Social commerce provider Alvenda lands $5M

Alvenda Inc., a Minneapolis-based e-commerce software developer, believes it knows how to tap into the wallets of the millions of people who use Facebook or other popular social networking sites, and it doesn’t force the consumers to leave the website.

Unlike traditional ads that lure customers to other websites, Alvenda brings the shopping experience directly onto the site the user is on. CEO Wade Gerten calls this feature “shop-able advertisements.”

“We literally pack up an e-commerce store into a banner ad,” says Gerten, who points out that the feature allows the users to shop while still able to update their Facebook status, respond to a blog or watch a YouTube video.

The company last week announced that it raised $5 million in a Series A round of funding from sole investor Split Rock Partners. Alvenda, which previously raised about $600,000 in seed funding when it was launched in 2008, intends to use the funding to expand its online advertising services, Gerten says.

Gerten says that most of the company’s sales are from commission, but the company also earns a monthly maintenance fee from advertisers.

The company launched its first customer banner ad for 1-800-Flowers.com in spring 2009. The company now has a storefront on Facebook. Other clients of the company include Brooks Brothers, Hallmark and Mark (a division of Avon).

The company mostly targets large and mid-size companies, but with the investment-fueled expansion they hope to include more small businesses, Gerten says.

If all goes well, the company—which last year won the Minnesota Cup business plan competition judged by area venture capitalists—should start making a profit by the spring of 2011, says Gerten, who co-founded the company in 2008 with Chief Strategy Officer Brian Howe, who prior to Alvenda worked as the head of marketing for Target.com.