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DEALFLOW DASHBOARD/ October 25, 2000
ASP: MMS, $19.2MB2C: Vivre, $8MB2B2C: Opentable, $42MCOMMUNICATIONS EQUIPMENT: Lara Networks, $40M; Rapid5 Networks, $53MNEW VENTURE FUND: Vanguard Venture Partners, $240MDEALFLOW DIGEST: Aristocart, $4.5M; Capital IQ, undisclosed amount; e-Commerce Solutions, $4M; eMikolo, $4.5M; Incurrent Solutions, $3M; Lineabox, undisclosed amount; Primavera Networks, undisclosed amount; Roundpoint, $5M; Sitara Networks, $5MELEVATOR PITCH: Biolynx.com, $5MDEALFLOP: Eve.com bites a bad apple
DEAL OF THE DAY: PINGTEL, $17.9M
Pingtel CEO Jay Batson declares hopefully: "We want to be the Palm Pilot of the business phone arena." Like Palm, you can break down Woburn, Massachusetts-based Pingtel into two distinct categories: hardware and software. For hardware, they manufacture Internet phones, devices that can run in tandem with networks and ethernets. On the software front, they produce a Java-based solution that takes many PC features, including streaming video and conference calling, and makes them phone-friendly.
Imagine, dual production priorities with only 18 full-time employees and a burn rate hovering around $500,000 per month? And as yet no publicly named customers! Will it fly? Mr. Batson, a big-hearted optimist, offers a resounding "yes!"
But developing both software and hardware simultaneously is an expensive proposition that requires exorbitant R & D costs. It seems likely he'll need more than the $20 million raised so far, probably much more since Pingtel is in the early beta stage.
The company has yet to devise a solid causeway to profitability. "I wouldn't say we have a publicly disclosable date for profitability," he says. But he assured us that day is coming, as is the official unveiling of product and a list of paying customers.
INVESTORS: SAIC Venture Capital; Intel Venture; St. Paul Venture Capital; Windriver Ventures; Dain Rauscher Wessels.
--Richard Byrne Reilly
ASP
MMS http://www.mmsincentives.com Norcross, GA FUNDING: $19.2M ROUND: 1stCATEGORY: ASPDESCRIPTION: Loyalty and incentive program enterpriseLEAD INVESTOR: Capital Resource PartnersOTHER INVESTORS: Equity-SouthTHE HERRING TAKE: Asked if she would like to bury her competitors, including Webmiles and Netcentives, MMS CEO Mylle Mangum said yes. "Well, I came from General Electric," she says ruefully. GE has buried plenty of bodies over the years, and with MMS, Ms. Mangum is hoping for deja vu. The 25-year-old company was profitable, she says, but is now feeding at the troughs of VCs to help grow the company. More than 40 new employees will be added to the current 160, with about one-third of the new funding going toward marketing. One of MMS's strengths is its customer base, which includes 20 percent of the Fortune 100, including GM, Chase, and First Union. But competition is stiff, so success will hinge on growth in MMS's customer base and market conditions. The determined Ms. Mangum is realistic about her exit strategies: either an IPO, acquisition, or just generating lots of cash suits her just fine.
B2C
VIVREhttp://www.vivre.comNew York FUNDING: $8M PRIOR FUNDING: $20MROUND: 3rdCATEGORY: B2CDESCRIPTION: Allows consumers to shop for luxury goods through its site.LEAD INVESTORS: RRE Ventures; Charles River Ventures; North Bridge Venture Partners; London-based Rolaco ServicesTHE HERRING TAKE: Although B2C endeavors are out of favor with most investors, not all VCs have written them off. Some smart VCs have lined up behind Vivre, an online luxury goods retailer that merged with beauty and accessory site Indulge.com in January. The company takes transaction fees from retailers on purchases made through its site. According to Doug Ford, Vivre’s COO, the company plans to add other revenue models, such as advertising fees and revenue sharing programs. So far, its partnerships include such luxury brands as Christofle and Cartier and a deal with American Express. Mr. Ford says the company is shooting for profitability in the fourth quarter of next year. However, it's competing against the individual catalogues of luxury retailers themselves, as well as online competitors eLuxury, Luxuryfinder.com, and Luxlook.com.
