Web Marketing Firm ReachLocal Seizes $55M

By Ty McMahan

October 10, 2007 — ReachLocal Inc. has raised a sizable $55.2 million Series D funding to increase its national sales team for localized online advertising.

New investor Rho Ventures led the round with participation from new investor Galleon Crossover Fund and existing shareholder VantagePoint Venture Partners.

ReachLocal delivers to small businesses local search engine marketing that links their online advertising spend to their offline sales activities. The company manages the process local businesses need to create, maintain, track and analyze their Internet search advertising campaigns.

"We've really been working on building a local sales force," Chief Executive Zorik Gordon said. "That's a big, big effort for us. We started to really see the most effective way to get these local businesses - doctors, dentists, lawyers - was to sit down with them face-to-face."

Gordon said the company currently has about 300 employees and sales offices in 11 U.S. cities. He said the company is expanding to a new market each month, but wants to increase that expansion to more quickly reach a global market.

Gordon said the company will also consider using the new capital for acquisitions.

The Woodland Hills, Calif.-based company previously raised $12.7 million from VantagePoint and European Founders Fund. The company has raised $67.9 million since its founding in 2004.

"We have obviously built the business and got to a certain scale where we wanted to do a round that was significant so we could aggressively continue expansion," Gordon said.

Gordon declined to provide specific figures on the company's revenues, but said they are "significant." He also declined to provide the company's post-money valuation. News reports put it at $305 million, but that figure could not be verified.

"The reality for us is we have been fortunate to hit a large market opportunity," Gordon said. "We're just focused on building the business. Exits will take care of themselves."