Vault.com CEO Eric Ober's candor was refreshing: "Q4 was a disaster for us. We missed our sales projections by hundreds of thousands of dollars." One result was that on Thursday, 33 employees were shown the door at the online media content firm's Manhattan HQ. Sixty-six remain with the company.
Mr. Ober has spent his whole career in media, six of them as the president of CBS News. Now, he finds himself at the helm of a troubled company whose founders, all in their twenties and thirties, are looking to him for a sure route to profitability.
Mr. Ober may be Vault's best investment. He's not content to place the layoff blame squarely on hostile markets and changing investor tastes. He says the success or failure of his company resides not in raising more VC, but on his vision. "We made a decision to control our own fate," he says. "And these job cuts are the equivalent of funding ourselves. This company's survival is based on not running out of money."
Although the company has multiple revenue streams, it will need to focus more on its core competencies, like sponsorships. Mr. Ober concedes the decline in online advertising hit them in the wallet. Going forward, the feisty CEO will focus on keeping his burn rate to around $500,000 per month and creating new ways of making money.
He has no illusions about the task before him. Will Vault.com be buried in the IT graveyard, or will it do the unthinkable and turn a profit by late 2001, the date set by Mr. Ober? "You have to be profitable to be taken seriously," he says. "That's what we plan on doing."
FUNDING DETAILS -- Location: New York; Status: 33 employees axed, 66 remain; Total VC: about $20M; No. of Rounds: 2; Backers at Risk: Tech Bank; New York City Investment Fund; Hollinger Capital; angels.--Richard Byrne Reilly
NETWORK ELEMENTS http://www.networkelements.com Beaverton, ORFUNDING: $77MPRIOR FUNDING: $23MROUND: 2ndCATEGORY: Optical networking componentsDESCRIPTION: Develops 10 Gbps and 40 Gbps optical networking modules.LEAD INVESTOR: New Enterprise AssociatesOTHER INVESTORS: Intel Communications Fund; Nortel Networks; Credit Suisse First Boston Private Equity; Western Technology Investment; Alloy VenturesTHE HERRING TAKE: Nowadays it's tough to open a financial magazine without encountering some doom-laden talk about capital expenditure cutbacks by communications carriers. The downturn is hitting optical component makers' stocks, such as JDS Uniphase, and equipment vendors such as Nortel Networks. But despite the grim outlook, Network Elements CEO Bruce Murdock says demand for his company's optical gear is extraordinary. The firm builds 10 Gbps to 40 Gbps ethernet modules that enable communications carriers to offer high speed, data, voice, and video transport at a fraction of the cost per port of current networking gear, Mr. Murdock says. With Network Elements gear, a mere $5,000 to $10,000 gets the job done. The equipment can be used in the so-called network core or edge. Mr. Murdock puts demand for his components at hundreds of thousands of units this year. His main concern: being able to ramp up manufacturing to meet demand. To that end, the firm will be contracting with factories in Asia and Thailand. --S.S.
SOFTWARE
CENTEGYhttp://www.centegy.com Fremont, CAFUNDING: $8.6MPRIOR FUNDING: $5.4MROUND: 2ndCATEGORY: Supply-chain managementDESCRIPTION: Provides software for Internet-enabling supply-chain features, such as order entry, inventory management, billing, sales, and customer service.LEAD INVESTOR: OCI Ventures ($3M)OTHER INVESTORS: Vantagepoint Venture Partners ($3M); Argane ($2M); insiders ($0.6 million)THE HERRING TAKE: When you've got 30,000 vendors with disparate software systems and variegated supply chains, CEO Ken Campbell reckons it's time to call Centegy. When things get that complex, the supply-chain management software of Webmethods, Vitria Technolgoy, or TRADEX Technologies just won't do, he says. In contrast, Centegy relishes in the complications. The company focuses on what Mr. Campbell terms "mass" collaboration and integration of enterprise supply chains. That means tying together back-end communications, demand forecasting applications, and linking disparate technologies together, he says. Centegy is targeting large enterprises such as General Motors and Boeing, who have thousands partners of all shapes and sizes, but it can work with any firm regardless of their girth, he says. Centegy's software is open standard, so it can work with any preexisting enterprise software. So far, Mr. Campbell has signed 11 customers, including its lead investor OCI Chemical. That gave the firm a run rate of $3 million in its first fiscal year, he says. Centegy's on track to reach profitability by year's end. --S.S.
MYRIO http://www.myrio.com Kirkland, WAFUNDING: $20.5M PRIOR FUNDING: $5M (all Ridgewood Capital) ROUND: 2nd CATEGORY: Interactive TV software DESCRIPTION: Develops software that lets telecommunications providers deliver the Web, video-on-demand, and TV channels to consumers. LEAD INVESTORS: Neocarta Ventures; Alexander Hutton Venture Partners OTHER INVESTORS: Ridgewood Capital; Churchill County Telephone & Telegraph (does business as CC Communications); telecommunications consulting firm GVNW THE HERRING TAKE: Myrio wants to make telecommunications firms competitive with cable providers in the race to bring Web and video services to consumers' homes. The one-year-old company has one paying customer, a telco that in the third quarter of last year began offering Myrio's software in the Livingston, Texas, area. Myrio is in negotiations with four more telcos in Washington, Oregon, Oklahoma, and Ohio. Myrio will close all of those deals by February, says Myrio president and CEO Robert Manne. By the end of 2001, Myrio plans to have 25 customers and to be profitable. If it executes its plan, the startup will record profits a short two years after its formation. Signing up telcos is its first hurdle. The next is consumer acceptance and interest. For several years, interactive television -- where users can access the Web through television sets -- has generated lots of talk among entrepreneurs but little buzz among the people who are supposed to pay for it. --M.A.D.
