Analysis of Mattermark - Quantifying Private Company Growth for Startup Investors

Published 5 May 2014

Mattermark provides a tool for finding, tracking, and researching technology companies. The tool analyzes businesses with data including social media traction, website traffic, and press mentions. Venture capital funds use Mattermark to prospect investments and conduct analysis. Telegraph Research conducted analysis of Mattermark using public sources.

Update - 29 June 2014

Today Mattermark announced that it closed a second Seed round of $2 million. The below analysis predicted Mattermark would raise $1.5 million near June 2014 with a valuation of approximately $8 million.

Telegraph Research is available for commentary on the recent Seed round - please email Contact@TelegraphResearch.com.

Summary

Section Description
Company Overview Mattermark started as Referly in 2012 but pivoted in June 2013 to provide a SaaS business intelligence tool for private equity firms.
Market Overview The SaaS market is over $15 billion annually and growing.
Investment Timeline Mattermark received $410k in seed funding in September 2013. Previously, Referly had received $1 million in seed funding in October 2012.
Management Team Mattermark was founded by CEO Danielle Morrill, CTO Kevin Morrill, and COO Andy Sparks.
Growth Outlook We built a model that estimates an upcoming round of $1.5 million and a $8 million valuation near June 2014.
Competitive Landscape Mattermark’s closest competitor is DataFox.
Comparable Exits Klout, a B2C version of Mattermark, sold for $200 million in March 2014.
Technology Mattermark is a web application built in PHP and Javascript.
Opinions Mattermark’s true value will be as a business intelligence tool for salespeople.

Company Overview

History

Mattermark was founded in 2012 as Referly by Danielle Morrill and Kevin Morrill. Referly was an online social network for tracking referrals on consumer goods, and it was a member of the Y Combinator Summer 2012 class. According to Referly’s Crunchbase profile, they raised $1 million in seed funding in October 2012. In February 2013, Referly acquired LaunchGram, founded by Andy Sparks, for an undisclosed sum in an apparent merger, then shut down the Referly product one month later in March 2013. The same legal entity then launched a new product, Mattermark, in June 2013. As documented in SEC filings( 1, 2, Mattermark tried to raise a $1 million seed round, but only succeeded in raising $410K. Mattermark’s investors include Andreessen Horowitz, Ignition Partners, New Enterprise Associates, Y Combinator, and Twilio CEO Jeff Lawson.

How it Works

Mattermark provides a platform that allows a customer to quantitatively assess the performance of thousands of private technology companies. The tool visualizes a variety of current and historical data including website traffic, Twitter mentions, Facebook likes, number of employees, and recent press coverage. Other types of data include recent funding, related news articles, competitors, and members of the management team. Mattermark analyzes the data it collects to generate a proprietary “Mattermark Score” that aims to track the company health and growth potential. Mattermark also offers features that enable a customer to compare similar companies against each other. One seat of Mattermark software costs $499 per month, but a new restricted seat is available for $99 per month. Team packages start at $1,999 per month.

Market Overview

Mattermark is a business intelligence tool in the SaaS industry.

Size

The Software as a Service (SaaS) industry is valued at over $15 billion per year. The main factor driving growth is that software is being used to address inefficiencies in other markets. The market for business intelligence SaaS products is rapidly growing.

Strengths

Mattermark provides insight into companies using quantifiable metrics. This data enables customers to make informed decisions. The filtering features of Mattermark also allow customers to identify companies that meet certain parameters and would be otherwise difficult to identify. The company provides tools that already exist to analyze publicly-traded companies and extends that coverage to private companies.

Weaknesses

The metrics that Mattermark provides do not directly measure any financial metrics about companies. The proprietary “Mattermark Score” has unknown reliability and utility. The systems mainly tracks technology companies and its metrics favor consumer facing companies.

Opportunities

Mattermark has the opportunity to provide intelligence data to sales professionals. This market is large, proven, and lucrative. Mattermark already provides a Salesforce integration, but focusing their product on the needs of salespeople could prove to be more valuable.

