News – Telcobuy Wraps $25M First Round

Not all telecommunications companies chase venture capital from the get-go, and those that wait can be more particular in the money they take. Witness Telcobuy.com of St. Louis.

In existence since 1996, the company had been self-funding throughout its history. However, chief executive Jim Kavanaugh saw the need to raise venture capital to support further development and retain its technology lead. The operating history allowed the company to be more selective in the firms it chose.

“We were looking for someone with Internet savvy and a complementary organization that had more experience with traditional funding, driving long-term structure and building a business,” Kavanaugh said.

Having met Summit Partners at a conference, the company ultimately chose Summit and Highland Capital Partners as the first institutional investors.

“I had been looking for a communications play in the Internet space,” said Sean Dalton, partner at Highland. “But no one had gone after the biggest, scariest piece of carriers and OEMs.”

Telcobuy.com addresses these markets. The company sells products to large telcos, such as Bell Atlantic and GTE, that help build networks. Kavanaugh said these include ancillary goods and minor materials that are needed for build-outs. He said the company helps with configurations, pre-order reservations and work flow services. He added that marketplace forecasts see sales of $200 billion in 2000.

Telcobuy.com also targets emerging service providers, such as competitive local exchange carriers and Internet service providers. Kavanaugh cited the fragmented contractor base that serves these companies as a growth opportunity.

“By looking at and buying hundreds of thousands of parts that are needed for buildout, [companies] get customer services, order templates that they can save and reuse,” Kavanaugh said.

He added that the company structured the round to last from 12 to 24 months.

“There is also a terrific trend in b-to-b e-commerce using the efficiencies of the Web,” said Scott Collins, a partner at Summit Partners. “We like the intersection of these two market opportunities.”

Proceeds from the funding will be used to expand sales and marketing efforts and to expand its b-to-b portal.