ChaCha keeps finding investors

Although Google still stands as the search engine behemoth, Carmel, Ind.-based startup ChaCha Search Inc. continues to try to carve out a niche.

The company recently raised $11 million from 15 investors in a Series C round and it pulled in another $1.7 million in debt. The funding is part of a $30 million round that the company is targeting, according to a regulatory filing.

ChaCha, which raised a $6 million Series B round in November 2007 and a $6 million Series A round in January 2007, is perhaps best known for having raised startup funding from Explore Holdings, the Seattle-based investment firm of CEO Jeff Bezos.

Explore also participated in the Series C funding, which included company CEO Scott Jones, company CFO Brian Modiano and individual investor Jack Gill, co-founder of Vanguard Ventures. Other investors participating in the round include former Nextel COO Tom Kelly; Mort Meyerson, former CEO of Perot Systems; and Compaq co-founder and former CEO Rod Canion.

Former CFO Dean Burger, who had participated in the Series B, was not listed in the regulatory filing as an investor in the Series C round.

ChaCha pays people to answer questions for users in a technique known as human-powered searching. The company says it has amassed 30,000 experts to be on hand to answer questions. It moved into mobile search early in 2008, and partnered with AT&T in December.

Mobile users can either send a query as a text message to ChaCha, or leave a voice mail with a question. The service responds by texting an answer back within several minutes. An advertisement is imbedded in the answer.

The service works well for simple questions. A reporter recently called the ChaCha service and asked several questions. ChaCha successfully answered questions about the square root of 7 (approximately 2.645), the number of feet in a mile (5,280) and the average lifespan of pet cats (14 to 20 years). The service could not determine how many years John Doerr worked at Intel Corp. (five, 1975-1980), in part because the system interpreted his name as “Door.”

For the last couple of years, investors have placed numerous bets on search-related startups that are developing general purpose search engines and creating specialized tools geared for mobile users, video queries and product information.

Among those that have scratched the surface are Farecast, which searches airline fares and predicts whether their costs wise rise or fall. The Seattle-based company raised about $20 million in total venture funding, including a $12 million Series C round in January 2007 from Greylock Partners, Madrona Venture Group, Pinnacle Ventures and Sutter Hill Ventures. Microsoft paid $75 million for the company in April 2008.

Startup search engines are faced with extremely high expectations. Cuill, for example, had a lackluster product launch in 2008. After raising more than $33 million from Tugboat Ventures and Greylock, the company’s product was panned by critics.

Probably the most heavily funded search company is iCrossing Inc., a Scottsdale, Ariz.-based digital marketing company. In July 2007, it raised $62 million in a fifth round of funding that it used to buy Proxicom for an undisclosed amount. Goldman Sachs led the deal and was joined by return backers Oak Investment Partners, RRE Ventures and StarVest Partners. The company, which has raised $157 million in total VC funding, works with companies to improve their rankings in search results and to bolster their online presence.

Another search engine company is New York-based Hakia, which finds results for queries phrased as questions, sentences or keywords, similar to Hakia, has raised $19.5 million from company management and the Alexandra Global Fund, according to a data from Thomson Reuters (publisher of PE Week). Individual investors include CEO Riza Berkan, COO Melek Pulatkonak and CFO John Grzymala.