As reported yesterday, Seeking Alpha, the largest aggregator of financial content from blogs, asset managers and investment newsletters, raised another round of funding yesterday. The raise of $7 million represents a B round financing from existing investors, Accel and Benchmark, along with new investor DAG.
There’s been speculation about what Seeking Alpha’s going to do with the new-found money. Let me first disclose that while I’m a small tiny shareholder in SA, I know no more than the average joe as to their actual plans. The following is pure speculation but I thought it’s worthwhile to go through the thought process.
Possible uses for Seeking Alpha’s cash:
- Paying contributors: Felix Salmon alluded to it in and top contributors have been clamoring for payment for years. Seeking Alpha contributors, many of whom have asset management businesses or premium financial content for sale, generally contribute their content to SA for free in return for traffic, eyeballs, and attention. Personally, I don’t think SA ever pays contributors for their writing. There is just too much free stuff out there that’s of decent quality to pony up money for some of the better work. SA has always been about aggregating the financial long tail and ascribing a price tag to acquire this content would skew things in such a way that I bank on Jackson avoiding this route vigorously. Jackson knows that his firm’s success rides on the ability to continuously drive value back to their contributors. As an investor in Covestor, an expert platform that in my mind provides the revenue model for investment blogging, I think Jackson takes a bigger swing at monetization vs. paying contributors a few bucks of AdSense money each month.
- Technology investment: According to Jackson’s comments, it appears that the company line is that this money is needed to fund further technology development. Programmers aren’t cheap and Seeking Alpha’s team of skilled geeks are continuously rolling out iterative changes on the SA platform — some big (like Instablogs and Stock Talks) and others small (like homepage tweaks). I think some of the money finds a home under the aegis of SA’s tech team. According to Fara Hain, Seeking Alpha’s recent marketing hire, the new money will be used to “expand features of the existing products like Instablogs and StockTalks as well as introduce new features and functionality to the site. Funding is primarily for technology needs – to create and support these new features.”
- Acquisitions: I know a raise of $7 million may not be enough to do any strategic M&A but I’ve been thinking about this. Jackson has big plans for his firm. Traffic has seemingly plateaued, so that means for SA to seriously compete, they’ve got to get growth reignited. That could mean a strategic investment in something growthy. Deals with firms like Nasdaq.com are interesting but hooking up with a Wikinvest seems to be a smarter, faster way to go. Would be really interesting to see a StockTwits/SA tie-up (though, extremely unlikely).
- Buying traffic: If you can no longer build it, buy it. When I was at SA, Jackson used to compare spending on AdWords to a cocaine habit and I tend to agree, but at some point, perhaps SA begins to get serious about marketing, or at least, search marketing, to find new communities of users. Most traffic, to date, has been generated organically and through partnerships with competitors, like Yahoo Finance.
- Strengthening management: Jackson and Company have built everything from scratch and managed the company from startup until now. It’s possible that to get to the next level, Jackson realizes he may need to cede some power and authority to bring in a A-player with history in building and selling large Internet properties. Some of the funds may go towards securing some of these roles.
More reading on the Seeking Alpha B-round of financing:
- TechCrunch
- The Deal
- BizJournals
- Message from David Jackson, Seeking Alpha’s Founder
