Already armed with a roster of top-tier customers that would make some more established telecom infrastructure companies blush, Bethlehem, Pa.-based Synchronoss Technologies Inc. recently closed its extended Series A financing round at $34 million.
The business services provider, which raised $25 million last November from ABS Ventures, Rosewood Venture Group and Ascent Venture Partners, chose to keep the deal open until earlier this month to reduce the probability of future private financing needs.
“When we put the original money in, we said, ?Why not raise more??” recalls Anne Martin, a general partner with Rosewood Venture Group. “We wanted to make sure that [Synchronoss] had enough capital in place to get to profitability, especially since raising capital is very time consuming for the CEO and we want him to be focusing on the business itself.”
Martin added that Rosewood, which has now invested nearly $8 million into Synchronoss, exercised its pro rata rights on the transaction?s $9 million second tranche. New second tranche investors included Adams Street Partners, Liberty Ventures and C.E. Unterberg Towbin.
Vertek Corp., a professional services company for telecom providers which spun out Synchronoss last year, did not participate on either tranche.
Proceeds from the deal will be used to further research and development efforts on Synchronoss? hosted and secure operated support systems (OSS) environments for major telecom carriers. The software-based back-office platform has already been deployed by carriers such as AT&T Digital Broadband, MCI WorldCom, Qwest Communications and Celox Networks.
“For carriers today, the biggest issue is growing revenues [sic],” explained Steve Waldis, president and chief executive with Synchronoss. “High-speed data services are the most profitable option, but the carriers really struggle from the time a customer says, ?Yes! Sign me up,? to actually turning up and operating the network properly. That?s what we can help them do.”
He added that Synchronoss? ActivationNow solution ? which includes ordering, provisioning, fulfilling, billing and asset management functionality ? needs to be modified for each individual customer, but not by much. Instead, Waldis said approximately 80% of carrier systems are the same, with about 20% being unique, but highly configurable.
Likewise, not every customer pays the same amount for the platform. Instead, revenue is based on a calculation that includes factors such as the number of business customers served and the number of assets managed.
“They are really working through the carriers to get to the carrier customer list,” Rosewood?s Martin said. “They are already up to 11 or 12 customers through the carriers.”
Coming Of Age
One company that Synchronoss is keeping at arm?s length, however, is its former parent company.
Vertek still owns a small piece of its one-time creation, but has agreed to a mutual decision to distance itself from Synchronoss so that the start-up can form relationships with numerous professional services providers. Interestingly, the cross-ownership goes both ways as Waldis himself has not divested himself of his own Vertek stake.
“The reality is that Steve?s net worth is much more tied up in Synchronoss, a fast-growing start-up where he also has high ownership, than Vertek, which will probably never go public and doesn?t have as much operating leverage (people-intensive versus technology-driven),” Martin said.
Waldis would not reveal his company?s post-money valuation on the Series A deal, except to say that it was higher than $68 million.
Contact Dan Primack: Daniel.Primack@tfn.com