MassChallenge alum ViralGains raises $7.7M to expand video ad-tech

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ViralGains, a Boston video advertising startup and former MassChallenge award-winner, has raised $7.7 million as part of an investment round that could grow to more than $12 million.

The company plans to spend the money on hiring new employees in sales, marketing, and development this year, doubling its roughly 25-person employee base as it attempts to add clients well beyond the Boston market.

“We’ve grown a lot in the last year,” CEO Tod Loofbourrow said. “This really puts us off to the races.”

ViralGains is trying to make its way in a crowded market. Forrester Research expects online video advertising to grow about 20 percent yearly over the next five years, but also says the number of companies seeking a piece of that market “has created a complex and inefficient ecosystem.”

The new Series A investment was led by Stage 1 Ventures, with other investors including 500 Startups, Hub Angels, and Launch Capital. Loofbourrow said the company has worked for dozens of Fortune 500 customers, and is notching millions of dollars in revenue annually.

ViralGains’ service is based on YouTube videos, which serve as commercials for a client. ViralGains “encapsulates” the video inside a digital ad that is placed on a website and shows a series of survey questions after the spot is finished playing.

That gives marketers the ability to gauge a consumer’s reaction to the company or its advertising message, Loofbourrow said, giving more information than would normally be available about the effectiveness of the ad.

One recent client, VistaPrint, said that a video ad distributed with ViralGains drew 100,000 possible customers to the company’s website.

“Marketing is all about listening to your customers and doing focus groups,” Loofbourrow said. “And advertising is all about broadcast, broadcast, broadcast, but don’t listen. Our view is that line is being torn down.”