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Index Stock Returns To Seal Series F Deal

After tech investor jitters caused it to briefly pull its private equity offering, Index Stock Imagery Inc. recently re-entered the ring by launching the second phase of its Series F preferred stock offering.

The online source for b-to-b and e-commerce stock images raised $15.6 million in the first tranche of a mezzanine offering in March and is now looking to complete the deal with an additional $9.4 million.

The first segment of the Series F deal – Index’s second institutional offering – was led by J. & W. Seligman & Co. Inc., which was joined by new investor SunAmerica Inc.

The round also included follow-on investments by existing backers Meridian Venture Partners, SCP Private Equity Partners and Tim Draper’s Polaris Fund. Investment bank S.G. Cowen Securities Corp. assisted in the first stage, and will continue to act as placement agent for the deal’s second tranche. Currently, Cowen is shopping the deal to investors, but it declined to comment on the status of its progress.

In order to avoid making the offering overly complex, Index has chosen to continue selling its preferred stock at the same undisclosed valuation used throughout the first part of the round.

New York-based Index had paused its financing efforts in late March as technology stocks plummeted and investors began to balk at the idea of funding e-commerce-related businesses.

“At the time, the market wasn’t favorable, so we decided to close the first portion of the Series F Round and put the capital we had already raised into building the business,” said Bahar Gidwani, chief executive with Index.

Better Off Later

That early withdrawal could well have turned out to be a blessing in disguise. Index tapped the capital it raised previously in the Series F Round to invest in research and development, expand its sales and marketing force, partner with a digital watermark technology company, pay off debt and build up its image collection.

In fact, the company – which touts itself as the largest source of images on the Web – now has more than 500,000 stock images online and reports about 600,000 unique visitors per month. It owns and operates two destination sites, indexstock.com and photostogo.com, and has partnerships with 75 other Web sites, including Intuit.com and Webshots.com.

Stronger than ever, Index returned to the private equity market and redoubled its fund-raising efforts in early September. As a competitor of Corvis Corp. and Getty Images Inc., the company hopes to close this latest round of funding by year-end in preparation for an IPO.

“Right now, the market is good, and investors are looking at the Internet again,” Gidwani noted. “Venture capitalists want deals like us. Index is moving in a direction the market understands and can appreciate. We have a clear path to profitability – we expect to turn a profit by mid-2001 – and we have very little cash burn. We’re as well-positioned as any company asking investors for money.”

The firm plans to use the additional funding for working capital, to further expand its image base, explore acquisition opportunities, increase headcount and strengthen its marketing efforts.

Prior to this offering, Index had raised about $4 million from angel investors and $17 million in institutional financing.