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DEALFLOW DASHBOARD/ September 14
B2B: Prefer Network, $12M; Telesuite, $3MINTERNET: Allegis, $26M; Appshop, $17M; SOFTWARE: Onepage, $12.5M DEALFLOW DIGEST: Cachestream, $2M; Circadence, $51M; Delirio, $1M; Epoch Internet, $27M; Eventzero, $20M; Glycodata, $2.5M; Infohighway Communications, $45M; Mobli, Undisclosed ELEVATOR PITCH: LowerMyBills.com, $15M
DEAL OF THE DAY: REPLICON, $2M
Replicon CEO John Eddy is, to coin a phrase, an anti-spin-ite. He holds views that are anathema to the high-tech PR establishment. "I don't use the words B2B and ASP to describe my business," he says. Instead he concerns himself with asking questions like: "What are a business' migraine headaches?" and finding cost-saving answers.
Mr. Eddy reckons that simple everyday processes like time sheet management and expense reports cause major problems. So Replicon's founders went about building two Web-based applications to relieve the stress on businesses and optimize workforce productivity.
The Calgary-based company (www.replicon.com) made its first sale in 1998 and has since brought in another 299 customers, including HP, Lucent Technologies, and Kraft. The software is sold through a traditional licensing model or through an ASP-type model.
The company pulled $540,139 in revenue last year and, until now, Replicon has built and financed its business on internal cash flow. This first round of outside investment was brought in by Mr. Eddy to finance marketing and sales initiatives in the U.S. VCs might find his philosophy on fund raising equally heterodox: he prefers angel investment to institutional venture capital because it has "no strings attached." "I just want enough money to get the fire going," Mr. Eddy says. "When you're sitting on $100 million you have to worry about how to spend the money." Replicon will be profitable by second quarter next year, he says.
INVESTORS: BDCVenture Capital ($500K, lead); Private investors
--Steve Silverman
B2B
PREFER NETWORKwww.prefernetwork.comNew York FUNDING: $12MPRIOR FUNDING: $4MROUND: 2ndCATEGORY: B2BDESCRIPTION: Offers products to help retailers sell more products online. LEAD INVESTORS: Desai Capital ManagementOTHER INVESTORS: Prospect Street Ventures; Draper Richards; eCom Partners; Pennell Venture Partners; Stonehenge Capital; BNY Capital Markets; Foster Management; individual investor Rick BlackTHE HERRING TAKE: Prefer Networks unites merchants with high traffic Web sites. The company makes money by taking a commission on product sales, and renting to clients transactional data from its collaborative consumer database. Retailers who join the network contribute their transaction information to the database with the aim of acquiring new customers. According to CEO Doug Platt, the 60-employee company has a monthly burn rate of $1 million. It will spend the new capital on acquiring customers, database mining, and marketing. Competitors include CatalogCity.com. Prefer has signed up more than 40 retail partners. Mr. Platt reconnected with Desai since he and his partner Sydney Herman had considered doing a project with them a couple of years ago. "We didn't want a lead that was an Internet-only VC, so we chose Desai," says 36-year-old Mr. Platt. The company is the CEO's fifth startup. At 22, he started a homeless services organization. Since then, he has run a catalog company, a furniture company, and a specialty travel business.
TELESUITE www.telesuite.com Dayton, OH FUNDING: $3M PRIOR FUNDING: Around $5M ROUND: 2nd CATEGORY: B2B DESCRIPTION: Develops virtual conferencing suites. LEAD INVESTOR: NMVP THE HERRING TAKE: Profitless, Telesuite has been limping along for five years thanks to the generous cash handouts from angel investors. The company secured this round because new investors, NMVP of Park City, Utah, think Telesuite's video conferencing suites hold promise and money-making potential, which begs the question, why? After all, a source close to Telesuite complained of company mismanagement and a need to infuse profitability to the money-losing enterprise. Alas, NMVP hopes this latest infusion and management changes will be the right formula for lifting Telesuite from its woes. What does Telesuite do? They produce video conferencing suites for entities like 3Com, PricewaterhouseCoopers and Duke University, among others. It was founded by CEO David Allen and others, whose idea to build an IT empire began while they worked as construction laborers in the British Virgin Islands, according to NMVP investor Mark Schaeffer. "They kept seeing planeloads of executives flying to New York for two hour meetings and thought 'hey, we can do something about this,'" he says. Today, Telesuite's fully-configured suites -- cameras, monitors, lenses, and broadband hookup -- cost between $100,000 to $300,000 each. So, Mr. Schaeffer, what happens when this round of funding peters out? "We're prepared to do whatever it takes," he says. And Telesuite's CEO David Allen told Redherring.com the company is looking for a third round of funding in the neighborhood of $25 million.
