Revamped EC Cubed Closes Third Round and Looks for a Fourth

When b-to-b applications provider EC Cubed Inc. completed a $19 million Series B round of venture capital last May, a company executive said it was no sure bet that the firm would be making a return appearance in the private equity market.

One year later, however, EC Cubed is sporting a new senior management team, a relocated corporate headquarters and a revised business plan. It has also changed its tune when it comes to venture capital, recently completing a $21 million third round with an additional offering waiting in the wings.

The upcoming deal is scheduled to close by July and net the issuer between $30 million and $50 million. It is being prepped as a mezzanine round and will differ from the firm’s previous private transactions in that an investment bank will be retained as placement agent.

Existing investor Battery Ventures led the Series C financing with a $5 million investment. Additional participants included Boston Millennia Partners, BCI Advisors, BancBoston Ventures, Cambridge Technology Partners, Crystal Internet Ventures, Infosys Technologies and the Walden Group of Venture Capital Funds.

“We were trying primarily to do an inside round to minimize the amount of time we had to spend on it since we are, after all, pretty busy running the business,” said Jeff Tognoni, chief executive with EC Cubed. “We knew we’d be doing some more [funding] in the future where we could cultivate more external people.”

Tognoni is a member of the experienced new guard at EC Cubed, taking over for former chief executiveFaisal Hoque.

“We had a young talent team that was more engineering-focused, but we really needed some extra business management ability… a few more gray hairs,” said Tom Crotty, general partner with Battery Ventures and board member with EC Cubed.

In order to recruit the desired talent, however, Crotty and others believed it was necessary to bite the moving expense bullet and transfer company operations from the sleepy town of Wilton, Conn., to the burgeoning suburb of Westborough, Mass. In fact, some of the proceeds from the recent Series C transaction were used to finance the move.

“The bottom line was that we wanted to recruit top-notch people, and we simply couldn’t do it in a town like Wilton because there was nothing else there for people if, for some reason, they stopped working at EC Cubed,” Crotty said.

New Applications

If the arrival of new blood in a new town can be viewed as the cause, then the effect has been an updated business plan that recognizes the complete needs of the its b-to-b e-commerce clientele. Indeed, the company has shifted from a traditional software package model to an application provider model that can recognize, and adapt to, market changes.

“The thing that EC Cubed is doing that I don’t think others are [doing] is to fuse a very strong and very malleable technology with a strong professional services skill set and to roll that into an out-sourced service provider that is also an ASP at the same time,” Crotty said.

To date, EC Cubed has raised a total of $53 million in venture capital.