Monday, January 29, 2007

Ziggs zags into funds, a more connected site

By Christopher Calnan

Boston-based Ziggs Inc. is expanding its website from a reference tool for professionals to what it says will be a more practical networking site where users can connect with one another.

Ziggs is moving into the already-crowded online business-networking space this week with version No. 2 of its site, armed with an additional $2.5 million in capital it has received from angel investors.

The updated site will enable users to post their own content, such as resumes or links to blogs with their profiles, and send gift certificates and instant chats to other users.

It's a dramatic departure from the original Ziggs.com, which started in 2004 as a site designed to provide professionals with a way to market and manage their profiles.

"We really want to move ourselves to be a utility site," CEO and founder Tim DeMello said.

That move is made easier by the type of investors backing Ziggs, he said.

Ziggs is backed by 50 to 60 angel investors who contributed a total $7.5 million in capital. Unlike venture investors, the company's angel investors don't have a board seat and don't have voting power over company decisions. DeMello is the only board member and has the autonomy to shape the company in his own vision, he said.

DeMello added that he fields all questions from investors, but mostly communicates through a quarterly newsletter detailing company changes without any financial figures.

DeMello said he warned investors at the outset that their money will be committed for three to five years, and that has given him the breathing room to make changes needed to position the company for growth.

"We didn't raise money against a plan -- we raised money against a concept," he said. "It gives me the ability to maneuver the business through the formative stage."

One investor, Howard Kra, a partner at Baltimore-based private equity firm Atlantic Capital Group Inc., has invested an undisclosed amount in Ziggs three times, including most recently in October.

He said the hands-off approach by Ziggs investors is acceptable because of DeMello's good track record. Prior to Ziggs, DeMello founded and operated Westwood-based online grocer Streamline.com in 1993 to an intial public offering in 1999 before closing it in 2000. Before that, he founded Dedham-based Replica Corp., an interactive educational and entertainment company.

"When you do angel investing, so much of it is on the jockey, the management and the team," Kra said.

Major players in the online business-networking space include three California-based companies: LinkedIn Corp., operator of LinkedIn.com; Ryze Ltd. and its site, Ryze.com; and Spoke Software Inc., which runs Spoke.com.

Matthew Lees, vice president and consultant for Boston-based consulting firm Patricia Seybold Group, said the trick is to come strong out of the gate and leverage the number of early adopters to attract large number of users through the web's viral effect, Lees said.

"You've got a small window of opportunity to prove your value," he said.