Matchmaker Attracts Nearly $110 Million in Venture Funding

Times Staff Writer

Online matchmaker said Monday that it raised nearly $110 million in venture capital in what experts said was a vote of confidence in the online dating industry.

Pasadena-based EHarmony sold preferred stock to 14 investors including Sequoia Capital and Technology Crossover Ventures, two of the early backers of Internet search titan Google Inc. The company declined to discuss terms of the deal.

For the record:

12:00 a.m. Dec. 22, 2004 For The Record
Los Angeles Times Wednesday December 22, 2004 Home Edition Main News Part A Page 2 National Desk 1 inches; 39 words Type of Material: Correction
Online matchmakers -- An article in Tuesday’s Business section about online matchmaker attracting nearly $110 million in venture funding said had canceled an initial public stock offering this year. It was MatchNet that canceled a stock sale.

The $110 million was the fourth-largest such funding this year, according to the National Venture Capital Assn., which has tracked more than 2,100 deals since January.


“This sends a signal that the venture capitalists who are funding the company have faith that they can have a very successful initial public offering in the next couple of years -- or that they expect it to be a very attractive acquisition target,” said Mark Heesen, president of the venture association.

EHarmony, launched in 1998, is unique in the online match-making world because it has little interest in simply arranging its customers’ next date, said Chief Executive Greg Forgatch. The service, co-founded by psychiatrist Neil Clark Warren, focuses on matching people for marriage. The foundation of the service is a 436-item questionnaire that seeks to match compatibility in 29 areas, including sense of humor and family background.

Customers are not allowed to randomly search the company’s database, Forgatch said. They can browse photographs and profiles of pre-screened potential matches only after they’ve completed the compatibility survey.

“Most of the other services use chemistry as the compelling factor,” said Forgatch, 45, who said he’s been married for 19 years. “We emphasize getting to know somebody in a deep compelling way. If you’re looking for a date for Friday night, you don’t need EHarmony. If you’re looking for marriage, you do.”

EHarmony charges more for its service -- about $50 a month versus the industry standard of $20 -- but converts registered members to full-time subscribers at a rate that’s six to 10 times the industry average, Forgatch said. The service has 6 million registered members, he added. A privately held company, EHarmony does not disclose its annual revenue or say whether it is profitable.

The company has identified 10,000 marriages linked to its service, but believes there are more. A goal for 2005 is to track 100,000 marriages linked to the service, Forgatch said.

Historically, online dating has been one of the leading paid-content categories on the Web, accounting for about $227 million in spending during the first half of the year, according to the Online Publishers Assn. However, industry analysts have said the category’s growth has been slowing., another industry leader, canceled an initial public offering this year, citing weak demand for shares.

“The market right now is not where we were in 2000, but that’s not where we want to be,” said Heesen, the venture association president, noting that $100 million-plus financings are rare these days.

During the dot-com boom, “entrepreneurs were getting a lot of money for not a lot of company,” he said. “Now we have venture capitalists who are demanding that companies meet particular milestones before they get financing. We have much more serious entrepreneurs. We are seeing companies that are much more mature and financially attractive to the investing public.”

EHarmony plans to use the $110 million for working capital and advertising.

Times wire services were used in compiling this report.