$160M Not Enough, Visto Craves More

Visto Corp. is at it again. The company has raised more than $160 million in seven rounds of funding during its nine-year life. But it is currently raising its eighth round of funding, according to several sources, and it’s shooting for a target of between $60 million to $100 million.

Visto targets a hot but competitive market. It makes software that lets phone companies offer wireless email services.

Already, its list of past investors reads like a Who’s Who of Silicon Valley. Among the 27 venture firms to have backed the company are New Enterprise Associates, Draper Fisher Jurvetson and Trinity Ventures. Its backers have also included later-stage investors Oak Investment Partners and Meritech Capital Partners, which helped fund its recent, $65 million round, which closed in March 2004 and were presumably hoping the company would file for an IPO rather than raise yet another round this year. (A call to Oak’s Bandel Carano, a Visto board member, went unreturned; Paul Madera of Meritech was unavailable for comment.)

Though at least one previous investor plans to participate in Visto’s eighth round, many of its past investors are reportedly not keen about investing again, sources say. Others, who have not invested, are scratching their heads over how VCs plan to make their money back – especially once its newest financing round is completed.

One source, not an investor, but who is close to the situation, says, “They can’t go public on their revenue line with their losses and their balance sheet. No way. They really need additional revenue traction, and I don’t know how they are going to generate that in the foreseeable future.”

Brian Bogosian, Visto’s founder and CEO, has been traveling in Europe and was unable to speak with PE Week. Company spokesman Sanjay Kamble says that he couldn’t confirm any details, “because we don’t discuss fund-raising before we make our announcement.” Additionally, there were no regulatory filings, such as a Form D, that detailed any funding plans.

Kamble did underscore Visto’s growth strategy – which is to grow big, fast.

Among its various plans, Visto, which sells wireless push email technology for mobile devices to telecom carriers, expects to double its staff of 155 by the end of the year.

The company also plans to double the number of operators with which it is now working with from 12 to 24. Current operators include AT&T Wireless, Vodafone and Bell Mobility of Canada.

Visto has also made an as-yet-unannounced acquisition of a Chinese telecom operator and, Kamble suggests, will likely make at least one more acquisition this year.

Based in Redwood City, Calif., the company has “development offices” in Seattle and London, as well as sales support and telemarketing offices in Tokyo, Rome and Toronto.

Its newest acquisition gives Visto two offices in China, too, says Kamble, including one in Beijing.

Driving Visto’s global push is the fact that carriers across all regions are beginning to offer software not only by companies with international ambitions, but by local email service companies attuned to regional pricing and the types of devices that their regional carriers’ customers are using.

Visto is also trying to lasso what looks like an enormous market. A year ago, Research In Motion (RiM), whose BlackBerry handheld device dominates the growing nascent enterprise mobile email market, had 1 million subscribers. Today, it has 2.5 million. IDC analyst Stephen Drake says, “There are almost a billion mobile phone subscribers, so there’s clearly a tremendous opportunity. We’re really just scratching the surface.”

Yet Visto has its work cut out for it. Unlike RiM, Visto isn’t in the software and device business; it is focusing squarely on providing email server software that gives phone companies the freedom to offer wireless email services on handsets made by a range of companies.

And Visto is among a number of companies that want to go after the same market. Good Technology, for example, is aggressively signing up companies for its rival software. Good Technology has also raised an astonishing amount: $201 million from 14 VC firms over five rounds.

And Seven Networks has raised more than $55.4 million over five rounds from four firms. (Seven’s most recent funding, last November, wasn’t disclosed.)

“When you talk about email, there are a lot of players; this market is still wide open,” says IDC’s Drake. “A lot of carriers are trying to figure out this market and who to go with, so they’re mostly hedging their bets and using the services of multiple providers. From a true carrier perspective, absolutely no decisions have been made.”

Email Constance.Loizos@thomson.com