INTERNET
ALLEGISwww.allegis.comSan FranciscoFUNDING: $26MPRIOR FUNDING: $39MROUND: MezzanineCATEGORY: CRM/ASPDESCRIPTION: Provides software and services that enable cross selling and collaboration amongst channel partners online.LEAD INVESTOR: J. & W. SeligmanOTHER INVESTORS: Amerindo Investment Advisors Private Equity Group; Benchmark Capital; Brinson Partners Integral Capital; Intel 64 Fund; Charter Growth Capital; Staenberg Ventures; Credit Suisse First Boston; Chase Hambrecht & Quist; Deutsche Banc Alex BrownTHE HERRING TAKE: Similar venture fundings come in twos. Earlier this week, iMediation, another online partner collaboration software maker, pulled in $52.5 million in funding. But CEO Dennis Ryan says Allegis is different. While iMediation focuses strictly on the collaborative sales, Allegis's offerings are broader. "We have 20 applications in our suite," he says. "They map to the entire life cycle of managing partner relationships." The applications help companies to recruit partners, manage leads, and monitor performance. Allegis also provides its services through a different model than iMediation's traditional licensing. The company hosts its services out of two California-based data centers for a monthly fee starting at $30,000 per month. So far Allegis has signed 15 customers, including HP, Lexmark, and Samsung. That's another area where the two companies differ: iMediation's client list numbers 60.
APPSHOP www.appshop.com Fremont, CA FUNDING: $17M ROUND: Seed CATEGORY: ASP DESCRIPTION: Develops IT infrastructure for small to midsize companies with Oracle products. LEAD INVESTOR: Menlo Ventures OTHER INVESTORS: El Dorado Ventures; Osprey Ventures; RSA Ventures; Stanford University THE HERRING TAKE: Appshop's burn rate? Around $1.5 million a month. Employee numbers? 130. Competitors? Aristasoft and Corio. What does Appshop do? It develops IT infrastructure for small to midsize companies using Oracle products. Revenue streams are licensing, hosting and consulting fees. Appshop was spun off from Simplify, an exclusive Oracle consulting group, in 1997, and changed its focus to an ASP model last year. President and cofounder Prashanth Prahlad, 37, spent seven years in the Oracle trenches in various application development groups before striking out on his own with other Oracle execs. Less than a year after morphing into an ASP, Appshop is claiming profitability on a $20 million run rate and has unveiled plans for aggressive expansion that will see it develop data centers in Denver, Seattle, and Los Angeles. Appshop's client list is strong, it's making money (according to Mr. Prahlad), and the ASP space it's occupying is in demand with clients and a favorite with VCs and investors. Two more reasons for the startup's possible success? Strong Oracle connections and a thick Rolodex of clients from their days as IT consultants.
SOFTWARE
ONEPAGEwww.onepage.comRedwood City, CAFUNDING: $12.5MPRIOR FUNDING: $2MROUND: 2ndCATEGORY: SoftwareDESCRIPTION: Provider of content aggregation and portal software to IT professionals and Web publishers. LEAD INVESTORS: Vulcan VenturesOTHER INVESTORS: Allen & Company; Texas Pacific Group; Oscar Capital ManagementTHE HERRING TAKE: Onepage CEO William Chen says the company's mission is to "uncomplicate the collection and dissemination of Web data." Its software automates the process of collecting data from different sources. The company, 60 employees strong, derives the bulk of its revenues from licensing its technology. It also plans to make money via hosting fees. Onepage will announce its initial customers in the next few weeks. According to Mr. Chen, the funding will last "well into next year." It will spend the bulk of its capital on research and development, and on exploring new markets. The company is competing with firms that use in-house engineers to aggregate data. Mr. Chen plans to pursue these companies by convincing them that his startup's software can reduce their costs. The pitch is Onepage's product will replace their engineers. It hopes to partner with publishing systems companies. This is Mr. Chen's first time as a CEO. He previously founded Billpoint, which was acquired by eBay. The 31-year-old says he pays himself between $100,000 and $150,000.
