InteQ Pushes Ahead With $57M

InteQ Corp. is proving that the “if you build it, they will come” philosophy can work in business as well as in baseball.

Although the Bedford, Mass.-based managed service provider?s peers openly criticized it last year for working to build its back-end infrastructure instead of pounding the pavement for would-be dotcom customers, InteQ ultimately ended up having the last laugh. Many of its critics? balance sheets ended up bleeding red ink after defunct dotcoms defaulted on their bills. Although it is just now beginning to ramp up its customer and revenue base, InteQ says it is 12 to 18 months ahead of the technology curve.

What is more, not going along with the crowd has enabled InteQ to continue garnering attention from the venture capital community. Earlier this month, the six-year-old company completed a $57 million round of debt and equity financing.

Interestingly, although the company?s offering was in the market for five months, it sparked so much investor interest that InteQ is currently contemplating re-opening the round in order to take in more capital.

“You never say no to money, but what we?re considering is [if] we need additional capital,” said Santhana Krishnan, InteQ?s chief executive, chairman and co-founder. “There is interest, but we haven?t decided yet. It?s a good place to be.”

He added that if he were to approach investors again, he would shoot for another $7.5 million to $15 million, mostly from strategic players.

First-time investor Merrill Lynch Capital Partners led the initial $40 million equity portion of the Series B transaction, with additional participation from newcomer Mercury Interactive Corp. and repeat buyers Charles River Ventures and M/C Venture Partners. The $17 million debt financing was provided by Hewlett-Packard Co.

In The IT Cockpit

When asked to sum up InteQ?s business model, Krishnan said it was akin to being an air traffic controller for the information technology environment.

Unlike other service providers in the data center or storage area network spaces, InteQ claims it is unique because its back-end infrastructure platform can serve enterprises both remotely and on-site to track, monitor and report on the performance of a company?s IT equipment and any problems that crop up within the system. Most of its services are delivered on a pay-as-you-go or subscription basis.

InteQ is no stranger to the corporate enterprise arena, as it spent its first four years of life providing technology consulting services to mostly New England-area companies like Bose Corp. and Thomson Financial. Now that it has graduated to a straight MSP, its sweet spot is companies with revenue streams of $100 million to $2 billion, including Millipore Corp., Manufacturers? Services Ltd., Excara and Hewlett-Packard.

Its chief competition is network assistance management software vendors, although Krishnan doesn?t see them as a threat because he believes they?re going to become obsolete.

“We?re selling services, so it?s not an apples-to-apples comparison,” he explained. “[Where we differ is that] we can provision services in 30 days, whereas it takes companies six months to get the same benefit out of software tools. Software is going to be diluted as a service because the infrastructure has to be up and running 24/7. Ours is a better, faster, cheaper way to get there.”

Investors are also keen on speed and cost-savings these days. “Most of the others doing this have been other MSPs focused on the dotcom space, which translated into smaller installations,” said Rick Burnes, a general partner with Charles River Ventures. “[InteQ] is doing enterprise mission-critical kind of stuff. It?s important that their enterprise focus has gotten sharper, because in the beginning everyone asked why they didn?t focus on dotcoms. But they stuck to their knitting pretty darn well, and they were positioned properly when the current unpleasantness in the market hit.”

Now with its infrastructure firmly in place, InteQ faces the challenge of bringing its new product to the marketplace. The company opened sales offices in nearly every major city in the country 90 days ago, intending to use part of its latest capital infusion to beef up its burgeoning sales force to help gain market traction. The remaining portion will go toward creating distribution channels with strategic partners to ensure faster delivery of its products to customers.

Krishnan isn?t considering taking InteQ public anytime soon, although he said that the company could have made a splash on Wall Street plenty of times in its consulting days.

“We?re in no rush,” he said. “When the time is right, we?ll know.”

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