Threats

Mattermark has no proprietary data and its scoring algorithm is currently of little value, thus making it is possible for many competitors to enter the space. Three main threats exist. The first is if an existing financial company that covers public markets expands into covering private markets. This company would have a much stronger reputation and could acquire customers more easily. The second threat that exists is that a competitor could obtain better data than Mattermark. Third, is the threat of a competitor developing a better algorithm that correctly predicts private equity financial trends.

Key Factors

Mattermark participates in the market of quantifying private technology companies. The benefit here is not the direct financial analysis of particular companies, but the ability to filter through companies, find competitors, and use alternative data metrics to gain insight once similarities have been identified.

Mattermark is targeted towards private equity investors as a search and analysis tool, but it is also being marketed as a business intelligence tool for salespeople. This sales intelligence strategy may be the key to Mattermark’s continued growth. Specific financial metrics that would be necessary for private equity groups provide less value to sales professionals. The metrics they desire to compare are easier to obtain. Being able to create effective filters for salespeople to identify companies in specific markets to contact is a feature that companies will pay for because it creates informed pitches.

Investors require precise information, operate with minimal budgets, and are unforgiving with mistakes. Sales organizations treat company analysis as a funnel, and thus occasional mistakes or inaccuracies are expected. The best market fit for Mattermark is sales intelligence.

Investment Timeline

  • January 2012: LaunchGram founded by Andy Sparks
  • April 2012: Referly founded by Kevin Morrill and Danielle Morrill
  • Summer 2012: Referly participates in Y Combinator Summer 2012 class
  • October 2012: Referly raises $1 million seed funding from New Enterprise Associates, Y Combinator, Ignition Partners, and others
  • October 2012: LaunchGram raises $50k seed from 500 Startups
  • February 2013: Referly acquires LaunchGram in apparent merger
  • March 2013: Referly closes product
  • Spring 2013: Referly pivots to become Mattermark with Kevin, Danielle, and Andy all referred to as active co-founders. Mattermark officially launched in June 2013
  • Summer 2013: Mattermark raises a total of $410k in debt financing from Andreessen Horowitz, Twilio CEO Jeff Lawson, and others (1, 2). Both filings show intentions of raising $1 million, thus indicating that the company failed to raise their goal.

Management Team

Mattermark's founders are Danielle Morrill, Kevin Morrill, and Andy Sparks.

Danielle Morrill, CEO and Co-Founder

[ Website / Facebook / Twitter / LinkedIn ]

Danielle Morrill served as a Financial Analyst for Reliant Consulting & Research in the Seattle area from October 2001 to March 2006. She concurrently served as a Business Process Analyst for Expeditors International from April 2005 until August 2007. In 2007, Danielle joined Pelago and served as a Community Manager for 18 months. Pelago was later acquired by Groupon in 2011. In October 2008, Danielle launched Seattle 2.0, a live streaming media platform that served the Seattle area. Danielle later joined Twilio in March 2009 as the Director of Marketing and first employee. After over three years at Twilio, Danielle left to co-found Referly with her husband Kevin Morrill and lead the company. After 14 months at Referly, Danielle lead the team’s transition to Mattermark and remains the CEO. Our research found no evidence of post-secondary education.

Kevin Morrill, CTO and Co-Founder

[ Facebook / Twitter / LinkedIn ]

Kevin began his career with Microsoft as an intern for three summers before joining full time in 1999. Over the following 10 years, Kevin served as a Program Manager for multiple teams at Microsoft, ultimately becoming a Senior Program Manager in 2007. Kevin left Microsoft to co-found Capito Life Technologies in September 2010, a company which provided a messaging service aimed at the healthcare industry. After 16 months at Capito , Kevin joined HelloSign as a software engineer in December 2011. Kevin left HelloSign in May 2012 to co-found Referly as CTO and participate in Y Combinator’s Summer 2012 Class. Kevin stayed with Referly through the transition into Mattermark and still holds the position of Chief Technology Officer. Our research found no evidence of Kevin completing post-secondary education.

Andy Sparks, COO and Co-Founder

[ Website / Facebook / Twitter / LinkedIn ]

Andy graduated from Ohio State University in 2011 with a BA in Globally Informed Entrepreneurship. In May 2010, he joined eProximiti as the third employee and ultimately he became the Director of Product Development before leaving in March 2012. In November 2011 Andy co-founded LaunchGram, a company that tracked news updates for pre-release products. The company was acquired by Referly in February 2013 in an apparent merger for an undisclosed sum. Andy worked with the Referly team to transition and co-found Mattermark in March 2013, where he has served as the Chief Operating Officer.

