Venture Update Vol III, #5, May, 1999

Done Deals

Charlotte-Osprey Systems Inc. (www.ospreysystems.com), a computer services firm, closed on $16.2 million in venture funding in March 1999. Investors included Morgan Stanley Dean Witter Venture Partners and Bank of America Ventures. Contact: David Rizzo (888.967.7739).

Chapel Hill-Electrifier (www.electrifier.com), a developer of graphics and multimedia software for Macintosh systems, closed a Series A round of financing in April 1999. The round was lead by Bernard Gray and included Tristate Investment Group III and private investors Gene Gabbard, Anthony Harrington, Robert Genieser, Jelmar de Jong and Marc Kaschke. Contact: Mihail Lari (919.968.0701).

Cary-Reciprocal (www.reciprocal.com), a developer of software for the protection of digital rights, received a $15 million investment from Microsoft in March 1999. Contact: Paul Bandrowski (919.462.4600)

Durham-BioStratum (www.biostratum.com), a developer of pharmaceuticals for diabetics, closed on $6 million in fourth round venture funding in April 1999. Investors were Scandanavian venture firms HealthCap and BankInvest. Contact: Archie Prestayko (919.572.6515)

Research Triangle Park-Raindrop Geomagic, a developer of software for three dimensional scanning, raised $5 million in venture financing in April 1999. Investors included Franklin Street/Fairview Capital. Contact: Jon Fjeld (919.474.0122).

Durham-Red Hat Software (www.redhat.com), developer of software for the Linux operating system, received equity investment from SAP AG of Germany, the world's largest corporate software producer. SAP distributes a version of its R/3 server software to run on servers powered by Linux. Red Hat also received equity investment Direct Invest, a recently formed private investment division of Dell. This is the first time Dell has invested in a private firm. Contact: Bob Young (919.547.0012).

Research Triangle Park-OpenSite Technologies Inc. (www.opensite.com), a developer of software for Internet auctions, formed a strategic partnership with Open Market, a provider of Internet commerce and information publishing software. Under the agreement, Open Market will resell OpenSite Auction software to its enterprise customers and Commerce Service Providers (CSPs). In addition, OpenSite will integrate OpenSite Auction with Open Market's commerce technologies. Contact: Kip Frey (919.544.1993).

New Developments
Durham-KOZ.com (www.koz.com), a developer of software for community Web publishing, signed an agreement with Knight Ridder Real Cities, MediaNews Group and Donrey Media to use KOZ's software. Contact: Harry Bailes (919.767.2131).

Research Triangle Park-Celotek Corporation (www.celotek.com), a developer of cryptographic systems for high-speed Asynchronous Transfer Mode (ATM) networks, signed distribution agreements Fiberdata AB, K-NET Limited, NEC Corporation, Tokyo, and Siemens SA in April 1999. Contact: Cheryl Joyce (919.462.1900).

Cary-SciQuest (www.sciquest.com), a developer of Internet site for scientific equipment sales, formed an agreement with Hoffman La Roche, under which Hoffman La Roche will buy 400 of its existing suppliers through SciQuest.com Marketplace. SciQuest released SciQuest.com Marketplace, an electronic commerce marketplace designed to streamline the $9.4 billion scientific products industry, in April 1999. Contact: Peyton Anderson (919.281.2100).

Research Triangle Park-Delta Pharmaceuticals, developer of pain killing pharmaceuticals, sold the world-wide licensing rights of its experimental painkiller, DPI-3290, to Netherlands-based Organon Teknika. Delta will receive an upfront payment and royalty payment based upon sales. Contact: Kwen-Jen Chang (919.572.6515).

Durham-AlphaVax Human Vaccines, a developer of pharmaceuticals for human vaccine products using the AlphaVax vector system, named Peter F. Young as its new president and CEO. Young was Vice President, HIV Oppotunistic Infection Therapeutic Development and Product Strategy at Glaxo Welcome R&D. Contact: Peter Young (919.688.6902).

