Worldview Technology Partners is on a tear. Thanks in no small part to the huge IPOs and mega-acquisitions of its portfolio companies; the four-year-old firm has just raised its fourth fund. Predictably, that fund weighs in at a cool $1 billion.
Even more impressive is the fact that the firm, now with $1.75 billion under management, has catapulted to success with just six general partners. How do they do it? Worldview (http://www.worldview.com) employs eight business development professionals in Tokyo and Singapore, who help the firm's GPs shoulder more portfolio companies, without increasing the average dollars per deal.
More importantly, the business development partners work closely with Asian carriers and help the firm's telecom-focused portfolio companies tap into a global customer base. "We're welcomed with open arms by all the major carriers there," boasts founding general partner Michael Orsak.
Mr. Orsak points to Ciena as a classic example of the Worldview method in action. The firm's partners made an early investment in the company in 1995 at Jafco America, back when Ciena's sole customer was Sprint -- an impressive catch, no doubt, but not enough to balance an IPO on. Thanks to Worldview's connections in Japan, Ciena was able to land a second customer, Teleway Japan, and accelerate its IPO. Today, the company is worth more than $20 billion.
Worldview's top investment priority is global market potential, says Mr. Orsak. Other portfolio success stories include the recent sales of Silicon Spice to Broadcom for $1.2 billion, and Cyras to Ciena for $2.6 billion, and the red-hot IPOs of Oplink, Cosine, and Corvis.
DETAILS -- Location: Palo Alto, CA, Tokyo, Japan, Singapore; Fund: Worldview IV; Fund size: $1B; Prior fund size: $475M; Focus: Telecommunications, especially systems, but also services and components; Average investment: $5M to $10M for first-round deals, which account for about half of the firm's investment dollars.--Julie Landry
ARBOR NETWORKS http://www.arbornetworks.com Waltham, MA FUNDING: $11M PRIOR FUNDING: Undisclosed seed ROUND: 1st CATEGORY: B2B security DESCRIPTION: Managed security services. LEAD INVESTOR: Battery Ventures OTHER INVESTOR: Cisco SystemsTHE HERRING TAKE: Arbor Networks focuses on the proactive side of online security. The startup, which is just entering the security space at a time when competitors are pulling in $75 million second rounds, serves its clients by monitoring, detecting, and tracing "network availability." Which means the core competency of Arbor is keeping networks running smoothly. The startup also focuses on forensics and analysis, giving systems administrators tools to define nefarious traffic patterns, and once detected, to catalog and database them for future reference. After establishing rogue patterns or defining threats, Arbor's technology moves to filter such network probes and stop attacks from being launched. Students and faculty at the University of Michigan at Ann Arbor founded the startup. They saw it as an offensive weapon to be installed by companies seeking to protect Web sites. Undoubtedly, the company will need much more than the $11 million raised thus far if it's to compete with a growing host of security-focused startups who've pulled in bigger rounds. Cisco, Intel, and DARPA ponied up the initial cash, which allowed Arbor a chance to compete. Now it's up to founders Farnam Jahanian and G. Robert Malan to establish a good customer base and profitability. --R.B.R.
PARA-PROTECT http://www.para-protect.com Centreville, VA FUNDING: $10M PRIOR FUNDING: $1.1M ROUND: 2nd CATEGORY: B2B DESCRIPTION: Managed security solution provider. LEAD INVESTOR: Noval Biddle Venture Partners OTHER INVESTOR: Winston Partners THE HERRING TAKE: VCs and institutional investors have funneled more than $170 million into the network security arena within a recent two-week span. Two startups, Vigilinx and Onesecure, for example, raked in $142 million between them. Now it's Para-Protect's turn. Para-Protect is one of an increasing number of security plays founded by former government and intelligence operatives, hoping to cash in on their system penetration and security expertise. In this case, CEO Mike Higgins spent years with the Department of Defense (DOD), overseeing network defenses. With Para-Protect, Mr. Higgins has assembled a team heavy with former DOD, State Department, and FBI vets. And with an eye to the commercial sector, Para-Protect hired Mark Graff, Sun's former security architecture chief, as its chief science officer. Interestingly, despite its staff's extensive government experience, Para-Protect's 75 customers are in the private sector, which accounted for $3.5 million in revenue last year. Mr. Higgins refers to his startup as a managed services play; that is, one that focuses on network surveillance, intrusion detection, and response. Para-Protect is on track to post $9 million in revenue for 2001, with profitability being attained by October. The frugal Mr. Higgins has got this far on only $1.1 million in VC. He's also running a lean monthly burn of $450,000 for his 83-employee operation. "Our team is unparalleled once the alarm goes off," he says. --R.B.R.