DEALFLOW DIGEST
CACHESTREAMwww.cachestream.comNorcross, GAFUNDING: $2MROUND: 1stCATEGORY: SoftwareDESCRIPTION: Provider of broadband software for the delivery, storage, and security of broadband content. LEAD INVESTORS: Q6 Technologies
CIRCADENCEwww.circadence.com/Boulder, COFUNDING: $51MPRIOR FUNDING: $41.5MROUND: 6thCATEGORY: Network ManagementDESCRIPTION: Provides quality of service software for Web sites.OTHER INVESTORS: Hewlett-Packard; PSINet Ventures; Global Crossing; Hikari Tshushin; Deutsche Telekom; MicrosoftMORE INFORMATION: PRNewswire
DELIRIOwww.delirio.comSantiago, ChileFUNDING: $1MPRIOR FUNDING: $400,000ROUND: 1stCATEGORY: B2B2CDESCRIPTION: Through its site, allows businesses to liquidate inventory to consumers. LEAD INVESTORS: Local investors including Hans Eben, Jaime Braun, Fernando Bellocchio, Alejandro Banados
EPOCH INTERNET www.epoch.net Costa Mesa, CA FUNDING: $27M CATEGORY: ISP DESCRIPTION: Offers full-array of Internet services LEAD INVESTOR: Williams Communications MORE INFORMATION: Epoch Internet
EVENTZERO www.eventzero.com Arlington, MA FUNDING: $20M PRIOR FUNDING: Unknown CATEGORY: Professional Services DESCRIPTION: Provides consulting for e-businesses. LEAD INVESTOR: First Union Capital Partners OTHER INVESTORS: Shawmut Capital Partners; Trident Capital; Integral Capital Partners; Sparkventures MORE INFORMATION: Eventzero
GLYCODATA(subsidiary of Health Care Technologies) www.hctech.comAshdod, IsraelFUNDING: $2.5MROUND: 1stCATEGORY: BiotechnologyDESCRIPTION: Startup in the field of glycobiology drug discovery and development and bioinformatics. LEAD INVESTORS: Israeli investment groups including Koor Corporate Venture Capital; MedabiotechMORE INFORMATION: PRNewswire
INFOHIGHWAY COMMUNICATIONSwww.infohighway.comNew YorkFUNDING: $45M (of a total capital commitment of $150M)ROUND: 1stCATEGORY: CLECDESCRIPTION: Provides end-to-end broadband data and voice telecommunications to small to midsize businesses and apartments.LEAD INVESTOR: GTCR Golder RaunerMORE INFORMATION: Businesswire
MOBLI www.mobli.com FUNDING: UndisclosedCATEGORY: Software DESCRIPTION: Software for mobile applications like cell phones and Palms. LEAD INVESTORS: A slew of American, Japanese, Scandinavian and German angels. MORE INFORMATION: Mobli
ELEVATOR PITCH
LOWERMYBILLS.COM, $15MNorth Hollywood, CAwww.lowermybills.comTHE PITCH: "LowerMyBills.com is a one-stop service to lower recurring bills -- energy, telecommunications, financial services -- plus a tool for service providers to acquire customers. An $800 billion market. A brand name team from Insweb, MCI, 24/7, Brobeck, Providian, USWeb, and Idealab, and an exclusive with consumer advocate David Horowitz. We are the first executing mover and our name clearly articulates the value proposition -- $26 customer acquisition cost in August that approaches Priceline efficiency, 1,000+ media placements this quarter including Parade, Newsweek, and Yahoo; distribution deals that make sense including Yodlee and SuperMarkets Online; and gross profits increasing monthly. We need $15 million to get profitable in 15 months."WHY WE LIKE IT: Aggregating cost-saving information on unavoidable monthly bills such as insurance, mortgage, long distance, and credit cards could make LowerMyBills.com a valuable resource for consumers. WHAT THEY'RE UP AGAINST: LowerMyBills.com makes money by taking a commission on services sold from its Web site. As with most business-to-consumer firms, LowerMyBills.com has to attract a critical mass of customers for its revenue model to work. That's an uncertain and expensive proposition. CONTACT: Matt Coffin, founder & CEO, mcoffin@LowerMyBills.com; (818) 755-8800 x2000; cell (818) 402-6917
(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.)
Dealflow is reported and written by Karie Atkinson, Richard Byrne Reilly, and Steve Silverman. Today's Elevator Pitch is selected and written by Steve Silverman.
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