Centive Resurfaces With $18M Round

Centive’s is a bubble story: it floated to the surface, plunged under water and its now floating back up. The Bedford, Mass.-based software maker has resurfaced with an $18 million round of venture capital financing, its fifth in six years.

Founded in 1997 as Incentive Systems Inc., the company hit a high in 2000 when it secured a $27 million Series C round that pushed its post-money valuation up to $100 million. Nine investors participated in the deal – BancBoston Ventures, KPMG Consulting, NetNext, Polaris Venture Partners, Syngy, Thomas Weisel Partners and the company’s co-founders, Elizabeth Cobb, Thomas Herring, David Love and William Warner. Eighteen months later, when the company began to bleed cash and went out for another $18 million, investors shaved $40 million off the company’s valuation and three of its backers walked away from the new deal.

“We raised money in the bubble days, and we were part of the land-grab frenzy of 2000,” says Centive CEO Michael Byers. “We went through a lot of capital and then we had to get smaller.” Byers joined the company in 1998 as its chief financial officer, taking the reins from founding CEO Cobb a year later.

Centive makes software that automates how companies pay bonuses and commissions. With its well of capital drying, Centive rid itself of much of its sales, marketing and business development teams, but it held on to its core of engineers. It stayed afloat, releasing four versions of its software and securing customers like American International Group, GE Medical Systems and Staples.

That attracted new capital, but investors tagged a $60 million valuation on the company, the same valuations investors gave it in 2001. Venture Strategy Partners, a San Francisco-based early-stage IT investor, led Centive’s $18 million Series E round with a $4 million commitment. Dow Chemical Co. and Infinity Capital also participated in the deal as new investors alongside some of the company’s previous backers – BancBoston Ventures, Polaris Ventures and Thomas Weisel Capital Partners.

“Enterprise incentive management is clearly an expanding market segment, and this team has proven they can close large deals and deliver a real ROI to their customers,” says Tony Conrad, a general partner with Venture Strategy Partners and Centive’s newest board member.

Centive plans to use much of its latest round of financing as working capital. With 130 people now on board, Byers expects the company’s head count to remain virtually flat, adding just a handful of sales and support employees in Europe as the company expands its operations there and begins an aggressive marketing push in the financial services and insurance industries. The company plans to break even during the second half of this year, and the financing is expected to sustain the company’s operations until it hits profitability.

“Revenue increases every year,” Byers says. “That’s not a change, it’s an expectation. We’ll continue to outsell by 50% year-over-year.”

Contact Carolina Braunschweig