COMMUNICATIONS SERVICE PROVIDER
NARAD NETWORKS http://www.naradnetworks.comNorth Chelmsford, MAFUNDING: $41MPRIOR FUNDING: N/AROUND: 1st CATEGORY: Broadband DESCRIPTION: Developing a product that will increase the efficiency of cable companies' installed networks to better reach business customers. LEAD INVESTOR: Polaris Venture Partners OTHER INVESTORS: Individual investments by company board members Bob Metcalfe, a Polaris venture partner and inventor of the Ethernet; and Rouzbeh Yassini, founder and CEO of YAS; and others THE HERRING TAKE: Narad Networks started working on its technology product last June and secured this round of funding in November of 2000, but he waited until today to announce the company's formation. The money will carry Narad well into next year, when it enters the manufacturing stage and begins taking in revenue, says Andy Chapman, Narad's executive vice president. The company was founded by Mr. Chapman and CEO Dev Gupta; they previously started two other companies together, Maxcomm Technologies and Dagaz Technologies, and sold both of them to Cisco Systems for a combined $267.5 million. Mr. Chapman is confident that this time around, their company will go public and won't be acquired. Narad says it's building a product made of hardware and software that will convert cable companies' existing Hybrid-Fiber Coax (HFC) networks to ones that act like fiber-optic networks. Cable operators will be able to use Narad's technology to target small and medium-sized businesses and generate new revenue, says Mr. Chapman. Narad's technology will allow cable companies to avoid the expensive and slow process of installing fiber-optic lines underground, he adds. --M.A.D.
NEWSOUTH COMMUNICATIONS http://www.newsouth.comGreenville, SCFUNDING: $85MPRIOR FUNDING: $230MROUND: 5thCATEGORY: CLECDESCRIPTION: Provides voice and data communications services in the southern United States.LEAD INVESTOR: Kohlberg Kravis Roberts & Co.OTHER INVESTORS: First Union Capital Partners; J.P. Morgan Capital; Vaxa Capital Partners; Carousel Capital Partners; CIT Venture Capital; Wachovia Capital Associates; Seruus VenturesTHE HERRING TAKE: Over the past 28 days, Alan Greenspan has shaved a full point off the federal funds rate, cutting it to 5.5 percent. It's the largest one-month cut the Federal Reserve chairman has made in 17 years, but the debt market for competitive local exchange carriers (CLECs) is still excruciatingly tight. CEO Michael LaFrance planned to hit the high-yield debt markets for additional funding, but it proved too difficult. "The bank market was soft, so we went out for some equity," he says. "You just can't get the same leverage from your equity -- it's not one-to-one for bank [loans] anymore." Mr. LaFrance has the luxury of hitting up his venture investors for new cash, because he's met his numbers. Newsouth has sold 100,000 lines with bundled voice and data communications services to businesses in the southern U.S. It's on schedule to be EBITA (earnings before interest taxes amortization) positive by the end of 2001 and profitable sometime in 2002. "We're fully funded through break even," he says. --S.S.
MANAGED SERVICE PROVIDER
CHAPTER 2 E-SERVICEShttp://www.chapter2.netSan Francisco, CA FUNDING: $34.5M (equity) ($15M Debt)PRIOR FUNDING: $9.5MROUND: 2ndCATEGORY: Managed service provider DESCRIPTION: Provides outsourced application service provider (ASP) hosting facilities.LEAD INVESTOR: American Express Financial ($15M)OTHER INVESTORS: Alliance Capital; RS Co-Investment Fund; Bayview Partners; Mentmore Holdings; Thomvest; Convergence Partners; Sand Hill Capital; Commvest THE HERRING TAKE: CEO Ritu Raj is getting closer to his personal utopia: early retirement and a bulldog farm. His company, which provides outsourced infrastructure and IT services to enterprises and ASPs, would be hard-pressed to be doing any better. Since its founding in March 2000, Chapter 2 has signed 20 customers including Accenture (formerly Andersen Consulting), Deloitte & Touche, PeoplePC, and Centrio. By bringing all the equipment and IT workers together, Chapter 2 can allocate resources more efficiently and save its clients a minimum of 50 percent on the operational costs of running enterprise applications such as Oracle and SAP. The model is similar to that of Jamcracker, which was founded by former Exodus Communications chairman K.B. Chandrasekhar in 1999. Chapter 2 also offers ASP services for a cut of their subscription fees on a declining volume scale (i.e. as the volume goes up, the percentage comes down). Chapter 2 brought in $2.2 million in revenue last year, and Mr. Raj says the firm will sign 180 customers and bring in about $18.5 million for 2001. Though Chapter 2's burn rate is around $2 million per month, he expects to be profitable by November. Mr. Raj's confidence must have rubbed off on his VCs: the firm's post-money valuation is around $200 million. --S.S.
