DocStoc begins M&A push, adds BestVendor to portfolio of small business content and services

By Michael Carney , written on August 26, 2013

From The News Desk

Six-year-old small business information platform DocStoc is making its first ever acquisition, picking up the New York City-based SaaS software recommendation platform BestVendor. The companies declined to disclose details of the transaction.

DocStoc’s initial mission when launching in 2007 was to provide small business owners with access to any and all documents necessary to run their business. In the time since, it’s grown into one of most highly trafficked sites in the world – with between 10 million to 15 million monthly unique visitors and has more than 35 million lifetime registered members, 3 million of which are on an active email list – creating an opportunity to deliver additional products and services to this highly engaged audience.

The company has expanded its focus over the last two years toward becoming a universal resource to small business owners. The first step in this direction was to begin offering video education content on subjects ranging from raising venture capital to acquiring customers online. Then in October 2012, DocStoc announced its first ever sister site with the launch of License123, which provides ready access to the licenses and permits necessary to start a business.

In May, the company followed up with the launch of ExpertCircle, a platform for experts to share recommendations of the best online and offline business products and vendors. BestVendor is intended as an add on to the ExpertCircle offering.

“We recognized that they had built a great platform,” DocStoc founder Jason Nazar says. “It may not have been a rocketship, but the intellectual property the have and the community they’ve built are amazing. It would have taken us a long time, several years probably, to duplicate what they’ve built to date.”

BestVendor has hundreds of thousands of product ratings and reviews on its platform, Nazar says. And the site has built a platform and a database which organizes thousands of business software products into exact categories, making them searchable by category and by keyword. The site offers a product description and user reviews on each product, as well as screenshots, videos, pricing, a description of what other software it integrates options, and the option to request a demo.

Two-year-old BestVendor had raised $3.6 million across two rounds of financing from RRE Ventures, SoftBank Capital, Lerer Ventures, SV Angel, David Tisch, and Peter Thiel. (Disclosure: Lerer Ventures and Peter Thiel are investors in PandoDaily.) While he declined to discuss the financial health of BestVendor in detail, the DocStoc CEO said that the company was in no immediate danger of ceasing operations and that the acquisition was more about an opportunity to jumpstart the ExpertCircle platform.

Nazar says:
We want to be the brand that people think to go to to help start and build their small business. Where do they really go now? People go to LegalZoom to incorporate, they go to Quickbooks to set up their accounting, maybe they read Entrepreneur and Forbes to get some topical business info. But what is that one universal resource where they can go to to get everything they could possibly need to run their business? That’s what we’re trying to build.
DocStoc will keep the BestVendor website live and slowly begin integrating it with ExpertCircle and the rest of its product offerings. The acquisition did not include the BestVendor team, but Nazar doesn’t rule out bringing aboard a few key members. BestVendor is the first acquisition in DocStoc’s six-year history, but it’s unlikely to be its last.

“We’re actively pursuing additional acquisitions of products & teams helping small businesses,” Nazar said in a statement today. “Any time you make your very first acquisition, it’s a big bet because you change the nature of what you’re going to do,” the CEO added in an interview.

The thinking behind the M&A strategy is twofold, Nazar says. “Diversifying revenue across additional properties is the fastest way to grow and provides us some hedge against a potential slowdown in any area/”

DocStoc company already has diversity of revenue type, the CEO says, including a large advertising business, its core content subscription offering, and a small direct ecommerce business. The goal now is to diversify by revenue source. The strategy also allows DocStoc to acquire customers through multiple channels and cross-promote within its portfolio of websites. Its a similar strategy utilized by the largest publishers including Yahoo, AOL and more recently gaming companies like Zynga.

The content creation and online-marketing heavy operation runs out of DocStock’s Santa Monica offices. The company has approximately 45 employees and has raised $4 million across two rounds of financing from backers including Rustic Canyon Partners, Crosscut Ventures, Scott Walchek Brett Brewer, Robin Richards, and Matt Coffin.

Building a large business serving small businesses is no easy task. While there are millions of potential customers in the US alone, all of which need of significant assistance, reaching them and then monetizing them materially can be like herding cash-poor cats. DocStoc is smart then to layer on multiple complementary traffic and revenue streams that can have a compound effect on growth and profitability.

DocStoc has been profitable for nearly three years, and Nazar has said previously that he had no intention of raising more capital to fund the company’s core business. Acquisitions, however, have been on the strategic roadmap for some time. Today we got a first glimpse into what this strategy may look like in practice. But it marks just the beginning of what could be an prolific and transformative period for DocStoc.

[Image via Lera Blog]