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ChaCha lands $20 million venture investment

October 14, 2010

Carmel-based ChaCha Search has closed a $20 million round of financing to fund an expansion of its signature mobile service, the company said early Thursday.

The funding comes from new investors VantagePoint Venture Partners and Rho Ventures. Since its inception in December 2005, ChaCha has raised more than $50 million, including $7 million earlier this year from a venture capital fund.

ChaCha, which bills itself as “the No. 1 free real-time answers service,” allows wireless phone users to call in or text their questions to the company’s human guides. ChaCha makes money by embedding advertisements in the answers.

“Our new investors clearly recognize the value of our business, which helps advertisers ‘get into the conversation’ with ChaCha users who frequently ask their ‘smart friend’ questions about anything and everything,” CEO Scott Jones said in a prepared statement.

The company said it has answered nearly 1 billion questions in the past two years, reaching more than 15 million unique users every month through its mobile platforms and website. Experts expect about 13 billion questions to be posed industry-wide this year.

ChaCha said it is working on a multimedia messaging service that will deliver movie trailers, videos, coupons and ads to all phones—not just smart phones.

The company has about 60 employees in addition to 30,000-plus independent contractors who work as guides, earning 2 cents to 20 cents per task.

Big individual investors include Amazon.com founder Jeff Bezos and Compaq Computer founder Ron Canion.

Canion is on ChaCha’s board, as are recognizable names such as Morton Meyerson, former chairman and CEO of Perot Systems, and former president of successor EDS.

The two new investors also will get seats on the board: Richard Harroch, managing director at VantagePoint Venture Partners, and Mark Leschly, a managing partner at Rho Ventures, will serve as directors.

VantagePoint, which has offices in Silicon Valley, Beijing and Hong Kong, funds “transformative companies” in the information technology, clean technology and heath care sectors. It has $4.5 billion of committed capital.

Rho Ventures has offices in Palo Alto, Calif., New York and Montreal. It has $2.5 billion under management and has experience in information technology, communications, new media, health care and energy technology.

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