Summary:

Prismatic, a San Francisco-based startup that uses machine-learning algorithms to recommend news and other content to users based on their social activity, has raised a $15-million Series A round from a star-studded group of investors including Accel Partners and Russian investor Yuri Milner.

Prismatic mobile

We’ve written many times about how the profusion of information from social networks and the web in general makes it harder and harder to find what matters to us, and how new tools are required to filter that vast ocean of content. Prismatic is one service that is using algorithms to try and become a smart recommendation engine for news and eventually expand into other content as well, and co-founder Bradford Cross and his San Francisco-based team have just raised $15 million in financing from a star-studded group of venture-capital firms that they hope will enable them to do so.

In an email interview about the funding, Cross said that the financing will allow Prismatic to grow from a group of just six, and allow it to take on more of the recommendation and filtering tasks it is trying to build into the product:

“This financing finally allows us to have the team that we need to tackle the problems we have ahead in the next 24 months. To date, we’ve run Prismatic with only 6 people, and built it with only 5… the active customer base is growing fast, and we need the resources to keep up and move on to our new product, distribution, research, and revenue ideas.”

As we described in a profile of Cross and his startup earlier this year, Prismatic is one of a number of tools that are trying to fix the problem that media theorist Clay Shirky once described by saying “It’s not information overload, it’s filter failure.” The service is based on machine-learning algorithms developed by Cross — a data scientist who used to run a hedge fund and later worked as a consultant on a number of Google projects — and his co-founder Aria Haghighi, and is designed to learn from users what they like or dislike about the content they are reading through the service.

The news-filtering business is a crowded field

In that sense, Prismatic is similar to Zite, the Canadian-born startup that was acquired last year by CNN and recently came out with a revamped version of its service, and other smart filters such as News360 and Pulse. But only Prismatic has explicitly said that it wants to use news-recommendation as a kind of Trojan horse to get a foot in the door with users, so that it can eventually learn enough about them to recommend all kinds of things to them — including purchases. As Cross explained it recently:

“The idea is that we become this trusted agent that you rely on to show you things, and over time we can really start to learn a lot about you. We do care a lot about [news recommendation], but we’ve also thought through how it’s a stepping stone to something much bigger. And a lot of what we do in the background, and how we slice and dice data and so on… is relevant across a really wide range of problems.”

Prismatic, which has about six staff — many of whom work out of a small office in San Francisco’s SoMa district that looks a lot like a university dorm room — also recently launched a mobile version of the app, which Cross said was designed to take advantage of the down time that many phone users have while waiting for the bus or standing in line at the airport. The information needs of mobile users are difficult to satisfy in part because they have so little time, he said, but Prismatic managed to build what amounts to a specialized mobile browser that makes the process far more painless than the usual mobile web experience.

I experiment with almost every news-recommendation app or service that comes along, from News.me (which eventually merged with what was left of Digg) and Summify — which was acquired by Twitter and became the foundation of its daily emails pointing users to worthwhile content — to News360, Pulse and Zite. So far, Prismatic is one of the few that has been able to capture my attention and keep me coming back to the app, although the new Digg has also quickly become almost as important in my daily browsing habits as the old version of the service was.

That’s the central risk for Prismatic: the world of news recommendations is a harsh one, and users are always looking for whoever can give them the best fix. Twitter is clearly focused on doing this, as Cross has acknowleged, and so are plenty of others with fairly deep pockets. Hence the need to raise a $15-million Series A round — which came from Accel Partners, along with a personal investment from partner Jim Breyer, and from Russian oligarch and Facebook investor Yuri Milner.

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