Investors Serve OpenTable.com with $10M First Round Financing

With 200 restaurants signed up in four markets nationwide, OpenTable.com, an online reservation provider, raised $10 million in its first institutional round of venture financing.

Founded in 1998, OpenTable.com has connected restaurant groups in New York, Chicago, Seattle and San Francisco-where it is based-to its electronic reservation network.

Chuck Templeton, founder and chief executive of OpenTable.com, said the company will provide reservation services to 600 restaurants and expand into five additional markets by the time it raises its next round of financing. He said that round is targeted to raise between $25 million and $30 million, will be held within the next six months and likely will be the company’s final private equity financing.

“We have made good inroads in Boston, Washington, D.C., and Atlanta and will expand into five more markets by February or March,” he said. “We knew it was time to raise this round when the need and demand for our product began to outpace our cash flow.”

The Series C round, which closed Jan. 3, was led by Benchmark Capital. Impact Venture Partners, a New-York-based venture firm founded by former Crosspoint Ventures partner Adam R. Dell, also contributed to the round. Dell will join the company’s board of directors as part of the deal.

OpenTable.com previously raised $2.5 million through angel investors and Venture Frogs of San Francisco. Templeton said the company’s anticipated Series D round will likely be its last, depending on market conditions, before a public offering.

In addition to market expansion, proceeds from the Series C round will be used for customer support and acquisition, technological development and a multimedia advertising campaign. Last month, OpenTable.com hired San Francisco-based advertising agency OWN&P to spearhead its $5 million campaign.

Templeton said OpenTable.com differs from venture-backed Food.com, which raised $25 million last March (PEW, April 1, 1999, p. 1), in that it focuses exclusively on reservations and skews toward a higher breed of culinary establishments.

“They are focused on offering to-go’ and delivery services and cater to Pizza Hut and fast food services,” he said. “We help restaurants manage themselves more efficiently by providing them with our software and active database.”

In exchange for its reservation services, OpenTable.com charges restaurants a monthly fee and a percentage of each transaction.

Impact Flying Through Fund I

OpenTable.com represents the fifth investment for the $100 million Impact Venture Partners I, which closed last November. Dell, who currently manages the fund by himself, said many of his firm’s deals have come from relationships he cultivated while at Crosspoint and Enterprise Partners.

“This is very much a relationship-oriented business where one builds good will with CEOs looking to raise more capital,” he said. “Thankfully, a number of portfolio companies I worked with in the past wanted to be involved with this new firm.”

Dell attracted a commitment form MSD Capital, brother Michael S. Dell’s personal investment vehicle. Additional LPs include Flag Ventures and Crosspoint General Partner John Mumford. The fund has a 80%/20% carried interest split, with incentives to push the carry to 75%, and a 2.5% management fee.

Dell said he is looking to hire a second partner to manage the fund, which invests in early-stage technology companies primarily based in the northeast.