Direct Hit Clears $26M Mezzanine Round

Planning to file for an initial public offering in the next six months, the founders of Direct Hit last month recruited a syndicate of investors that will help position the company for the scrutiny of the public markets.

The mezzanine round was led by TA Associates and Commonwealth Capital. Other first-time investors in the round included Hikari Tsushin, Viventures Partners, NeaCarta and Cornerstone Capital Group. Draper Fisher and Mosaic each returned at pro rata.

“Having TA Associates on board is a great asset for us,” said Direct Hit Chairman and co-founder Gary Cullis. “They bring financial knowledge and connections to the table.”

Incorporated in April 1998 and financed by early-stage investments from Draper Fisher Jurvetson and Mosaic Venture Partners, Direct Hit has developed a tool that allows search engines to prioritize information based on how much time Internet users spend at selected sites related to the search. Lycos, the Microsoft Network and HotBot are among the 12 search engines that use Direct Hit technology. Direct Hit will launch its feature for e-commerce sites later this year.

Proceeds from the investment will be directed toward sales and marketing.

“We want to generate consumer awareness so people recognize that search engines are using us,” Cullis said.

Direct Hit earns a percentage of advertising sold by participating engines and will eventually get a cut of the e-commerce transactions it facilitates.

“Direct Hit does a great job in developing and positioning its product and creating a great relationship with its customers,” said TA principal Jonathan Goldstein.

Cullis said Direct Hit might recruit an additional strategic partner prior to its initial public offering.