Touting itself as a metaphorical public telephone system that connects computer systems instead of people, Web services network provider Grand Central Communications Inc. recently came off the venture capital campaign trail with a windfall of $23 million. This was the company’s first dip in the private equity pool since May 2000, when Grand Central pulled in an $8 million-plus Series A round.
The company’s Series A backers re-upped for the recent second round transaction, which was led by Benchmark Capital. Repeat investors JGE Capital, Merrill Lynch, Gryphon Investments, Goldman Sachs and Morgan Stanley also anted up additional capital for the Series B deal.
Interestingly, none of Grand Central’s venture investors sit on the company’s board of directors, which includes new members eBay Founder and Chairman Pierre Omidyar and Ted Waitt, founder, chairman and CEO of Gateway. With this round, they joined CNET Networks Founder Halsey Minor and Grand Central President and CEO Craig Donato on the company’s board.
When asked why there isn’t any VC representation, Donato says, “We wanted to have a small, functioning board. It was a group decision not to have VCs on the board.”
Grand Central intends to use the proceeds from its latest financing to build out the company’s sales and marketing efforts. Currently, the company has signed on 10 “reference customers” – brand-name players that have used Grand Central’s Web services networking product and are willing to endorse it to other prospective clients. Only four of the 10 have been publicly announced, however, including Wachovia, Eastman Chemical, Putnam and Thomas Weisel Partners.
Grand Central does not intend to revisit the private equity market this year, but may look to raise another venture round in 2003, depending on how close the company comes to meeting its sales objectives, Donato says. He doesn’t seem overly concerned, though. “We have a very repeatable sales process,” he adds.
Essentially, Grand Central’s product offering enables computer systems to operate between different programs. Simply put, if Eastman Chemical wanted to integrate its business systems with those of its distributors to keep tabs on the status of their inventory, it could easily do so using Grand Central’s Web services networking offering.
Additionally, Grand Central provides network services on a subscription basis, which offers enterprises a “nice alternative” to building their own integrated networks, Donato says. “Building an integrated network can take millions of dollars, and months, if not years,” he adds. “We enable people to implement [an integrated network] in days, and realize ROI with every integrated supplier. That’s a lot of the reason people select us instead of building their own integrated networks.”
The challenge of an integrated network, of course, is that an enterprise has to get everyone in its network – including third-party vendors and suppliers – to be part of the electronic dialogue that’s taking place. Grand Central, Donato claims, makes that process as painless as possible.
The company is currently targeting Global 1000 companies, but hopes to reach smaller firms over time.
Despite having done a Series A round in mid-2000, when tech valuations had not yet plummeted to all-time lows, Grand Central received a higher post-money worth this time around, Donato says. He declined to reveal an exact figure, however.
Contact Robyn Kurdek at: Robyn.Kurdek@tfn.com