After a year of searching through the performance management space to find the “ideal deal,” Wit Soundview’s Andrew Weissman finally found ProactiveNet Inc. In Weissman’s view, the Alviso, Calif.-based firm was a VC’s dream: It already had a viable product on the market, a bevy of paying customers and a clear path to profitability.
“It wasn’t speculative, it wasn’t a company still building software,” Weissman said. “The product had been through a number of versions, and had been tested in the field. And clients had great things to say about the product. It solved a problem for them and [produced] a return on investment for the users of the software.”
Looking for a little potential ROI of its own down the road, Wit Soundview recently led a $15.3 million Series D financing for ProactiveNet. Newcomer Sun Microsystems Inc. also invested some strategic money, opening the door for a marriage of the companies’ products. Previous backers Crosspoint Venture Partners, Sevin Rosen Funds and Oak Investment Partners also came back and exercised their full pro rata rights.
The company’s $22 million third round of financing was completed in January 2000 at a post-money valuation of $64 million.
Hunting Down The Root Cause
As companies have built out expensive and complex e-business infrastructures to move their businesses online, a great need has emerged to not only monitor Web-based transactions from end-to-end, but also to track the performance of the back-end systems that make those dealings possible.
Unlike many other systems performance management firms, which passively track how overall transactions are running and simply alert their customers when there is a problem, ProactiveNet takes a mathematical approach, using statistical techniques to get to the bottom of the problem and make sure the entire back-end system is performing up to snuff.
“If there is a problem happening across the back-end infrastructure, we can find the root cause using patterns and statistics,” CEO Ajay Singh said. “In many cases, that can prevent the problem from happening in the first place.”
Essentially, having more efficient, less problematic back-end systems means online businesses can offer faster, more reliable transactions and, in turn, bolster customer satisfaction and potentially increase revenue while reducing operating costs, Singh said.
That value proposition has scored ProactiveNet nearly 100 customers to date, including such marquee names as American International Group Inc., Bank of America Corp., Nortel Networks Corp., Wal-Mart Stores Inc., eBay Inc., Verizon Communications Inc. and Excite@Home Corp.
Moreover, with a heightened number of companies deploying e-business infrastructure in Europe, ProactiveNet plans to use a portion of the Series D proceeds to help beef up its London office, as well as put people on the ground in Germany and France next year.
Although this round is expected to take the company to profitability by the second quarter of 2002, Singh said ProactiveNet might draw some additional token capital if it forges more strategic partnerships like the one it has with Sun.
It may also consider a possible Wall Street debut if the IPO window reopens, Singh said. – R.K.