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The news

Morgan Stanley Venture Partners recently led a $15.8-million late-stage funding round for iRise, based in Los Angeles. The round raises iRise’s total funding to $28 million, with several of the more than 30 individual first-round financiers returning. The money will be used for expansion—aiming to increase sales domestically and in Europe—as well as for customer support improvements.

Why it matters

iRise software, called Application Simulator, shows what a web page will look like before it goes into development. Execs can review the look, feel, and functionality of the mock-up before sending it on to programmers to build. The software’s strength is simplicity. Users can lay out a web page and step through the basics of how it will work within minutes, hacking off hours of tedious technical description and revision. The software does not actually build a web site—it only conceptualizes the design. Integrating the site with the company’s existing Internet infrastructure and databases is left to developers.

According to the company’s web site, iRise has sold its e-commerce simulator to blue-chip companies including Boeing, Bank of America, Deloitte, and The Home Depot. It’s easy for a team’s non-techies, says CEO Emmet Keeffe: “Anyone who knows how to use Excel, Powerpoint, and Visio can use this.”

The iRise simulation improves communication. Once the business team signs off on an application, they can send the blueprints they’ve designed to the application programmers. The simulation replaces a hefty, and often confusing, set of written instructions. Communicating business needs to application programmers has become increasingly critical as more development jobs have been offshored.

“Seventy to 80 percent of project failures come from poor requirements-gathering and articulation,” says Melinda-Carol Ballou, an analyst at research firm the META Group. “It’s pretty costly.”

Increasing application complexity and offshore production has increased demand for tools that help businesses implement e-commerce. According to research firm Gartner, the market for tools that facilitate collaborative application development will exceed $500 million per year by 2008.

The team

The management team is split between people who have a lot of experience building software and people who have sold a lot of software. iRise President Maurice Martin worked for both Accenture and Deloitte Consulting designing web applications.

Mr. Keeffe sold technology for Minolta, NetDynamics, and General Electric. The company has 90 employees.

The competition

Sofea, based in Toronto, sells similar application simulation software. The company got its first round of venture funding last May, from AXIS Investment Funds, but has not disclosed the amount invested. Although Sofea is the most direct competitor, it may not be the biggest threat. Larger companies that manage a wider slice of the application construction process could give iRise trouble. IBM’s Rational software, for example, helps business people put together specifications, like iRise, but also has tools that developers need to actually make the site. iRise has yet to build out to cover all parts of the production process.

Skepticism

The company has done interesting things. Instead of rushing out for venture funding, the founders put the company together in 1996 and sold their consulting services while developing the Application Simulator. It raised its first round of funding from over 30 individual investors, including Dean Witter III. Now it has signed an investor with the ability to quickly expand the company’s sales. According to Mr. Keeffe, Morgan Stanley spends $3.3 billion on new applications each year and will be able to plug iRise into the development process.

Since the company sells a tool for developers, it limits its customers to those who professionally build applications: mainly consultants. Its $250,000 software suite has so far only attracted 50 customers, each of which can then develop a slew of web sites.