FirstRain, a search-based research firm, has received $7.3 million of an anticipated $8.8 million round of equity, according to a recent filing with the SEC. The firm has raised over $40 million in capital since 2006 and is backed by Ampersand Ventures, Oak Investment Partners, and Emancipation Capital.
FirstRain’s last financing was in early 2008, when it raised $13.6 million from Ampersand, Oak and Diamondhead Ventures. According to its CEO, the total capital raised at that time was just over $33 million since the first quarter of 2006. The company said that the proceeds were helping to fund an expanded sales force. Unfortunately, the financial crisis intervened, and FirstRain has shifted its emphasis from direct sales to third-party distribution.
As we have noted, FirstRain has developed distribution agreements with Code: Red, Wall Street on Demand, CapIQ, FactSet, Hanley & Associates, and the Financial Times’ Newssift project. The firm also launched a new research platform in September of last year. The new platform features reports on 15,000 companies which are categorized by specific business lines, key competitors, industry and company-specific topics.
FirstRain first obtained $2.3 million in seed investment and in 2001 had a Series A financing of $11 million from four VC firms, including Allegra Partners and Diamondhead Ventures. It completed a Series B financing in 2003 raising $8 million, with Ampersand Ventures leading the round.
In 2005, current CEO Penny Herscher joined the firm, along with a $10 million capital infusion, led again by Ampersand Ventures. So altogether, FirstRain has raised over $70 million in capital since its inception.
Doubtless its VC investors now understand how tough the investment research market is. FirstRain has differentiated itself in text-oriented search-based research, but faces broad competition, not only from the two dozen search-based research firms, but the thousands of research sources vying for investors’ attention. Then there are the challenges of sales and distribution, pricing and payment.
Nevertheless, we expect that FirstRain is close to profitability, if not already there. It has cut back staff over the last few years, and has expanded its user base, saying it has 10,000 users at 100 firms. It has overhauled its product line and has built strong distribution partnerships. Which is probably a good thing since we suspect going back to the well again would be difficult at best.
Disclosure: Integrity Research Associates’ CEO Sandy Bragg is an advisor to FirstRain.