Growth Outlook

Financial Model

Historical information about the performance of Mattermark is limited, and the short amount of time that the company has been selling its product suggests that internal metrics are likely unreliable for future projections. We constructed a model using basic assumptions about the business based on data we collected and general SaaS performance. The primary purpose of this model is determining when Mattermark will raise a Series A round. The model considers the history since Mattermark’s launch date, June 2013, through the end of 2014. The model then tries to estimate monthly costs and possible revenue based off on assumptions about the performance of their sales staff.

LinkedIn profiles yielded data about the employees of Mattermark, including their respective start dates. This model assumes that each employee will cost the company $150,000 a year, which includes salary, office space, equipment, and benefits.

The size of the sales staff over time was also gathered using LinkedIn. Using the known number of available salespeople per month, the model then assumes that after 2 months of onboarding, each salesperson is able to an average of 7 new deals per month. We estimate that the average deal size is on average $1,500 as a balance between individual and team plans. For the monthly net margin, the model adds new deals with existing monthly recurring revenue and subtracts an estimated monthly churn of 9%.

We assigned a two-month onboarding time before a salesperson was at regular capacity because it would take approximately one month to generate leads plus one month of a free trial period. The churn rate of 9% monthly is a high estimate, but we believe that the company will begin selling annual subscriptions to curb this metric.

Estimated EBITDA

2014 Q1 2014 Q2 2014 Q3 2014 Q4
-$5,441.18 $75,353.34 $390,944.37 $700,657.36

View the model in Google Drive

To experiment with the values, add it to your own Google Drive:

View file in Google Drive -> File -> Make a copy... 

Future Funding

We predict that Mattermark will raise a $1.5 million dollar Series A round at an $8 million valuation near June 2014. By the end of the year we expect that Mattermark will focus on a lower-priced plan that integrates with Salesforce for use as a sales intelligence platform. One of the financial major barriers to growth in the private equity market will be the cost of acquiring proprietary data.

Competitive Landscape

DataFox

Founded four months prior to the launch of Mattermark, DataFox offers a competing intelligence platform with broader scope. The company has raised a $1.5 million round closed in October 2013 and an additional round of an undisclosed sum in February 2014. The company was founded by a group of Stanford University alumni: Bastiaan Janmaat, Mike Dorsey, Alden Timme, and Ben Trombley. Alden and Ben have strong technical backgrounds in mathematical computing, and Bastiaan and Mike have backgrounds in both business and operations. The company currently has 9 listed employees on LinkedIn.

Testing DataFox and comparing it to Mattermark showed Mattermark to be a more mature product. Although imprecise, the Mattermark Score seems more accurate the DataFox equivalent. However, DataFox offers insights on about twice as many companies. Mattermark provides more time-series data and a Salesforce integration, but costs more. DataFox offers two packages at $49 per month for personal plans, and $399 per month for professional plans. No price was listed for the enterprise package.

Inkwire

Inkwire appears to currently be building a product similar to Mattermark and DataFox, but little further information can be available. The company attracted some news articles in 2011 for an iOS application that curated news content, but it is no longer listed in the App Store. LinkedIn shows that Inkwire currently has 7 employees. The company’s Crunchbase refers to the product as a “fast, comprehensive ‘instant analysis’ secret used by top VCs to find investment winners, losers, and hidden gems.” Inkwire “[. . .] converts unstructured big data from public and hidden Web into actionable insight for banks, investment firms, and private investors.”

Indicate

Indicate by Disruption Corporation is another unlaunched company builing an analysis tool for venture capitalists. No news articles could be found, however it is reported that they received $750k in seed funding in March 2013 via Crunchbase.

Crunchbase by TechCrunch

Crunchbase is a public database operated by TechCrunch that is one of the most frequently used tools for gathering information on technology companies. Companies profiles list key facts including funding rounds, important milestones, leadership team, and recent news articles. The website is free to use and offers an API.

