Massdrop Raises $6.5M To Turn Group Buying Into A Broader Community Platform

Next Story

Science Inc. Acquires Mobile Ad Network PlayHaven From Upsight

Massdrop, a startup offering what it calls “community-driven commerce,” is announcing that it has raised $6.5 million in Series A funding.

The round was led by Mayfield Fund, with additional investment from previous backers Kleiner Perkins Caufield & Byers, First Round Capital, and Cowboy Ventures. Massdrop has now raised a total of $8 million.

The Massdrop model works by allowing groups of “enthusiasts” to gather on the site and discuss the products that they’re interested in buying. The company then negotiates directly with the manufacturers to create special group discounts.

Founder and CEO Steve El-Hage acknowledged that “super-smart people had tried to get the ball rolling in the past” on group buying — one of them was Mercata, which shut down back in 2001. (More recently, I’ve written about a group-buying startup called Higgle.)

However, he said that unlike previous group-buying sites, Massdrop isn’t focused on “enthusiast products” with a relatively niche market. Yes, it’s working with enthusiast groups, but it’s trying to sell them products that have a broad appeal.

For example, El-Hage said that audiophiles formed one of the first communities on Massdrop, and they used the service to negotiate a deal on “incredibly high-quality headphones” (El-Hage actually gave me the specific product name, but it had a lot of numbers and letters in it, and my eyes started to glaze over), eventually placing an order for more than 2,000 of them.

Plus, El-Hage’s vision doesn’t stop at group-buying. Instead, he sees the commerce part of the business as just the first step in larger plan to turn Massdrop into the center of these different communities. In fact, he said the company has started holding in-person meetups two years ago.

“Up until now [Massdrop launched in 2012], we’ve been nailing down this commerce model, making sure we can sustainably add value to each of the communities,” he said. “With this new round of financing, we’re totally restructuring our web product to make it possible for communities to have their own individual section of the site.”

In the funding release, Mayfield Managing Director Tim Chang made a similar comment, saying the firm has “long held a view that commerce stands to be disrupted by being truly community and hangout first, marketplace second.”