WESTLAKE VILLAGE, Calif. – There are many places to buy a cheap stereo. Likewise, for a high-end system or a tony home-theater setup in the low-six-figure range. But where would you go for an in-between model that costs $3,000 to $50,000?
You might want to check out KnowledgeLINK, a southern California online company designed to sell such units.
Sunil Mehrotra’s Web site, slated for a July launch, educates consumers about various brands of stereos, home entertainment and office-media components before they decide to make a purchase either on the Web site or at an affiliated retail store.
KnowledgeLINK works with local retailers whose involvement can range from making an actual sale to delivering the goods sold by the Web site. Retailers and KnowledgeLINK share the profits that are generated by customers who sign on to the site.
Unlike many e-commerce companies that shun direct involvement with product distribution, KnowledgeLINK will maintain inventory of rare electronic components that stores are unlikely to stock and ship them to consumers. Also, KnowledgeLINK will get a referral fee when Web site users make a store purchase based on research conducted on the site, explained Robert Kibble of Mission Ventures, one of the company’s backers. The idea is to work with manufacturers and retailers rather than as direct competitors.
Founded three years ago, KnowledgeLINK had been bootstrapped until now. KnowledgeLINK chose to close its Series A financing in two tranches. The first was completed in February and totaled $1.25 million, including $750,000 from Mission and additional capital from individual investors. A second tranche of about $4 million – including another $1.25 million from Mission – is expected to close before the Web site is launched, likely bringing in another venture capital firm.
A big part of the company’s business model centers on what Mr. Mehrotra refers to as being an “infomediary.”
“Our model’s based on trust, so we are very particular about the information” posted on the site, Mr. Mehrotra said.
KnowledgeLINK also hopes to help expand the stereo and home entertainment market for high-end brand names.
Mr. Mehrotra is unaware of any direct competition at the moment. And while manufacturers could establish their own e-commerce sites, he points out that doing so would create competition with their own brick-and-mortar retailers.
Mr. Kibble noted that the electronic products in KnowledgeLINK’s range boast 30% to 60% profit margins and reasoned that manufacturers and retailers would benefit from teaming with his company because they could garner new clientele.
KnowledgeLINK will use the money it raises to build its Web site before its summer launch.
Mr. Kibble said Mission was attracted to its new portfolio company because it created a cooperative model involving e-commerce and traditional retailers.
“There will always be retailers coexisting with e-commerce delivery mechanisms, and this is one of the very first significant market opportunities exploiting an e-commerce business model mixed with bricks-and-mortar.”