Dan Primack

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

Beyond LinkedIn: 7 Degrees' visual, open social graph as business tool

October 13, 2010: 7:00 AM ET

A former Yahoo exec gets a funding injection for his plans to take on LinkedIn with a social graph that's more Google than (old school) AOL.

7 Degrees, a developer of business applications based on the social graph, today announced that it has raised $6.8 million in new VC funding. Rho Ventures led the round, and was joined by return backers vSpring Capital and Parkview Ventures.

The company's flagship product is PeopleMaps, which leverages existing relationships (Facebook friends, email contacts, work history, etc.) in order to make new introductions. For example, imagine I'm trying to sell widgets to Cisco (CSCO). I can use PeopleMaps – either directly or via SalesForce.com – to find someone I know who could make a warm introduction to Cisco's general manager of widgetry.

Yes, this does sound a bit like LinkedIn. Or even Jigsaw, which SalesForce (CRM) acquired earlier this year. So I spent some time on the phone with 7 Degrees CEO Timothy Sheehan, onetime head of Yahoo Finance (YHOO), to learn the difference:

Fortune: Beyond display, what is the primary difference between what you're doing and what LinkedIn is doing?

Sheehan: It's really about the comprehensiveness of the search.

LinkedIn is great. You will get some connections, often to the person or company you're trying to reach. But sometimes you don't, either because the person isn't in LinkedIn or because the path is really, really long. Here's an analogy: Searching LinkedIn is similar to doing an AOL (AOL) proprietary search, as opposed to doing a Google search. In one, you're searching a closed network. In the other, you're searching everything in the world. We're taking the Google (GOOG) approach, trying to gather every piece of information on the Internet and put it into a massive social graph…

The other thing about LinkedIn is that a lot of people have just started connecting to anyone who asks, which dilutes the value of the service. We're saying that we want to be aware of who you're connected to, but we go another step to ask which data is the most relevant. Who do you know really well, as compared to someone you met one time? That's the type of relationship you're looking for to make a sale or get a warm introduction for some purpose.

When 7 Degrees launched last fall, PeopleMaps looked like the first in a series of products focused on the social graph. Is that still the plan, or are you using PeopleMaps as the base?

What you're going to see is a whole line of PeopleMaps products coming out, with a focus on different types of customer segments. We started off focused on B2B like salespeople and recruiters, and we're soon moving onto fundraisers and some consumer segments. The idea for fundraisers is to help them get warm introductions to potential donors.

What consumer segments?

Job-seekers is a good one. Anyone looking for a job will be able to leverage their social graph, either through MyPeopleMaps.com or through PeopleMaps being embedded inside of actual job boards.

Are you making more money directly through your website or via embedding with third parties?

Most of it is coming through our partners. SalesForce.com is the biggest, and we just launched on Oracle CRM On Demand, so that one's starting to ramp up. And JobScience for recruiters is fairly new.

Some of these are done as OEM deals, where we're either sold as part of a product or as one of many applications available on an app exchange. We either get paid a licensing fee or on a per customer basis.

Today you announced new VC funding. What will it be used for?

It allows us to take the size of our universal social graph and just blow it out, so that it's on a magnitude of Google in terms of comprehensiveness of search. Take it from almost one billion relationships to 100 billion. We also want to scale up the operations of the company.

Speaking of those operations, you live in Atlanta while your company is headquartered in Salt Lake City. And your new lead investor, Rho Ventures, has most of its people in Palo Alto and New York. Would you be better off centralizing in a place like Silicon Valley?

We're actually opening an office in the Bay Area, which is another thing this money will allow us to do.

Are you moving there?

Yeah. Basically I'll go and open the office there. We'll still have the core graph engineers in Salt Lake, but the idea is to have our real main office be in the Bay Area.

Have you given any thought yet to what the next venture round might look like?

I think we'll figure that out at the time. Right now we're just focused on executing and achieving our next set of milestones so we can tee up that round if necessary. I really expect this next phase for our company to be explosive. An acquisition is equally likely as a Series C.

Well, since you brought it up. Who do you see as potential acquirers for 7 Degrees?

Business software companies like SalesForce or Oracle (ORCL) or even Microsoft (MSFT) are definitely possibilities. I also think the big search engines would have interest given what we can do.

We've actually already had people express interest in buying the company, but we think the smarter approach is to take this round, really demonstrate the power we have, experience massive growth and then revisit the opportunities. If we keep executing and don't get distracted, then good things will happen.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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