B2B2C
OPENTABLEhttp://www.opentable.comSan Francisco FUNDING: $42M PRIOR FUNDING: $13M ROUND: 3rd CATEGORY: B2B2C DESCRIPTION: Allows consumers to book restaurant reservations online, and provides services to restaurants and hotels so they can track client profiles and manage restaurant reservations. LEAD INVESTORS: Benchmark Capital; Impact Venture Partners OTHER INVESTORS: Integral Capital Partners; Epoch Partners; Comdisco Ventures; Upstart Capital; Worldspan THE HERRING TAKE: Like many other B2B2C companies, Opentable is beefing up the B2B side of its value proposition. The San Francisco-based company originally made money from transaction fees for reservations made through its site, as well as from the CRM software it installs on restaurant PCs for managing tables and tracking customer profiles. Now, it's also hoping to sign partnerships with travel and other sites. CEO Jeff Edwards says the new capital will be spent on potential acquisitions and expanding its service to new markets. It currently has about 36,000 registered members and 1,200 restaurants signed up, according to Mr. Edwards, with 150 new restaurants added each month. He adds that profits will be served up by the end of 2001. Foodline.com is Opentable's biggest competitor, in a field that also includes Ireserve.com, Dinnerbroker.com. Another rival, Eseated, bit the dust recently, leaving room for further consolidation in the sector.
COMMUNICATIONS EQUIPMENT
LARA NETWORKShttp://www.laranetworks.comSan Jose, CAFUNDING: $40MPRIOR FUNDING: $17.5MROUND: 2ndCATEGORY: Integrated circuitsDESCRIPTION: Provides networking processors for high-performance search engines, network switches, and routers. LEAD INVESTOR: Raza VenturesOTHER INVESTORS: Battery Ventures; Investar Capital; Telesoft Venture Partners; Bancboston Robertson Stephens; U.S. Bancorp Piper Jaffray; Dain Rauscher Wessels; Needham & Co. THE HERRING TAKE: The multiplication table cheat sheets we all used in grade school actually have a use outside of a seven-year-old's treachery. Well, conceptually, at least. Lara Networks is embedding silicon with multidimensional "routing table" cheat sheets to speed up the way routers direct traffic on the Internet. Current router technologies use inefficient "sequential" charts (the grade-school equivalent is solving multiplication problems such as 5x5 by adding 5 together 5 times). That process requires a combination of networking processors, SSRAM databases, and software, which can slow down packet throughput and cause bottlenecks. By contrast, Lara's technology can handle multiple 10 Gbps pipes in a router without impeding performance, looking up destination addresses and service level priorities in ten nanoseconds. The company has signed up about 60 customers, including Cisco Systems, Nortel Networks, and Lucent Technologies. With at least another 40 customers expected for next year, Lara should be profitable by mid-2001.
RAPID5 NETWORKShttp://www.rapid5.comSan Jose, CAFUNDING: $53MPRIOR FUNDING: $17MROUND: 2ndCATEGORY: SwitchesDESCRIPTION: Develops an access gateway switchLEAD INVESTOR: Meritech Capital PartnersOTHER INVESTORS: Redpoint Ventures; US Venture Partners; Menlo Venture Partners; Bank of America Venture Partners; Sumitomo; US Venture PartnersTHE HERRING TAKE: That innocent two-hour call to your local dial-up ISP is running a savage burn on someone: your local phone company. That’s because each time you connect to the Internet from a dialup modem, your call is routed through a Class 5 switch designed to handle four- to five-minute phone calls, not one to two hours of Web surfing. As a result, you're tying up an entire circuit for the duration of the call. Rapid 5 develops a "dialup offload" switch that sits alongside a Class 5 switch. Rapid's gear traps all dial-up traffic and puts it onto the Internet without going through the Class 5, thus freeing up much-needed switching capacity. CEO Shirish Patel reckons that product will save carriers $1.2 billion over the next three years. The gear will be in lab trials by first quarter next year, with a general release slated for the second half of 2001.
NEW VENTURE FUND
VANGUARD VENTURE PARTNERS Palo Alto, CA and Houston, TX FUND: Vanguard VIIFUND CHIEF: General partner Don Wood FUND SIZE: $240MPRIOR FUND: $100MFOCUS: Early stage; communications equipment providers, Internet infrastructure, software and life sciences companiesAVERAGE INVESTMENT: $8M to $12M PITCH EMAIL ADDRESS: info@vanguardventures.com THE HERRING TAKE: "This fund was the easiest to raise ever," chirps general partner Don Wood, the former president of Metricom who abandoned ship two years ago to pursue venture capital. This latest windfall was garnered from pensions, trust funds, Paul Allen, the partners at Vanguard, unnamed CEOs, and of course, family and friends. Yet with an eye on the current market downturn, Mr. Wood quickly added: "But the partners are looking more closely as to where they're now investing." The $240 million should last around two years, with investments going to around 25 companies, half of them in Silicon Valley and the rest elsewhere. Vanguard has in the past met with success as an early backer of Network Appliance, Cobalt, and Digital Alliance, but also invested in flops like Cooking.com. Still, Mr. Wood says the firm has is coasting on 130 percent returns.
