Innocentive Raises $7M—One More Time—to Keep Building Problem-Solving Network
In a development that may cause déjà vu for anyone who read my May 2008 story about Waltham, MA-based Innocentive raising approximately $7 million as part of a Series B funding round, Innocentive has raised approximately $7 million as part of a Series B funding round. Again.
This time around, it’s $7.3 million, in a Series “B-2” round to be exact—from the same source as last year’s $6.5 million “B-1” round: Spencer Trask Ventures, a New York investment network funded by high-net-worth individuals.
Innocentive was launched by the drugmaker Eli Lilly in 2001 and spun out as an independent venture in 2006. It is essentially an online idea marketplace where companies and other organizations, called seekers, post problems they need solved. Experts, called solvers, submit proposed solutions and compete for monetary prizes.
Spencer Trask has now put nearly $23 million into the venture, including a $9 million Series A round in 2006. Many of the same individuals who participated in the earlier rounds have come back for this week’s round, but Spencer Trask has also brought in “lots of new investors,” says Dwayne Spradlin, Innocentive’s CEO.
“We have definitely proven that this more open style of innovation is really incredibly powerful, and we continue to see examples of that every day,” Spradlin says. In the last year, the company has successfully rolled out several new features, including a software-as-a-service version of its platform, called Innocentive@Work, that companies can use “to tap pools of creativity and inventiveness within their own companies…or just push the proverbial button and go to outside innovators,” he says. The number of solvers participating in Innocentive’s global network has increased from 140,000 to 180,000, and the percentage of challenges that are marked as “solved” by seekers has increased from the mid-30s to almost 50 percent, he adds.
Moreover, Innocentive has set sales and revenue records in recent quarters, even in the midst of recession. “For companies living with high fixed-cost R&D organizations, where they may have 100 or 1,000 people working on problems but they are really not diverse, crowdsourcing innovation seems to solve things much more effectively than anyone thought,” Spradlin says.
Given that Innocentive is on track to be profitable within a couple of quarters, a new round of funding wasn’t really needed, Spradlin says. “The irony of fundraising is that you tend to be able to raise money when you don’t need it,” he says. “But our board really came to the conclusion that we did so well late last year and in the first half of this year that it would be silly not to double down and really spend for growth.”
He says the new money will be used mainly to expand sales and marketing operations—including opening an Innocentive office in Europe—and to accelerate work on new site features such as the ability to support teams of solvers from different geographies.
The cash may also give Innocentive the opportunity to go on a bit of a buying spree. “One of the things we’re potentially interested in,” says Spradlin, “is identifying other companies with capabilities that complement ours, where there may be opportunities to roll some of those up into what is really the dominant brand in this evolving space.”