Pando

Got startup data? Mattermark raises a $6.5M Series A to keep VCs in the know

By Michael Carney , written on December 16, 2014

From The News Desk

Danielle Morrill has become a mainstay in the Twitter feeds and email inboxes of Silicon Valley’s most powerful individuals. As the CEO of deal intelligence startup Mattermark, Morrill has parlayed her incessant curiosity and love of data – “I do spreadsheets in my spare time for fun,” she tells me – into a thriving subscription software business that allows investors, salespeople, and other startup industry observers to identify, track, and quantify the progress of millions of individual technology companies.

Today, Morrill’s curiosity and her 27-person team’s two-plus years of hard work were collectively rewarded with a $6.5 million Series A round of funding led by Foundry Group. The round brings Mattermark’s total funding to $11.5 million. The path to this point has been anything but typical, however.

Mattermark actually set out to raise a $10 million Series A in January, but was met with the cold hard reality that her company wasn’t there yet. Undeterred, Morrill raised a $2 million second seed* – it eventually grew to $3.5 million – following the $1.54 million raised under her first business, Referly. With the additional runway, Mattermark capitalized on its early momentum and exceeded the Series A benchmarks set out in its early 2014 fundraising talks.

“Initially, I wondered if we should call this a Series B,” she tells me. “So I looked at our data and I realized we’ve raised more money than the typical Series A stage startup and less than a typical Series B. This wasn’t the path we originally set out, but we pivoted and it took us some time to hit the milestones needed for a Series A.” She added by email, “I'm certainly glad it is over, and excited to move on to the next adventure in creating Mattermark.”

When it came time to decide who to approach for this latest funding round, Morrill again turned to the data. She wanted to know which SaaS investors’ portfolios had the best survival track record, whose companies raised the most follow-on funding, whose companies were the most likely to reach profitability, and which firm had the highest CEO survivorship rate. This narrowed the list down to just six firms (Morrill declined to name them).

Foundry, which has been a Mattermark customer since January, scored highly on each of the above analyses and also on the qualitative test – what investors would align with the company culture and values?

“We’re nerdy, analytical, and a bit boring,” Morrill says. “Foundry group is a great fit for us. They’re also one of the best B2B investors, they have a high survivorship rate, and lots of profitable companies. Plus, I sort of like that they’re not in the Valley.”

The next phase for Mattermark will be about deepening the product, Morrill says. This will mean adding more analytics tools as well as publishing more, and more thoughtful research reports. When it comes down to it, however, Morrill knows that Mattermark can never address all the analysis needs of its customers internally. Instead, she’s focused on giving users the best raw data available and empowering them to do interesting things as a result. This means ingesting as much “noise” as possible and distilling it down into clear, actionable “signal.” It just takes the domain expertise of Mattermark’s clients to make use of that signal. By focusing on data, Morrill hopes to avoid doing custom service work and keep Mattermark a self-serve platform.

“Mattermark has identified a valuable secret hidden in plain sight –­­ the average person's ability to extract value from business content on the Internet is limited by an outdated model for search,” Foundry Group Managing Director Brad Feld said in a statement today. “Mattermark is bringing science to the art of dealmaking by organizing content into structured data, and we are thrilled to join them in indexing the growth signals of more than 250 million companies worldwide.”

As Mattermark continues to collect data on startup transactions, growth, and public sentiment, the company should be able to deliver insights that extend beyond individual businesses and into broader categories and industry trends. One of Morill’s biggest regrets is that Mattermark was not around at the beginning of the ride-sharing category, so as to track the rise of that now white-hot industry. She’s hoping to be able to look back one day to do a similar analysis around drones and Internet of Things, to see how emerging categories grow, what investors have the midas touch when it comes to identifying these trends early, and how the rest of the industry follows on. This is the kind of data that will prove invaluable not only to direct investors like VCs, hedge funds, and mutual funds, but also to the institutional LPs that back them.

Look again to the data – always, the data – Morrill posits that with rates of startup formation up fivefold in some markets, there’s reason to expect a similar increase in the number of “unicorn” companies.

“Unless the funnel is fundamentally broken and company quality has somehow dropped significantly,” she says. “Which I can’t see happening because people are more educated than ever about building tech companies. I guess I’m an optimist about that because I don’t want to live in a world where things are constantly failing.”

In this world, where there are more companies to evaluate, but more winners to be had, identifying promising deals early is all the more important. To quote NEA partner John Backus, “All unicorn investments do not create unicorn outcomes for LPs. It isn’t even close. ... Look beyond the unicorn and find the dragon. Unicorns are for show. Dragons are for dough. A dragon is a company that returns an entire fund – a ‘fund maker.’”

Morrill is betting that Mattermark can help VC better identify these dragons, including, in a perfect world, itself. The good news for Morrill and her still nascent business is that the Mattermark product is resonating with customers. Just two or three years ago, it was highly uncommon for investors to rely on data to source new investments. Today, it’s all the rage.

“Where will we be by our next fundraise?” Morrill says, repeating my question. “It’s so hard to imagine. I’d like to be at an eight-figure revenue run rate. And I imagine we’ll be in a new office by then.”

The current 27-person team will grow as well over the next year, she adds, first and foremost on the data and product side of the house. Being used by the majority of active startup investment firms wouldn’t be a bad goal either.

With the rate of startup formation on the rise and companies emerging in markets around the globe, it’s more important than ever to have effective tools to scan the competitive landscape when making investment decisions. With Mattermark building what might be described as a “Bloomberg terminal for the startup world,” it’s not unthinkable that its platform could become as ubiquitous as that Wall Street mainstay.

[*Disclosure: Andreessen Horowitz invested in Mattermark's second seed. Andreessen Horowitz partners Marc Andreessen, Jeff Jordan, and Chris Dixon are individual investors in Pando.]