No “pivot” required for Sprout Social to take root, says Lightbank’s Lefkofsky
March 14, 2011 2:18PM
Sprout Social is the fifth Chicago startup backed by Eric Lefkofsky and Brad Keywell to raise a subsequent venture capital round (in this case $10 million) from elite firm New Enterprise Associates. The batting average - or even field goal percentage - of the previous four is off the charts.
While Groupon alone changed the Chicago startup landscape, the other three - InnerWorkings, Echo Global Logistics and MediaBank - are among the most successful companies to emerge locally in the last decade. A year ago, Lefkofsky and Keywell established a venture capital fund to invest (mostly their own money) in more early-stage deals. Since then, Lightbank has invested in travel social network Where I’ve Been, educational testing application WaterMelon Express, and nightlife directory Poggled.
Lefkofsky says that Sprout, which develops technology to help small businesses recruit customers from social networks like Facebook, Twitter and LinkedIn, required less guidance in its early days than another one of his holdings labeled by Forbes as the “fast growing company ever.”
“(Sprout) developed a tool to help make the lives of small businesses better,” said the 41-year-old Lefkofsky. “With businesses that are already on the right path, raising a bigger round comes down to enhancing the product and getting the word out there through sales and marketing.”
Sprout Social was founded by former digital sales executive Justyn Howard in 2009. Howard bootstrapped the company, now based at 600 W. Chicago, until raising money from Lightbank last year. Scoring money from NEA, also an investor in Chicago-based distributed storage company Cleversafe, is no easy feat. Yet Sprout managed to raise twice as much out of the gate from NEA as did Groupon (then called ThePoint.com) three years ago.
“Sometimes businesses can’t find that early spark and have to pivot,” said Lefkofsky, noting ThePoint’s early struggles forming a business model around online petitions. “We pivoted a lot with Groupon. I never mind a good pivot. It can be great.”
Lightbank adds partner, expands geographic focus
Former Playboy Enterprises managing director Paul Lee recently became the first full-time partner to join Lefkofsky and Keywell at Lightbank. Lee, who’s venture capital experience also includes serving as a senior vice president for NBC Universal’s Peacock Equity Fund, will look to Chicago and beyond for compelling early-stage investment opportunities.
Lightbank already has portfolio companies outside of Chicago, including New York-based Betterfly - a socially-driven online marketing platform for service professionals, and Cleveland-based financial software developer 60mo. Lefkofsky said Lightbank will soon announce or close deals in Silicon Valley and other markets.
“Over time, we’ll add additional folks as it is hard to manage this many companies at one time and find new ones,” he said. “We still intend to do a lot in Chicago because we are here and it’s easy.”