Atlas Leads 7C’s Venture

As the bricks-and-mortar business world continues to shift toward a clicks-and-mortar model, a number of independent electronic customer service providers are carving out a significant share of the venture capital pie.

With the domestic electronic customer relationship manager space already congested with the likes of E.piphany Inc., Exchange Applications Inc. and Siebel Systems Inc., a number of venture firms recently went overseas in search of the next big thing.

What they found was 7C, a London-based firm that had already received GBP10 million last summer from Atlas Ventures. The UK issuer most recentlyraised a GBP28.5 million round led by Tarrant Venture Partners, which took approximately 40% of the offered securities plus a board seat. Additional participants included Morgan Stanley Dean Witter, Chase Capital Partners and Atlas.

The involved VCs reflected a consortium of strategic, high profile, international high-tech investors, said Juan Solotongo, managing director and co-founder of 7C. Tarrant, for example, was able to bring organizational and structural expertise to the company, while Chase offered an international commercial banking perspective. MSDW, on the other hand, could provide assistance when 7C is prepared to enter the public equity market, although Solotongo said that such a move is not a near-term possibility.

“We need the right reason to go into the initial public offering market,” he said. “We’re concentrating on further aggressive expansion, growth related to acquisitions. Our bottom line is getting consistently better, with significant risk calculation.”

Since its founding in July 1998 – the company was originally a European customer support unit of AT&T Corp. – 7C has grown to GBP25 million of revenue for the fiscal year ending in June, up from GBP3.5 million in revenue in its first year of operations. Solotongo predicts that 7C will double its take next year, with GBP50 million in revenue.

The company’s client base has grown to 20 clients from three, and 7C now has 1,500 employees under management, up from 120 three years ago. Although 7C is not yet profitable, Solotongo said that it would be by year-end.

According to First Union Securities, worldwide spending in marketing automation and business intelligence technology – the two markets encompassed by e-customer relationship management players like 7C – is expected to grow to $8.3 billion by 2002. Marketing automation corporate spending is expected to grow at an annualized growth rate of 80%, to $2.1 billion in 2002 from $0.4 billion in 1999. Business intelligence spending is expected to grow at an annualized rate of 43%, from $2.1 billion in 1999 to $6.2 billion in 2002.

Total spending for customer relationship management solutions in Europe should reach GBP100 billion, said Solotongo, but nearly 90% of that sum is spent on in-house solutions. Still, the spending in the customer relationship arena is expected to grow at an annual rate of 20% in Europe.

“We looked at a lot of companies in this space, and it’s going to be a booming market,” said Andrew Dechet, principal at Tarrant. “We invested in 7C’s technology, a company with a first-mover advantage and the right corporate clients to be the leader in the field.”

7C customers currently include Vodafone AirTouch plc, Alitalia (Linee Aeree Italiane S.p.A.), AT&T and United Parcel Service Inc. With the additional capital, 7C hopes to make further inroads into the transportation and telecommunications sector by establishing contracts with major industry leaders. The company will be spending heavily in creating a brand name, expanding its sales and marketing departments, launching an advertising campaign and redesigning its Web site.