Shocase shuns traditional VC, raises $17M from individuals to build a marketers-only professional social network

By Michael Carney , written on January 21, 2015

From The News Desk

There’s no "right" way to fund a startup. That includes the decision of whether to bootstrap or fundraise, whether to raise from angels or venture capitalists, and whether to join an incubator, accelerator, or studio. The answer to each of these questions is contextual and unique to every company and founder.

When Ron Young set out to build Shocase, a social network for the marketing industry, he deliberately avoided the VC community. His goal was to retain as much ownership in his company as possible and, just as important, keep the details of his business from potential competitors. He felt that neither goal fit within the traditional Silicon Valley model he came to know via three prior VC-funded startups.

Eschewing VC didn’t mean Young wouldn’t raise major money to build out his product and team, however. Launching today after more than two years in development, Shocase has already raised some $17 million across two rounds of funding from approximately 100 individual investors. The company’s $9 million Series A round carried a $15 million pre-money valuation, while its $8 million Series B valued the company at $40 million pre-money, according to Young.

Some would argue that such significant pre-launch funding is indicative of the kind of “dumb money” that VCs advise entrepreneurs to avoid. But Young didn’t raise from Ma and Pa Main Street. Rather, his backers consist of many of the same LPs which back the VC funds he so deliberately avoided. This included several large family offices and ultra-high net worth individuals, as well as strategic senior executives from the advertising and marketing industry.

Shocase opens its virtual doors to the public today, but the platform has already attracted 1,100 beta users, including household names within the advertising and marketing world such as Chuck McBride, Lee Clow, and Vince Engel. The site offers members of the industry an experience that is part Facebook, part LinkedIn, part Pinterest, part YouTube, and part Behance. Shocase users are able to create a digital portfolio and resume, share content to a newsfeed, aggregate content into personal collections, post and apply for job opportunities, follow topics and individuals, and otherwise discuss their industry with their peers.

“I think if we’ve learned one thing over the last few decades it’s that all media verticalizes,” Young says. “And when it does, engagement rates go up, growth rates go up, advertising CPMs increase, everything improves. In the beginning of TV there was mass media, a few channels that tried to be everything to everybody – your ABCs, NBCs, CBSs. I think Facebook is that today. Now we have CNN and ESPN and some people watch these channels 24-hours per day. Social networks will undergo the same sort of verticalization.”

Some of the magic of Shocase is that it can automate much of the profile creation process, including assembling a portfolio and resume based on publicly available data and content. Users are then asked to verify and augment this data with additional information, where necessary. The company has ingested some 50,000 advertising and marketing projects to date, according to Young.

Like LinkedIn and many other professional social networks, Shocase will operate on a freemium basis, with premium features available through paid subscriptions (individual and company). The site will also look to generate revenue through paid recruiting and advertising.

Young has some experience in the advertising industry, having previously held senior creative positions at Levi’s, CVS, and Electronic Arts. Prior to that, he built three companies, selling each for more than $100 million. These include Diamond Lane Communications, Yipes Communications, and Innovative Management Services. Young’s co-founder and VP of product, Matt Warburton, was previously the head of communities at Betfair and director of community management at both LinkedIn and Yahoo.

Shocase’s path to this point is certainly non-traditional. The company has raised meaningful capital and grown its SOMA-based team to a stout 47 people before ever launching to the public. This is in many ways the antithesis of the lean, iterative methodology that defines most consumer and social product development today.

But there’s little arguing that there’s an opportunity to build something significant in this space. Vertical social networks have found huge success in other industries, including Spiceworks for IT pros, GitHub for developers, Doximity and Practice Fusion for doctors, ResearchGate for scientists, and Edomo for educators, among others. As former Pando writer Carmel DeAmicis wrote previously:

It may be true that not many people want a social network for dogs. But it turns out people do want a social network for their jobs, and one with a more curated user base than LinkedIn. ...

Websites like GitHub, ResearchGate, and Spiceworks are helping people do their jobs better, by giving them access to fellow professionals and also to products and tools specific to their industries. Furthermore, they’re big money generators because they deliver a targeted audience up to advertisers looking to market their wares. The advertising and marketing industry has never had its own equivalent to these analogs in other industries. The closest thing has been Behance, an online portfolio tool popular among students that was acquired by Adobe in 2012 for $150 million. Santa Monica-based SHIFT offers the industry an Asana-like, cloud-based collaboration and productivity hub, but is far less social and less open than what Shocase is looking to offer.

The big questions here are, have Young and his team nailed the feature-set that will make this product sing, and can they get it in the hands of the right people to see it take off within this small and deeply interconnected industry? And, then, can they turn that adoption into a business?

Shocase doesn’t have a lead investor in the traditional sense, someone who put in the bulk of the money, set the investment terms, and will take ongoing responsibility for shepherding the company through its early years. This is another potential problem with the non-VC syndicate approach, but it’s not all that dissimilar from what can happen when companies raise so-called party rounds from traditional angel and VC startup investors.

Shocase has four investors who contributed more than $1 million, and another handful that put in north of $750,000, according to Young. Given Young’s and Warburton’s experience, and also the supposed pedigree of their backers, this might prove to be a non-issue. But there’s certainly several good reasons why Silicon Valley has settled into a set of best practices for successful startup building.

Young rejects the notion that Shocase is at a disadvantage based on its investor makeup. The company does have a board of directors that meets monthly and it has met every production deadline while under-spending for 27-consecutive months, he notes. This is the first month the company will have real feedback from the market, however.

In many ways, Shocase is as much an experiment on the business methodology front as it is in its product. It’s still early days, and succeed or fail, it will only provide a single data point toward answering the question of how best to build a startup. Young certainly isn’t following anyone else’s playbook. Whatever the outcome, it will be on his terms.