Redpoint Ventures takes stake in Answers Corp

By Michele Gershberg

NEW YORK, June 17 (Reuters) - Answers Corp (ANSW.O), home to reference web site Answers.com, said on Tuesday that venture capital firm Redpoint Ventures has agreed to buy a stake of up to 25 percent in the company as it revamps its strategy.

In a private placement on Monday, Answers issued to Redpoint $6 million worth of convertible preferred stock at a conversion price of $4.50 per share, constituting a stake of about 14.5 percent.

Redpoint also received a second tranche warrant that can be exercised over the next 12 months to buy an additional $7 million in convertible preferred stock at a conversion price of $5.50 per share. If fully exercised, the investment could make Redpoint the single largest shareholder in Answers Corp.

Redpoint's Allen Beasley will join the board of Answers Corp as part of the deal, with a second board seat becoming available if the firm exercises its additional warrant.

"We believe they are interested in significant long-term value," Answers Chief Executive Robert Rosenschein told Reuters. "We feel partnering with a firm of their prestige and smarts would be good for the organization."

Redpoint's previous investments in public companies include Intermix, the parent of social network MySpace, which was bought by News Corp NWSa.N in 2006.

Answers Corp has cultivated a new source of web traffic growth in its WikiAnswers.com site, which offers community-written answers to questions posed by its users.

Rosenschein told Reuters earlier this month that the company plans to connect more closely the reference-based results of Answers.com with the community-generated knowledge of WikiAnswers.

The sites differ from industry leader Google Inc (GOOG.O), which lets users search by individual keywords.

WikiAnswers has grown to some 11 million unique monthly visitors in May since it began operating in early 2007, according to comScore data provided by Answers Corp.

"The Answers properties, but especially WikiAnswers.com, represent the type of high growth opportunity we look for," Redpoint's Beasley said in a statement.

Answers said it would file a registration statement with the U.S. Securities and Exchange Commission covering the resale of shares once the preferred shares are converted.

Thomas Weisel Partners was the lead placement agent and Canaccord Adams was the co-placement agent for the offering.

Answers Corp shares closed 2 cents higher at $3.92. (Editing by Leslie Gevirtz)