Moscow-based social startup Flocktory announced last week that it has landed a $1.5 million Series A funding round from Digital Ventures, a new Russian venture fund, which has obtained a minority stake in the company.
The main product that Flocktory is working on is a SaaS platform, which allows e-commerce companies to target the most socially influential customers and engage them to recommend the service to their friends and followers in social networks. This is done via a flexible rewards system.
“For instance, a store can offer a discount for future purchases, free shipping, a cashback reward, or additional miles or points on the customer’s loyalty card,” said Flocktory’s founder and CEO Simon Proekt in an exchange with East-West Digital News.
Flocktory has thus powered “over 600,000 unique social referral recommendations in just a few months, resulting in clear measurable sales for our clients.” Conversion of traffic to sales can be “up to 8 times more effective than any other marketing channel,” the company claims, although it has not disclosed specific figures.
The platform integrates with both local and global social networks, such as Facebook, Twitter, Vkontakte, and Odnoklassniki. At present Flocktory claims to have more than 200 clients, including major e-commerce players like Svyaznoy, Lamoda, Oktogo, and Groupon.
The founders of Flocktory say they were initially inspired by such social media marketing (SMM) startups as Buddy Media in the US (which was acquired by Salesforce last year) and 55social in Brazil. But their concept evolved as they were thinking about how best to address brands’ concrete SMM issues. As a result, the idea behind Flocktory came as a rather original social referral platform powered by big data and oriented toward decision-making.
Proekt added that the company does not “see any real competition in Russia at this time, but the landscape constantly changes.”
Flocktory attracted a $220,000 angel seed round shortly after its launch in April of last year in addition to some funding from its co-founders’ Simon Proekt and Ilja Eisen own money, Proekt told EWDN.
A free beer for a Google Analytics demonstration
This funding round marks the first investment of Digital Ventures, a venture fund created last year. Founding partner John Quinn, a technology investment banker from New York, told EWDN that Flocktory is “hands down the most cost-effective customer acquisition tool for Russian e-commerce businesses” – which is of considerable value in a competitive market like Russia, where players are now investing sizable amounts to acquire market shares.
“If any e-commerce business founder can demonstrate to me [a more cost-effective tool] via Google Analytics, I will gladly buy them a cold beer,” Quinn added.
“At the intersection of consumer and social behavior, targeting and predictive analytics, Flocktory’s data set is growing exponentially month over month, [like] gold,” he said enthusiastically.
Quinn joined Flocktory’s board of directors as part of the funding deal.
Quinn did not disclose the amount of funds under Digital Ventures’ management, but he indicated that the fund is likely to close “three or four more deals of $1 million to $3 million this year.”
The fund’s sweet spot involves enterprise software and SaaS companies at post-seed and Series A stages. “But we also look at consumer Internet companies and other exportable software,” Quinn said.
While Digital Ventures is focused primarily on Russia and Ukraine, it will also consider international opportunities “with a Russian angle.”
Digital Ventures was co-founded by Victor Frumkin, an experienced entrepreneur and investor in such Russian startups as the online music site Zvooq.ru and the e-book cloud storage service Bookmate.com.
