up repeatedly in conversations with investors. The company's $15 million Series B round of funding had some momentum behind it. Today the company makes the news official -- the round was led by Norwest Venture Partners with participation from Battery Ventures, DFJ Gotham Ventures, RRE Ventures and Forerunner Ventures.

The Series B tops off a prior $7.2 million raised since its inception in 2010. The company used those funds to prove out its business model, CEO Jordy Leiser says. Once the company realized that flash sale retailers, big box retailers and big e-commerce sites were willing to pay for the data, the company knew it had something big.

That data is essentially the Nielsen ratings of customer service for retailers. Meaning, StellaService employs an army of mystery shoppers who rate and analyze their experience. The company employs 23 people in New York and many more across the country, who buy "tons and tons of products," Leiser says.

But unlike, say, debt ratings agencies Moody and S&P, which only rate your debt if you pay them to, StellaService shops at all of the retail outlets. And rates them all. And makes those ratings available to anyone who wants to pay for them. They do this in the same way that Nielsen provides TV ratings on all channels, not just the ones that request it. The company covers more than 4000 retailers. Lending credibility to the data, StellaService ratings are audited by KPMG.

Building such a business is not cheap. Thus, the $15 million. StellaService's data is attractive to retailers because they can understand what their competitors are doing, and they can benchmark their own customer service. Many of them pay six figures for access to enterprise-level data.

Yes, retailers get feedback via customer surveys and online reviews, but that's a self-selecting group that often provides skewed results (very bad or very good). And it doesn't provide valuable industry-wide data. "We can show Wal-mart Amazon data and vice versa," Leiser says. Companies from Zappos to GNC, Gilt, PacSun, Nautica, Hugo Boss, Tory Burch, Microsoft and Foot Locker have used StellaService. The company wouldn't comment on its number of customers, growth rate, revenue or valuation.

With $15 million in fresh capital, StellaService can expand its service beyond its current roster of 4000 retailers to include hundreds more. "It's a winner-take-all space," Leiser says. "It's like Nielsen where you have a data set that is a standard measurement, and everyone in the same industry is speaking the same language and using the same numbers."