NEW VENTURE FUND
DRAPER FISHER JURVETSON GOTHAM http://www.dfjgotham.com New York FUND: Draper Fisher Jurvetson Gotham Venture Fund, L.P. FUND CHIEFS: Ross Goldstein and Daniel Schultz, managing partners FUND SIZE: $107M FOCUS: "Early-stage information technology companies in Internet technology, broadband, and wireless communications, networking infrastructure and solutions, enterprise software, and IT services."AVERAGE INVESTMENT: $1M to $2M PITCH URL: http://www.dfjgotham.com/bp/index.html THE HERRING TAKE: You don't see odd numbers like $107 million as a venture fund amount very often, but DFJ Gotham's partners didn't get back to us to explain the extra $7 million. At any rate, this firm is part of the ever-growing DFJ affiliate network, meaning the dealflow is plentiful. Since DFJ Gotham was established in early 2000, the firm has made seven investments, including Inforocket, Inc. (http://www.inforocket.com), XOSoft Inc. (http://www.xosoft.com), Lumeta Corporation (http://www.lumeta.com), and Commerce Systems (http://www.2Scoot.com). Another portfolio company is Mimeo.com, whose services the firm requests entrepreneurs use when submitting a business plan. The fund is led by Ross Goldstein, a former CFO at Interactive Imagination (predecessor to 24/7 Media), and Dan Schultz, a Lehman Brothers alum. Initial investments are small, but the fund does set aside a fair amount for follow-on investments. DFJ Gotham plans to invest in 25 companies over the life of its first fund. --J.L.
DEALFLOW DIGEST
CHINGARI http://www.chingari.com Palo Alto, CA FUNDING: $23M PRIOR FUNDING: N/A ROUND: 1st CATEGORY: B2B DESCRIPTION: Enables companies to launch products over the Web. LEAD INVESTOR: Azure Capital Partners OTHER INVESTORS: Interwest Partners and Charter Venture Capital
CLASSMAPhttp://www.classmap.com Austin, TXFUNDING: $2.3MPRIOR FUNDING: N/AROUND: 2ndCATEGORY: Web site developmentDESCRIPTION: Builds and maintains course-specific Web sites and publishes reading material for university professors.LEAD INVESTOR: Chisholm Private Capital Partners; CCG Venture PartnersOTHER INVESTORS: N/AMORE INFORMATION: PRNewswire
HELIX CODE http://www.helixcode.com Cambridge, MA FUNDING: $15M PRIOR FUNDING: N/A ROUND: 1st CATEGORY: B2B DESCRIPTION: Software apps for Linux operating systems. LEAD INVESTOR: Battery Ventures OTHER INVESTORS: Angels
PHYLOS http://www.phylos.com Lexington, MAFUNDING: $25.1MPRIOR FUNDING: N/AROUND: N/ACATEGORY: Biotech/proteomicsDESCRIPTION: Develops a high-throughput protein biochip for drug discovery and functional proteomics applications.LEAD INVESTOR: Three Arch PartnersOTHER INVESTORS: Sprout Group; Lone Pine Capital; Invemed AssociatesMORE INFORMATION: PRNewswire
TRIAD THERAPEUTICShttp://www.triadtherapeutics.com San Diego, CAFUNDING: $30MPRIOR FUNDING: N/AROUND: 2ndCATEGORY: Biotech/ProteomicsDESCRIPTION: Develops technologies for accelerating small molecule drug discovery.LEAD INVESTORS: CSFB Private Equity; International Biomedicine HoldingsOTHER INVESTORS: Invus Group; 511 Equities; Yasuda Development; Skyline Ventures; H&Q Life Science Investors; Mediphase Venture Partners; J&J Development; Genechem Technologies; Lombard Odier & CieMORE INFORMATION: PRNewswire
VOLANTIA http://www.volantia.com London, England FUNDING: $2.8M PRIOR FUNDING: N/A ROUND: 1st CATEGORY: B2B DESCRIPTION: Artificial intelligence software apps. LEAD INVESTOR: NCOTEC Ventures OTHER INVESTORS: N/A
DEALFLOW DISH
WORLDREX, $2Mhttp://www.worldrex.com New York THE PITCH: "Worldrex is an auction-based marketplace for residential real estate. We create a seamless way to buy, sell, or rent properties within a compressed time sequence by introducing proprietary auctions and streamlining the property selection, pre-qualification, contract, and closing process. Initially, Worldrex focuses on New York City rental market, followed by the sales. With an emphasis on the traditional media outlets, Worldrex is building alliances with traditional brokers and real estate developers. Worldrex is seeking a first round of funding to finalize the auction software, finalize the marketing strategy, and perfect the registration of the patents."WHY WE LIKE IT: Increased efficiency for the tight New York rental market. WHAT THEY'RE UP AGAINST: Apartment/home brokers with Web presences who don't want to let anyone else have a piece of the market.CONTACT: Marsha Lipton, CEO, marsha@worldrex.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.)
DEALWOE
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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