VC Rewind

PE Week periodically tracks the progress of venture-backed companies to see how their plans have panned out, good or bad. This week, we take a look back at three, ForeScout Technologies, Exigen Inc. and.

ForeScout Technologies Inc.

Business: Develops network security software called ActiveScout. Operating on the assumption that hackers do reconnaissance before launching attacks, the ActiveScout sensor sits outside a primary firewall and watches incoming traffic for suspicious network probes and scans. If it identifies shady activity, it feeds the scanner in question counterfeit information, such as false resources, services, ports and IP addresses. Should that attacker try to exploit the counterfeit information, ActiveScout denies access to the network.

Headquarters: San Mateo, Calif. ForeScout employs 25 engineers in R&D facilities in Israel who are working on modifications and a couple of new products. Plus, there are about 15 sales and marketing pros in the U.S. headquarters. Additionally, ForeScout has support offices in Germany and Asia.

Founded: 2000

Most recent capital raised: $10M in September 2002.

VC raised to date: $24M (includes $2M in seed financing)

Valuation: Had a post-money valuation of $27M when it raised $12M in venture money in December 2001

VC Investors: Accel Partners, Meritech Capital Partners and Pitango Venture Capital. (strategic investor Itochu participated in the latest round).

Directors: Rami Kalish of Pitango and Theresia Ranzetta of Accell have two of the five board seats.

Plans one year ago: The first round was used for research and development, whereas the second round last year primarily went to sales and marketing.

Status: The company started shipping product in November 2002 and has since managed to sign up over 100 customers, mostly from the United States. As of the end of August, the privately held company reported revenue in the sub $10 million range. The funding is expected to carry the company to positive cash flow in 2004.

Exigen Inc.

Business: Exigen makes automation software that focuses on lowering operational costs for financial, insurance, communications and other service industries.

Headquarters: San Francisco. The company’s outsourcing centers include development divisions in Moscow, Saint Petersburg, Riga, Latvia and Vilnius, Lithuania, whereas integration and architecture centers are located in San Francisco, Los Angeles and Edison, N.J.

Founded: 1999

Most recent capital raised: $62M, Series A

VC raised to date: $62M

Investors: Lightspeed Venture Partners, Focus Ventures and Investor Growth Capital (a wholly owned subsidiary of Investor AB).

Directors: Gill Cogan of Lightspeed is one of six board members.

Plans one year ago: In December 1999, Greg Shenkman and Alec Miloslavsky started Exigen with $50 million of their proceeds from a $1.5 billion sale of Genesys Telecommunications Laboratories to Alcatel (NYSE: ALA). Exigen then embarked on a series of acquisitions, which provided it with customers and revenue.

At the time of its Series A round, and after nine acquisitions, Exigen boasted of having more than 300 customers including Allstate, Wells Fargo and Bell Canada. The capital raised in the offering was expected to fuel its acquisition spree and help with product development. The company planned to reach profitability in Q1 2003 and had no immediate plans for raising additional equity.

Status: As it planned, Exigen has bought a few companies since last year, and the company has been concentrating on product development. It is currently able to fix more than 150 types of “cost leaks.” The broader product base resulted in higher sales, with 70% of increase in revenue coming from sales to existing customers.

Additionally, Exigen continued signing in industries’ behemoths. In October, it clinched a five-year deal with Prudential Securities, an affiliate to Prudential Financial Inc. (NYSE:PRU), to provide production support, maintenance and development for a set of back-office brokerage applications.

The company is looking to post a 50% year over year increase in revenue in 2003. Shenkman did not identify the level of revenue and would not comment on the information reported by the San Francisco Business Times that Exigen is tracking to do roughly $60 million in revenue for 2003, up from $40 million in 2002 and some $10 million in 2001.

The privately held company is reportedly profitable as of Q2 2003, still has some money left from the previous round of financing and claims that it’s not under any pressure from its investors on the timing or type of exit.

Inxight Software Inc.

Business: Inxight Software Inc. was spun out from the Palo Alto Research Center in 1996. The company’s products allow users to organize and analyze text, used primarily in financial services and electronic publishing.

Headquarters: Sunnyvale, Calif.

Most recent capital raised: $22M in September 2002

VC raised to date: $55M

Investors: Atila Ventures, BT Investment Partners, DB Investor (Deutsche Bank), DB Venture Partners, Deutsche Bank eVentures, GD&C Partners, Sterling Mezzanine Partners, VantagePoint Venture Partners, Reed Elsevier, Siemens, Xerox.

Directors: J. Stephan Dolezalek from VantagePoint is one of five on the board.

Plans one year ago: With about 200 customers already in place, Inxight brought in $12 million in sales in 2001 and expected 15% to 20% growth in 2002.

The company also anticipated reaching breakeven by Q4 in 2002. It planned to use the late 2002 round of financing for growth and acquisitions.

Status: In 2002, Inxight reported revenue of $10 million, a dip from the $12 million it reported in 2001.

In 2001, Inxight was primarily an OEM, selling technology and components to large enterprises, such as IBM. But in 2002, Inxight started going after an enterprise market. This strategy switch appears to have paid off. In Q2 2003, Inxight’s revenue reportedly surged 75%, year over year. “We believe by the end of this year the enterprise business will be 60 to 65 percent of our total business,” says John Laing, president and CEO of Inxight.

This year, the company has focused on its contracts with government agencies. Overall, government contracts contributed 40% of the company’s revenue in the first half of 2003. Inxight hopes to have mor ethan 300 customers by year-end with revenue of $17 million. This should allow the company to break even by the fourth quarter of 2003 and show profit in early 2004.

With an eye towards IPO, Inxight brought in a new CFO Roger Weismann. He was CFO at Forte Software, where he managed a 1996 IPO and negotiated numerous strategic partnerships and private equity financing rounds. Previously he was also CFO and COO at Banyan Systems, where he led an IPO in 1992.

If the conditions are right, Insight might embark on launching an IPO sometime in late 2005. Although there’s no hurry. “We have enough capital and enough deep pocket investors that we can continue to build our business without the public lime-light,” Laing says.