When should a start-up no longer be considered a start-up?
No one’s pinned a definitive timeframe on it, but IMX Exchange, which has been around since 1995, apparently thinks it still qualifies, and its VC backers seem to agree.
Existing investor Hummer Winblad Venture Partners of San Francisco recently led the company’s sixth round of financing, which closed last week at $18 million. Existing players ABN AMRO, Lehman Brothers, Mohr, Davidow Ventures, Presidio Venture Partners and Technology Crossover Ventures also got in on the deal.
This latest capital infusion brings IMX’s total funding to date up to more than $70 million.
A Precarious Past
While it seems to have a rich funding history, dark times fell on the San Ramon, Calif.-based online mortgage community marketplace earlier this year, temporarily clouding its vision and creating barriers to its already precarious progress.
A bleak forecast for the future of tech stocks forced the company to yank its S-1 filing in May, while simultaneously issuing walking papers to about 60 of its employees. Some attrition and another small round of layoffs in August further reduced IMX’s staff from an all-time high of 158 in April to just 94 employees.
Chief Executive Richard Wilkes said the company ramped up its headcount after filing for its IPO in March worth upwards of $57.5 million. It did so under the assumption that it would cash in on more than 5 million shares, enabling it to pay additional employees to increase its market penetration and ready its products for public consumption.
“When we pulled our registration… prudent management dictates you don’t wait until you run out of money to reduce your workforce,” Wilkes said. “It’s sad, but first and foremost, this is a business, and my first duty as CEO is to shareholders. We did what we needed to do.”
With a burn rate of approximately $1.25 million a month, which Wilkes attributed mostly to technology purchases and software licensing fees, trimming staff was probably the easiest way for the company to cut corners.
Still, its struggles lingered. According to IMX’s prospectus, the company posted a net loss of slightly more than $13.2 million for the year ending Dec. 31, 1999, with revenues of only $319,000.
Wilkes said IMX’s revenues for 2000 were up 300% year over year to date and, although he declined to give exact figures, he said the company had record second and third quarters.
An IPO Isn’t Its Lifeblood
Clearly this latest round of financing was necessary to bolster the company’s bottom line and bridge it to profitability, which it hopes to achieve in late 2001.
“We have to get the company to a point where we don’t need to go public, and that means making it profitable,” Wilkes noted. “That’s a fundamental business rule everyone seemed to forget for the past few years, and even the early part of this year. I’m just as guilty of that as anyone else.”
He added that IMX has not entirely abandoned its plans to go public, and will reevaluate when it feels it can do right by its shareholders. In the interim, Wilkes said he expected this latest infusion to carry the company for more than a year.
He added that he was reassured by VCs’ interest, especially at a time when they’re tightening their belt loops.
“I haven’t seen a funding announcement in this space since June,” he said. “We’re very fortunate.”