Arguing that it had overestimated its capital needs when launching a $40 million Series B deal last fall, software developer and integrator eRunway Inc. recently tied off the offering at just $22 million.
While such a decision from some companies would likely be viewed as a poor excuse for failing to secure desired funding, the eRunway case seems to be a bit different as it had already secured $25 million in commitments nearly six months ago.
“We decided that what we really wanted to do was focus on a few of the VCs who we thought would add significant value to our company,” said Kris Canekaratne, chairman and chief executive with eRunway. “We had more commitments, but when we went back and evaluated everything we saw it wasn?t really about the cash.”
Charles River Ventures and JAFCO Ventures both contributed $5 million to the second round deal, although Charles River acted as the technical lead investor in terms of setting the Westborough, Mass.-based issuer?s pre-money valuation at $54 million. What is interesting about that figure, however, is that it converts to a $76 million post-money valuation, or the exact same amount eRunway was considered to be worth following its $13.5 million Series A deal last summer.
“[The valuation] is just the reality of today?s market,” said Andy Goldfarb, senior managing director with JAFCO Ventures. “It?s not at all a reflection on the company itself.”
Other participants on the deal included Comdisco Ventures and first round backer Sigma Ventures, which pumped in slightly more than its pro rata option.
All four investors are also investors in online transaction software provider eDocs Inc., which Canekaratne also founded.
As for his current company, Canekaratne said that the new funding would be used for strategic investments and to help eRunway build out its infrastructure. In addition, the deal is intended to help it expand its Asian operations, which should be significantly aided by JAFCO?s involvement.
“Our specific area of expertise is to help companies penetrate the Japanese and South Asian markets,” Goldfarb said. “Our technologists will work with portfolio companies like eRunway as a free international development arm.”
Investor Powers Up
In related news, eRunway backer Sigma Partners recently held a $600 million first and final close on its sixth venture vehicle, said Wade Woodson, a managing director with the firm.
The fund doubles the size of its predecessor, 1999?s Sigma Partners V LP, the limited partners of which all renewed their commitments for Sigma 6. The firm timed their fund raising to coincide with their institutional LPs? new budget calendars, informing their current investors in December that they would be seeking commitments in 2001.
The lead investor in the fund is the Massachusetts Institute of Technology, and five other major university endowments count themselves as LPs. The fund has at least one corporate pension fund as an LP and one foreign investor, but no state pension funds have invested in Sigma 6.
Woodson would not comment on the management fees or carried interest structure of the vehicle, but he did say that the general partners had invested close to $100 million in a side vehicle that would make coincidental investments with Sigma 6.
Dan Primack can be contacted at Story Feedback.