Proving that outlandish ideas and unprecedented technological advances still have the power to mystify investors – even in a post dotcom era dominated by skepticism and caution – Softface Inc. is expected to announce today that it snared $10.4 million worth of new money in a recent, unsolicited round of venture capital financing.
Indeed, the Palo Alto, Calif-based enterprise software firm, which has developed what it claims is the only product that enables companies to automatically transform their “dirty,” unstructured data into clean content, originally had no plans to hit the venture capital campaign trail until early next year. It quickly changed course, however, when investors began to show more than a passing interest in the company.
In fact, Softface’s management didn’t even do a full-fledged road show. The company’s executives had meetings with just six investors, almost immediately scoring three different term sheets.
Although Softface needed significantly less than $10 million to pave its path to profitability, management decided to take the money and run given the current economic uncertainty, said Olivier Sermet, the company’s president and chief executive.
New investor Norwest Venture Partners led the oversubscribed Series C transaction with a $4.5 million contribution, investing alongside RWI Group, which is also a first-time Softface backer. Series B lead Telos Venture Partners exercised its pro rata rights, re-upping along with a cadre of well-known Silicon Valley angel investors, including Don Lucas Sr., who is chairman of the board at Cadence Design Systems Inc.; and Alberto Sangiovanni-Vincentelli, who is a co-founder, board member and chief technology advisor for Cadence, as well as a Synopsis co-founder.
It’s not surprising that Softface has garnered the rapt attention of the venture capital community. Its chosen space is growing at a rapid clip and, at least for now, it claims the only alternative to its software solution is the expensive, tedious process of manually keying in all of the data a company may have stored in its extensive network.
In fact, Softface claims its only competitor is manual labor, the likes of which only comes from large-scale “human content factories” in places like India, Mexico and the Philippines, or from hiring scores of employees in-house, Sermet said.
The problem with these alternative solutions, however, is they are error-prone, time-consuming and hugely expensive, he added.
In its barest-bones iteration, Softface’s product taps into the vast stores of data lurking behind enterprise walls, ranging from procurement, customer order and other transaction histories to cryptic inventory product descriptions. Its software automatically transforms such “dirty data” into structured content.
“Softface automates the entire process,” said Venkat Mohan, a venture partner with Norwest. “I didn’t believe it could be done until I saw it in action. Leading universities have tried to solve this problem and couldn’t. The intellectual property is tremendous, and the market application is huge.”
Customer Traction Galore
The company has signed on eight new, big-name customers in the past eight months, including ICG Commerce, a procurement service provider for Global 2000 companies; cruise line operator Royal Caribbean International; Sasol, a South African energy company; and Hagemeyer North America, a wholly owned subsidiary of Hagemeyer NV that specializes in business-to-business markets for electrical materials, products and services.
This is likely to be Softface’s last foray into the private equity arena, as it expects to become profitable by the fourth quarter of next year. However, should the company choose to further accelerate its growth curve, or should the economy take a turn for the worse, Softface’s investors may ante up additional capital on an as-needed basis in the future, Mohan said.