DEALFLOW DIGEST
ARISTOCARThttp://www.aristocart.comWilmington, DE FUNDING: $4.5M ROUND: 1st CATEGORY: B2C DESCRIPTION: Provides an online shopping assistant tool that allows consumers to find products and compares prices. LEAD INVESTORS: Israeli AIG Orion OTHER INVESTORS: eXseed Technology Investments; founders MORE INFORMATION: PRNewswire
CAPITAL IQhttp://www.capitaliq.com New York FUNDING: Undisclosed CATEGORY: Vertical Applications DESCRIPTION: Provides a software platform for investment banking which includes searchable market intelligence; customer relationship management; and electronic transaction processing capabilities. LEAD INVESTOR: Wit Soundview Group NOTEWORTHY: Under the deal, Wit Soundview will begin using Capital IQ's software.MORE INFORMATION: PRNewswire
E-COMMERCE SOLUTIONS (ECS)http://www.ecsnetwork.comStamford, CTFUNDING: $4MROUND: 1stCATEGORY: ASPDESCRIPTION: Develops and manages outsourced e-commerce applications and systems for Internet, traditional media, and telecomcompanies. LEAD INVESTORS: Connecticut Innovations; Davenport Capital Ventures MORE INFORMATION: Businesswire
EMIKOLOhttp://www.emikolo.com New York FUNDING: $4.5M CATEGORY: Internet infrastructure provider DESCRIPTION: Facilitator of content distribution and delivery between content providers, ASPs, and ISPs. LEAD INVESTOR: Israel Seed Partners OTHER INVESTORS: Angels MORE INFORMATION: eMikolo
INCURRENT SOLUTIONSParsippany, NJFUNDING: $3MROUND: 1stCATEGORY: CRMDESCRIPTION: Provides Internet and wireless services to card-issuing banks and other transaction processors.LEAD INVESTORS: Edison Venture FundMORE INFORMATION: Businesswire
LINEABOXhttp://www.lineabox.com Miami, FL FUNDING: Undisclosed CATEGORY: Wireless DESCRIPTION: Voice-enabled Internet applications targeting Latin American markets. LEAD INVESTOR: Dorado Investments (Motorola)MORE INFORMATION: Yahoo
PRIMAVERA SYSTEMS http://www.primavera.com Philadelphia, PAFUNDING: UndisclosedCATEGORY: Enterprise softwareDESCRIPTION: Provides project management and control software for the architecture, engineering, and construction industries. LEAD INVESTOR: Intel Capital NOTEWORTHY: Combined with a recent investment in Primavera by i2 Technologies, the investments represent a 21.7 percent ownership in the company. Both Intel and i2 will aid in the development of Primavera's software. MORE INFORMATION: Businesswire
ROUNDPOINThttp://www.roundpoint.com San Francisco FUNDING: $5M ROUND: 2nd CATEGORY: Wireless applications DESCRIPTION: Provides a technology for publishing Web site content on wireless devices. LEAD INVESTOR: Thinkventures OTHER INVESTORS: Arthur D. Little, Inc.; Brainstorm Ventures; private investors MORE INFORMATION: Businesswire
SITARA NETWORKShttp://www.sitaranetworks.com Waltham, MA FUNDING: $5M PRIOR FUNDING: $70MCATEGORY: B2B DESCRIPTION: Integration network solutions for deploying e-business protocols. LEAD INVESTOR: SI Ventures
ELEVATOR PITCH
BIOLYNX.COM, $5MSan Antonio, TXhttp://www.biolynx.comTHE PITCH: "Biolynx.com utilizes patent-pending process and proprietary software and biometric technology to create an Internet-based time & attendance and data integration system. Industry research reveals that companies using a traditional time clock, punch or swipe card system may be losing 8 to 20 percent in labor costs due to time theft/fraud and clerical errors. The Biolynx.com system provides unprecedented accuracy and accountability, and customers enjoy an immediate reduction in labor and administration costs, which translates into increased profits. Market: U.S. employers currently hire 133 million hourly wage earners. Seeking $5M."WHY WE LIKE IT: Companies could cut down on employee slacking.WHAT THEY'RE UP AGAINST: The Big Brother-ism implied in biometric tracking of employees.CONTACT: Alan W. Saltzman, Chairman & CEO, asaltzman@biolynx.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.)
DEALFLOP
EVE.COMSan Francisco STATUS: Shut doors; trying to sell assetsTOTAL VC: $29MNO. OF ROUNDS: 2BURNED BACKERS: Charter Growth Capital; Crosslink Capital; Lightspeed Venture Partners (formerly Weiss, Peck & Greer); Menlo Ventures; Idealab Capital PartnersDESCRIPTION: Business-to-consumer beauty and accessories site founded in June 1999 by Idealab. Most of the company's 164 workers were let go as the site closed up shop on Friday.MORE INFORMATION: Excite
Dealflow is reported and written by Karie Atkinson, Richard Byrne Reilly, Steve Silverman, and Julie Landry. The Elevator Pitch is selected and written by Julie Landry.
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