Despite a growing army of e-mail service providers, it seems that United Messaging Inc.?s dedication to large corporate enterprises could prove the spark that ignites tremendous profitability and an eventual public offering. And, if the venture community?s warm reception to the company?s latest quest for capital is any indication, then let the countdown begin.
In its third, and likely final, trip to the private equity market, investors wired the West Chester, Pa.-based issuer $70 million, far exceeding its original $50 million target. The latest infusion brings United Messaging?s total venture capital war chest to $106 million.
“Based on the current [slowdown in the] venture capital environment and the company?s valuation, we decided to raise more money this time around,” said Ron Rodgers, chief financial officer with United Messaging. He declined to divulge how much the company is worth, saying only that its post-money valuation is twice the value assigned to it following United Messaging?s Series B round of venture financing. That amount has not been disclosed either.
Broadview Capital Partners led the Series C deal, and was joined by first-time investors Brinson Partners, Comcast Interactive Capital and First Union Capital Partners. All of the company?s previous backers, including Internet Capital Group>, Infinity Capital, Labrador Ventures and Oak Investment Partners, also made commitments. Representatives from Broadview Capital Partners and First Union joined United Messaging?s board of directors.
S.G. Cowen Securities Corp. also acted as a placement agent on the deal.
Right On Schedule
It may seem as though United Messaging missed the boat when many of its now-public peers began offering e-mail services to consumers and Internet companies, but nothing could be further from the truth.
According to Mark Levitt, an industry analyst with IDC, United Messaging arrived on the outsourced messaging scene just in time. By offering hosted e-mail messaging services to large corporate enterprises through an application service provider model, the company has cornered a burgeoning niche market that many of its competitors haven?t yet latched onto.
It also works with and offers around-the-clock support services for e-mail messaging platforms such as Internet Mail, Lotus Notes/Domino and Microsoft Exchange that are widely used and recognized by most corporations.
Moreover, focusing solely on corporate clients gives United Messaging a potential opportunity to generate perennial revenue flow.
“They avoided the whole quagmire of selling to individuals and small businesses,” Levitt said, “as well as giving away capabilities or pricing their offerings at [astronomically] low monthly rates as many of their competitors have done just to get in the door.”
Instead, the company is acting like an established business that can get annual contracts designed to foster long-term relationships that will perhaps lead to referrals and additional clients down the road.
Stephe Bachmann, a managing director with Broadview Capital Partners, echoed that sentiment. “The complexity of e-mail messaging services begs for a company [like United Messaging] to take it over as a discreet function,” he said. “The value proposition to the customer is better, more reliable service at a lower price.”
Of course, a large-scale customer pool can be difficult to penetrate, “but if you can get their attention, they are the best clients in terms of longevity and being able to pay the bills,” Bachmann noted.
That formula seems to be working for United Messaging. Since its inception, the company has grown its enterprise client base from seven to 89, and its revenues have seen a 2,200% increase from 1999 to 2000. Last year, it netted $400,000 in revenue, and is on target to rake in at least $8.5 million by the end of this year.
United Messaging hasn?t yet turned a profit, but expects this latest round of venture financing to bridge it to a break-even point and positive cash flow sometime in 2002.Until then, the company plans to use its third-round venture funding to continue developing its technologies and expand its international operations. United Messaging has already set up shop in London and Belgium, and hopes to open more offices in Western Europe. It?s also cautiously looking into Asia, Latin America and the Caribbean as possible locations to start up other operations over the next year.
While Rodgers conceded that it would certainly “be nice” for United Messaging to become a public company when the markets are fair so it can have another form of currency, it?s not the end-all, he said. For now, he?s got his mind firmly set on building a multi-million-dollar business.
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Contact Robyn Kurdek at Story Feedback.
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