Research Triangle Park-The Council for Entrepreneurial Development (www.cednc.org) will hold the STREAK luncheon, venture forum program created to assist early-stage high-growth companies that are seeking equity investment in developing their business strategies, on May 5, 1999, at the Sheraton Imperial. Reedy Creek Technologies will present at the luncheon. Reedy Creek has developed an e-mail based content management tool that allows even the most novice Internet user to quickly and easily manage Web pages. Contact: Sherie Johnson (919.549.7500).

On The Up
FOVEON
With so many people eager to buy on the Web, e-retailers face a tremendous challenge to replicate the personal service shoppers can get in a store. Raleigh's Foveon Corporation is developing Internet data services and software to help e-commerce sites to tailor their products and services more closely to the wants, needs and desires of their customers-and all of it in real time.

"Foveon's technology allows users to understand, track and improve e-commerce relationships," explains Mike Munsch, Foveon's CEO.

For instance, ISPs can use the product to understand subscribers' online activities and preferred sites, allowing them to identify new service and revenue opportunities. On-line merchants and vendors can integrate Foveon data with their internal customer and Web site performance data to calculate the profitability of specific types of users. "The result," says Munsch, "is that they can manage the growth of their on-line business and Web presence at a lower cost, without compromising quality or privacy."

The company was financed by a seed round of $3 million led by Intersouth Partners and Tristate Investment Group III. The funds are being used to prove the concept through three beta trials (which were completed in April), and to work with ISPs to develop profiles and scale up operations.

Munsch is the founder and management team member of two other successful companies. He is joined on the Foveon team by Jan-Dieter Spalink, CTO, and Brian R. D. Gullette, vice president of system development.

While the company is still in its very early stages, Munsch is confident it will get the support it needs to continue to grow. "The Research Triangle is a great place to do business," he says. "There's a lot of support from the infrastructure, so you can really nurture your business here."

Featured Fund
CANAAN PARTNERS
With almost $700 million under management, Canaan Partners is an active investor in start-up IT, software and communications companies from coast to coast. But, cautions Principal Jim Furnivall, "if you're just looking for money, don't come to us."

"We take an active role in our companies," he continues. "We work closely with the management teams and other board members to help make the companies successful."

With offices in Rowayton, Conn., and Menlo Park, Cal., the firm looks closely at two primary characteristics when reviewing companies: product and management.

"We like to see an exciting product idea with a large market opportunity and a compelling value proposition," he explains. "A strong team must be highly motivated to create a successful company and work well together."

Last year, the firm participated in Ganymede Software's second-round of $5.5 million with Pioneer Capital of Boston. "We like Ganymede because they have an outstanding product and a great customer list." And although Morrisville-based Ganymede is Canaan's only Research Triangle investment to date, Furnivall is excited about the area and is actively looking for new investment opportunities.

"The reason I spend time in the Research Triangle is that it's got a great technology base and a strong desire to build and grow small companies. The region is starting to think big."

Mark Your Calendar!
STREAK Luncheon
May 5, 1999
11:30 - 1:00
Sheraton Imperial
Members of the entrepreneurial and investment community are invited to Take a first look at a bright young company .

CED Entrepreneurial Excellence Awards and 15th Anniversary Celebration
June 10, 1999
Join CED in recognizing top entrepreneurs while celebrating the 15th anniversary of the nation's largest entrepreneurial support organiztion.

For more information about these events or to register, visit the CED Web site at www.cednc.org or call 919.549.7500.

CED is a private non-profit supported, in part, by corporate contributions, including funding from Intersouth Partners, KPMG Peat Marwick and Manpower.

Research Triangle Venture Update is published by the Council for Entrepreneurial Development (CED), a non- profit organization located in Research Triangle Park, N.C.
Editor Carolyn Foy, CED
P.O. Box 13353
RTP, NC 27709
Phone: 919.549.7500
Fax: 919.549.7405
Email: mcfoy@cednc.org