Who likes paying taxes? No one, but it’s something everyone has to do. So while Sabrix doesn’t exactly make paying taxes pleasurable, its software does make the process easier, which is why Mohr, Davidow Ventures and Venture Strategy Partners decided to put $19.1 million in to the San Ramon, Calif.-based company.
“Corporations have to pay multiple taxes. If you look at companies in the United States, about 7% of the top line revenue goes to taxes, and that number increases if you do business outside the U.S.,” says the company’s new CEO Steve Adams, who was the former president and CEO of Uniscape. “Companies do 60% of tax work manually and lots of money falls through the cracks. [Our software] improves bottom line results while maintaining tighter financial controls and ensuring legal and ethical compliance to tax regulations. This is a great opportunity and the absolute best time to offer a product that lowers the cost of doing business.”
Indeed, especially in light of all the corporate scandals that have rocked the U.S. this year. “Budgets are tight right now but I am convinced that every company will have Sabrix or Sabrix-like software down the line,” says Bill Ericson, an MDV general partner and Sabrix’s newest board member. “Sabrix can have a big impact on the problems that a lot of companies are having. It’s complex software, and it takes training, but the ROI is unbelievable. It solves a real pain point.”
The funding will be used for continued product development and to expand sales and marketing efforts. The company now employs 35 people and expects to hire an unspecified number of account executives and sales people. “All the hires will be on the revenue- generation side,” says Adams.
To date, the company touts six customers, including the company it was spun out of, Tektronix, a test, measurement and monitoring company that enables the coming together of computers and communications, and Franklin Covey, an organizational company that sells daily planners. Adams expects Sabrix, which targets Fortune 1000 companies, to hit profitability in the second half of 2004, baring any further global economic problems.
“The economic climate adds a layer of unpredictability because people are not spending on IT, however, our proposition saves companies money so that should help us,” says Adams.
Assuming that Adams is correct and Sabrix’s products start flying off the shelves, he still expects to go to the private markets again for money. “Right now, were are not focused on an exit strategy. We are focused on how to build value, and once we have done that, doors will open for us. Depending on what happens with this round, it seems likely that we will need one more round of financing,” he says.
Ericson agreed. “We intend to continue investing in Sabrix and we expect it will need one more round and depending on the environment maybe another. Our preference is to build a standalone company that can be public, but it is also fine to be private and profitable. If a company focuses on going public too early, it may not spend enough time building a good company.”
Spun out in June 2000, the company immediately closed on $1 million with CB Capital, an Oregon-based VC firm. This time around, Sabrix collected $12.9 million in April and then took in another $6.2 million last month. Adams says the plan was always to collect the money in two tranches.
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