DEALFLOW DIGEST
ECRIOhttp://www.ecrio.comCupertino, CAFUNDING: $7MPRIOR FUNDING: N/AROUND: 1stCATEGORY: Wireless applicationsDESCRIPTION: Provides wireless messaging applications and equipment. LEAD INVESTOR: N/AOTHER INVESTORS: Nexit Ventures; CDB Web Tech; Netnet Ventures; Cirlab!MORE INFORMATION: PRNewswire
ESILICONhttp://www.esilicon.comSanta Clara, CAFUNDING: $20MPRIOR FUNDING: $5MROUND: 2ndCATEGORY: ICsDESCRIPTION: Designs application-specific integrated circuits. LEAD INVESTOR: Tarrant Venture Partners; Crosspoint Venture PartnersOTHER INVESTORS: Catamount Ventures; inSilicon; Palmchip MORE INFORMATION: Businesswire
ISHOPSECURE http://www.ishopsecure.com Ft. Lauderdale, FL FUNDING: UndisclosedPRIOR FUNDING: N/A ROUND: 2nd CATEGORY: B2B/Security Software DESCRIPTION: Applications to make online financial transactions more secure. LEAD INVESTOR: An unnamed angel OTHER INVESTORS: N/A
MINDMATTERS TECHNOLOGIES http://www.us-mindmatters.com Pittsburgh, PA FUNDING: $1M ROUND: 1st PRIOR FUNDING: N/A CATEGORY: B2B Software DESCRIPTION: Intellectual asset management solutions.LEAD INVESTOR: Mid-Atlantic Venture Funds OTHER INVESTORS: Future Fund MORE INFORMATION: Mindmatters Technologies
PROXIMA THERAPEUTICShttp://www.proximatherapeutics.comAlpharetta, GAFUNDING: $17MPRIOR FUNDING: N/AROUND: N/A CATEGORY: Biotech/Medical devicesDESCRIPTION: Develops site-specific cancer treatment systems for breast and brain tumors.LEAD INVESTOR: Domain AssociatesOTHER INVESTORS: Merrill Lynch Ventures; Neuroventures Capital; New Enterprise Associates; Hillman Medical Ventures; Catalyst Ventures; Lovett Miller & Co. MORE INFORMATION: PRNewswire
UPOC http://www.upoc.com New York FUNDING: $18M PRIOR FUNDING: N/A ROUND: 2nd CATEGORY: Wireless DESCRIPTION: Wireless apps that allow users to send voice and text messages via mobile devices. LEAD INVESTORS: Patricof Ventures; Advent International OTHER INVESTORS: Tribune Ventures; 550 Digital Media Ventures; Allen and Company; Arts Alliance MORE INFORMATION: Businesswire
ELEVATOR PITCH
UNEX CORPORATION, $3M to $5M Atlanta, GA THE PITCH: "UNEX is an international currency trading platform that facilitates global payments, financial information, and contract fulfillment. Using the Internet, it can perform transactions of any size, anywhere in the world, across multiple currencies. And even create a worldwide virtual currency system or 'mimic' against currencies that don't traditionally trade. UNEX bypasses traditional transaction paths, thus dramatically shortening the time and reducing the costs for currency movements and settlement of trade contracts. Whether dealing with a fleet of oil tankers or a single Belgian handkerchief -- regardless of in what countries are the manufacturers, sellers, or buyers -- Unex can make a market, easily handling all processes and settlements necessary for the trade."WHY WE LIKE IT: Enormous market for increasing the efficiency of currency trading. WHAT THEY'RE UP AGAINST: Existing market makers whose economies of scale will help them hang on to the majority of this market.CONTACT: Mitch Sepaniak, CEO, ssepaniak@mindspring.com
(Looking for funding? Drop us a line at elevator@redherring.com. Let us know who you are, how much you're seeking, the funding sources you're targeting, your contact info, and, of course, your pitch. Please keep the pitch to no more than 100 words. Do not send attachments. One tip: pretend you're actually pitching a VC in an elevator. Submissions should have "Seeking Funding" in the subject line.)
Today's Dealflow is reported and written by Matthew A. DeBellis, Julie Landry, Richard Byrne Reilly, and Steve Silverman. The Elevator Pitch is selected and written by Julie Landry.
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