StockTwits, a burgeoning financial media company launched last year as a Twitter-based messageboard for traders, today will announce that it has raised $3 million in Series B funding. Foundry Group led the round, and was joined by return backer True Ventures.
“The question you have to ask yourself when doing a round of this size is if you want a smaller piece of what could become a bigger pie,” says StockTwits co-founder and CEO Howard Lindzon. “I just feel that this one deserves the money, deserves the chance. This is an idea that has legs.”
The original concept for StockTwits wasn’t terribly unique: Create an online community for professional and amateur traders, where they could share stock tips and recent actions. Kind of a virtual replacement for the trading floors that once were packed with actual people.
What initially made StockTwits different than some of its competition, however, was largely its leveraging of Twitter’s open API. The 140-character message limits makes it easier for users to quickly process large streams of information, since they aren’t distracted by loquatious traders who fancy themselves the next Hemingway. Moreover, the character limits have encouraged the participation of traders who otherwise might be self-conscious about their (lack of) writing ability.
In addition, StockTwits has a strict policy against discussions of penny stocks or other OTC securities — for fear of attempted market manipulation.
The result has been a devoted community of stock geeks — this is not for the casual, once-per-month trader — including some former unknowns who are now considered gurus. StockTwits recently began offering its users a hosted micro-blogging platform, including an option whereby they could charge for subscriptions (StockTwits takes a cut, of course).
“Brad Feld [of Foundry Group] wasn’t so much interested in the stock-picking stuff as he was in the microblogging platform,” Lindzon says. (Note: Seth Levine of Foundry will serve on the StockTwits board of directors.)
The company’s primary revenue model remains advertising, but Lindzen hints that it soon plans to expand its data offerings well beyond just its current Data Junkies agreement with Nasdaq. Kind of an iTunes for financial information.
As Lindzon says: “I obviously thought about dilution because this was more money than we’d taken before, but it’s worth it because of the big things we want to do.”