Alvenda raises $5 million for "shop-able" ad software

Alyssa Ravasio displays her page on the social networking site Facebook, while attending school in Los Angeles January 26, 2010.

SAN FRANCISCO (Private Equity Week) - A Minneapolis-based e-commerce software developer has found a way to tap into the wallets of the millions of Facebook users, without having them leave the website.

Unlike traditional ads - on Facebook and other social networking sites - that lure customers away, Alvenda brings the shopping experience directly onto the site the user is viewing. CEO Wade Gerten calls this feature "shop-able advertisements."

"We literally pack up an e-commerce store into a banner ad," said Gerten, who pointed out the feature allows users to shop while still able to update their Facebook status, respond to a blog or watch a YouTube video.

The company last week announced it had raised $5 million in a Series A round of funding from sole investor Split Rock Partners. Alvenda, which previously raised about $600,000 in seed funding when it was launched in 2008, intends to use the venture capital to expand its online advertising services, Gerten said.

Gerten said most of the company's sales are from commission, but the company also earns a monthly maintenance fee from advertisers.

The company launched its first customer banner ad for 1-800-Flowers in spring 2009. The company now has a storefront on Facebook. Other clients of the company include Brooks Brothers, Hallmark and Mark (a division of Avon).

The company mostly targets large and mid-size companies, but with the investment-fueled expansion they hope to include more small businesses, Gerten said.

If all goes well, the company - which last year won the Minnesota Cup business plan competition judged by area venture capitalists - should start making a profit by spring 2011, said Gerten, who co-founded Alvenda in 2008 with Chief Strategy Officer Brian Howe, who previously worked as the head of marketing for Target.com.