Comparable Exits

Klout

Klout make a social analysis and scoring tool for consumers that quantifies individual influence in social media networks using a score from 1 to 100. In March 2014, Klout was acquired for $200 million by Lithium Technologies. Mattermark’s current product parallels the data and analysis of Klout, but it targets the conclusions toward businesses.

TechCrunch

In September 2010, AOL acquired the technology news site TechCrunch for an undisclosed amount likely between $25 and $40 million. This deal included TechCrunch’s aforementioned CrunchBase database.

Technology

The Mattermark interface appears to use PHP in combination with BackboneJS. It is likely that Mattermark aggregates data from feeds such as news RSS, Alexa, and company websites, then stores it in a SQL database. The type of data they display does not appear consistent with the types of analysis that would require a distributed database optimized for data analysis.

Opinions

Andrew

After testing the platform, I have come to the conclusion that Mattermark is building a product that could become useful after some adjustments. Public companies are required to publish their financial performance, but private companies are not obligated to do so, thus making it difficult to gauge financial performance. Currently there are few tools to quantify private equity, and Mattermark is one of the early entrants in this developing market.

Of the competitors I found, I thought that DataFox was the most promising, but it lacks the utility of Mattermark for venture capitalists. Mattermark offers better time series data crucial for observing trends and growth. Both Mattermark and DataFox attempt to assign an arbitrary score that indicates value and potential growth, but I found neither score to be insightful. Mattermark’s score is based on their time series data, which is mostly collected from social media sources. Thus, the reactive nature of their data sources is reflected as a reactive score. Mattermark has had a very small engineering team, but now that they are growing I expect more meaningful analyis of their data. Currently their system provides better information than insights.

To garner further investment Mattermark must expand its market beyond venture capitalists. Pitching Mattermark as a business intelligence tool would provide access to a larger and more attainable market. With their current Salesforce integration, a salesperson can use Mattermark to assess the current trends of a company and better understand their inclination towards any purchases. The search and filtering tools allow a salesperson to discover more potential customers and develop new leads. All of these insights are available without having to figure out how to make accurate predictions with such little data.

Mattermark has created a powerful tool, but their product needs some redirection. I suggest that Mattermark pivots to a business intelligence tool for salespeople. Providing true, predictive value for venture capital investments is going to be difficult and require a talented quantitative team, whereas a salesperson requires a less advanced product not very different from the current one. If they choose this path, Mattermark should extend its insights to all publicly traded companies.

Philip

Based on my experiences in funds trading public and private equities, the private equity market lacks access to the granular information of public stocks. It takes a team of analysts to replicate the equivalent of a Yahoo Finance page for a private company. Mattermark seeks to address data disparity in private markets with an intriguing approach, but the analysis they provide is better suited for sales intelligence than for financial forecasting.

Unfortunately, Mattermark provides no metrics that actually matter for companies. Beyond the results of a simple Crunchbase search, they only provide little more than insight on social engagement trends. Mattermark fails to directly report or gauge any financial metrics. While tracking and comparing social trends provides limited insight, this approach alone does not provide meaningful analysis of core business performance.

Another area that concerns me is the conclusions presented by Mattermark in the form of their eponymous score. With company scores ranging seemingly unbounded from -2000 to +3000, the correlation appears mainly to be of social success instead than business traction. In businesses that recently made announcements about acquisitions, investments, or exits the scores seemed inflated due to increased traffic and buzz - thus making the score reactive rather than predictive. Instagram has three times the “Mattermark Score” of WhatsApp, even though its acquisition was priced $18 billion dollars below that of WhatsApp. This is not the type of insight investors desire.

The utility I foresee for the Mattermark platform is as a sales intelligence tool. Their current Salesforce integration allows sales development efforts to be concentrated on specific company profiles and characteristics. During the sales process, social trends identified by Mattermark may provide insight about growth, trends, and users. The “Mattermark Score” would have utility as a reactive tool for identifying companies that just raised money and are ready to make new purchases. One-off errors or model inconsistencies would be tolerated because sales focuses on building a funnel that targets many companies and only expects a few to close.

Overall, Mattermark has identified a ripe market but has failed to deliver a product with financial significance. Instead, I predict that Mattermark will become a valuable tool sales organizations to identify and investigate companies.