Lithium Technologies scores money to revitalize community support for enterprises

Venture Beat — Mon, 30 Jun 2008 00:01:08 -0700

Lithium Technologies has raised $12 million in venture capital today and that’s a big boost for the Fong family dynasty.

You could say that Lyle Fong has lived in the shadow of his younger brother Dennis “Thresh” Fong, a professional video game player who won a Ferrari at age 20 when he was crowned the world’s best “Quake”player. But now it’s Lyle’s turn to shine.

Lyle built his Emeryville, Calif. company into a profitable operator of community relations sites for enterprises that want to engage their customers in two-way conversations. To get an idea of how the sites function, take a look at the one the company designed for Dell. With features such as Dell IdeaStorm where customers can present their own product ideas, the main point is to build brand loyalty in a two-way conversation with consumers.

And now it has raised a second round of funding in a deal led by Benchmark Capital. The cash will help the company expand its marketing and product development as it faces new kinds of competitors.

Lyle said in an interview that the company hosts and designs online communities for the likes of Dell, AT&T, Sony PlayStation, Univision, and PayPal. It sets itself apart by using game-like motivators such as leaderboards, rewards, reputations, profiles and social networking tools to encourage customers to invest time and energy in the community support sites of major companies. Lithium comes in when big companies learn they have no idea how to handle millions of customers who could become a tech support nightmare if they’re handled in the old-fashioned way.

“We’re managing sites for companies that collectively get a billion page views a month,” Lyle said. “Our job is to get those one percent of users who are hardcore fans and turn them into the company’s biggest evangelists.”

The idea is to use best practices to stir up people like Jeff Stenski, a Dell customer who has voluntarily spent the equivalent of 141 days of his time over the years and posted more than 22,000 answers to technical support questions on Dell’s community web site. Stenski’s answers have been viewed more than a million times, saving Dell more than $1 million, Lyle said. That prompted Forrester Research analysts Charlene Li and Josh Bernoff to call out Lithium in their social networking book, “Groundswell: Winning in a World Transformed by Social Technologies.”

It’s no surprise that the mechanics that set apart the company’s community hosting services are game-like, a phenomenon we wrote about in our story about Funware (the use of game mechanics in non-game applications). In the Dell IdeaStorm voting, the most-frequent contributors can get “iSquared powers,” meaning they get ten times the voting power of other consumers when it comes to selecting which of the IdeaStorm product ideas are the best.

The boyish-looking Fong brothers of Los Altos are legendary in video games. Dennis dropped out of UC Berkeley to play video games for a living. He picked up honors as the world’s best “Doom” and “Quake” player. He was one of the first people to actually make video gaming a profession, winning big cash prizes and the Ferrari.

Dennis cofounded GX Media with Lyle, who wasn’t quite as talented with the trigger finger as his brother and actually finished his schooling at Berkeley. At first, they were selling gaming computers out of a dorm room. In 1997, they founded Gamers.com, a site that offered news and community forums for hardcore gamers, as well as game fan site FiringSquad.com, started with their other brother, Bryant. They raised $11 million in venture financing from CMGI in 1999 and lived the good life. Gamers.com even threw a party at the Playboy Mansion during an E3 show.

In 2001, Ziff-Davis bought Gamers.com and GX Media spun out Lithium Technologies under Lyle, its CEO. Dennis went on to found Xfire, an instant-messenger service for gamers which was purchased by Viacom’s MTV for $102 million. Dennis is now head of the startup Raptr, a gamers social networking client.

Lithium is based on the community-focused technologies that made Gamers.com a heavily trafficked site. The system of rewards got gamers talking to each other long before the phrase “social networking” was hot. Lithium previously raised a $9 million round from Shasta Ventures and Emergence Capital Partners in 2007. Before that, Lyle bootstrapped the company.

Lithium does face competition of sorts, which motivated Lyle to raise money. Marc Andreessen’s Ning social-networking platform can be used to build enterprise communities. And Jive Software enables collaboration inside a company for internal communications. Liveworld also promises companies that it can build them thriving social networks. Others include HiveLive, Kickapps, and Igloo.