Magnet Communications Inc. raised $9 million in its second round of venture financing. The Atlanta-based company develops 14 Internet-based cash management, business banking and e-commerce solutions for 12 banks and financial services providers.
Coral Ventures of Minneapolis, Minn., led the Series B round, which closed Aug. 30, with a $4 million investment. Previously, Coral invested $3.2 million in Magnet’s first round last September. The balance was provided by a pair of Atlanta venture firms, LiveOak Equity Partners and Cordova Ventures. No placement agent was used for the deal.
“In this space, there is a stigma that large banks won’t work with you without serious financial backing,” said Chief Executive Steve Gordon. “We were compelled to get bigger more quickly than through organic growth.”
Gordon was introduced to Magnet, which was incorporated in 1995, through a relationship he had with Coral. Since his arrival last September, Magnet has grown to 53 full-time employees from its seven founders.
Customers such as Bank of Montreal, LaSalle Bank and Sun Trust Bank use Magnet software to offer all corporate banking products and services online. Magnet also hosts a data center that works with banks on an outsourced basis. Although the company earns much of its revenue from selling its software, Gordon said Magnet will focus more closely on its outsourced model, especially as the end of the millennium approaches.
Proceeds from the round will be used to further develop its product line, hiring additional staff and for sales and marketing expenses.
As for future financing, Gordon said the company is well funded, but may eventually take advantage of the relationships it has cultivated with many of its customers.
“We took in more money than we thought we would and are pretty flushed,” he said. “If we need to do another round, we will be interested in working with our client banks.”