L2 rakes in $16.5M to run market research companies out of business

Venture capitalist Paul Sagan sounds quite enthusiastic as he opens our phone call about his firm’s latest investment. Sagan’s firm, General Catalyst Partners, just announced its lead in a new investment of $16.5 million in business intelligence firm L2, and he will now be advising a friend of over 20 years.

L2 uses algorithms to track and analyze hundreds of data points about a variety of digital media. The company claims it’s figured out how to gather these points and slice them up by geography, categories, verticals, and so on. It also identifies trends and provides comparisons between brands in the same category.

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L2’s competitors, according to Sagan, are the consulting firms traditionally hired by brands to provide them with marketing research and strategy. “We are always looking for traditional businesses that can be disrupted by technology,” he said, describing the firm’s investment strategy.

Sagan, an executive in residence (a seasoned executive or entrepreneur paired with a portfolio company’s founders) and partner at General Catalyst, will join L2’s board as a non-executive chairman and help guide the company’s next phase of growth.

While the attention has shifted to digital media and the need for brands to promote themselves through those channels, Sagan claims big consulting firms continue to be incredibly expensive and slow.

This is exactly the opportunity Sagan believes L2 can seize.

“We think that other world will keep doing what it’s doing, and we will bring more value,” he said.

Big brands are asking questions such as, “How do I need to react in an Amazon world? How do I need to react in a Twitter world?” and Sagan sees L2 as becoming the leader in helping companies answer them.

With General Catalyst leading the round and his joining L2’s board, Sagan already has goals in mind for the now $16.5 million-richer company. Building out the product’s technical capabilities and offerings, and expanding L2’s ability to serve current and potential customers around the world are his plans for the new injection of funds.

In the first area, L2 plans to track new geographical areas and categories. Digital IQ Index, the flagship product, currently tracks 850 data points across dimensions such as e-commerce, digital marketing, social media, and mobile.

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As for increasing its “geographical footprint,” as Sagan describes it, L2 will push to expand beyond its New York City staffing base. Although he was not specific, this will probably mean opening new offices or inking partnership deals.

This investment is a personal one for Sagan. L2’s chief executive, Scott Galloway and Sagan have known each other for over 20 years, since the early days of media and Internet technology. This was an opportunity he couldn’t pass up.

L2 is based in New York City and was founded in 2010. This is the company’s first institutional funding round, and no other investor names were disclosed.