[BusinessTeam] FW: DEALFLOW: Zap! Pow! Bang! Zaplet nets $90 million

Message-ID: <6B75EF096AE0BE428B8CEDEA89C5F6327822BE@exchange01.lab49.com> · Fri Oct 20 17:40:54 2000 UTC

More on Zaplet... 

-----Original Message----- 
From: Redherring.com [mailto:dealflow@listserv.redherring.com] 
Sent: Friday, October 20, 2000 12:09 AM 
To: scolamarino@mail.com 
Subject: DEALFLOW: Zap! Pow! Bang! Zaplet nets $90 million 

        The latest information on venture capital 
                and startups can be found at: 
                http://www.redherring.com/vc 

DEALFLOW: Zap! Pow! Bang! Zaplet nets $90 million 

DEALFLOW DASHBOARD/ October 20, 2000 
ASP: Scheduling.com, $31.9M 
COMMUNICATION SERVICE PROVIDERS: ITF Optical Technologies, 
$30M; New Edge Networks, $139.9M 
INTERNET: Edgix, $50M 
NEW VENTURE FUND: St. Paul Venture Capital VI, $1.3B 
DEALFLOW DIGEST: Broadbeam, $29M; Lockstream, $15M; 
Presenter.com, $5M; Stemco Biomedical, $4M 
DEALFLOW DISH: Idealabs says adios to an IPO; One less 
Olympian 
ELEVATOR PITCH: Zoom2net, $5M to $7M 
DEALFLOP: Hypermedia Communications 

------------------------------------- 

DEAL OF THE DAY: ZAPLET, $90M 
They say old habits die hard. Take the case of Zaplet 
cofounder and "head Zaplet" David Roberts. Prior to starting 
Zaplet (http://www.zaplet.com), Mr. Roberts, 37, did stints 
in U.S. Air Force counter-intelligence, the CIA, and the 
National Reconnaissance Office. 

It's fitting then, that he diplomatically declined to offer 
burn rates, profitability timelines, or how much venture 
funding he's shoveled into developing Redwood Shores, 
California-based Zaplet's technology. That said, the startup 
has created a unique machine bundling e-mail, instant 
messaging, and the Web into a convergent platform that 
creates user-priority methodology as a means to streamline 
online use. 

In essence, Zaplet acts as an automated aggregator, flagging 
user necessities based on user priority. To be sure, Zaplet 
has cost a small fortune to develop, hence this latest $90 
million windfall. And, the reticent Mr. Roberts has not 
ruled out a fifth round. 

He also declined to enumerate on his customer base, but 
allowed the Republican National Committee is using Zaplet to 
facilitate the conducting of political polls. Zaplet 
currently employs 160 and derives revenue from software 
sales. We hope to have Mr. Roberts pay a visit to our 
offices soon, so stay tuned. 

INVESTORS: Integral Capital Partners and Amerindo (lead); 
Questmark Partners; Azure Capital; Kleiner Perkins Caufield 
and Byers; Sands Brothers; and assorted capitalistic angels. 

--Richard Byrne Reilly 
  richard.reilly@redherring.com 

------------------------------------- 

ASP 

SCHEDULING.COM 
http://www.scheduling.com 
Los Gatos, CA 
FUNDING:   $31.9M 
PRIOR FUNDING:   $10.5M 
ROUND:   3rd 
CATEGORY:   ASP 
DESCRIPTION:   Provides applications and services for 
functions such as patient scheduling, patient registration, 
and verification of insurance eligibility. 
LEAD INVESTOR:   Thomas Weisel Partners 
OTHER INVESTORS:   Interwest Partners, New Enterprise 
Associates; SMS, a unit of Siemens; and management 
THE HERRING TAKE:   Scheduling.com hopes to cover all the 
bases when it comes to arranging hospital care. The year-old 
startup is an application service provider that rents its 
core software to hospitals. That software allows hospitals, 
doctors, and patients to handle all aspects of care, from 
scheduling appointments to verifying a patient's medical 
eligibility. So far, five hospitals are using its services, 
with 20 coming on board in the next three to five months, 
says CFO Paul Krug. Scheduling.com plans to book revenue by 
charging hospitals fees, ranging from 25 cents to $2 per 
scheduling transaction and medical inquiry. The company has 
no revenues now, but predicts $6 million in fiscal year 
2001, and up to $40 million in 2002. With Scheduling.com's 
burn rate at about $1 million a month, Mr. Krug says the 
funding will last long enough for the company to make it to 
positive cash flow. As far as rivals go, there are none, 
according to Mr. Krug. He says Scheduling.com has no direct 
rivals also trying to connect hospitals, physicians and 
consumers together over the Internet -- at least for now. 

COMMUNICATION SERVICE PROVIDERS 

ITF OPTICAL TECHNOLOGIES 
http://www.itfoptical.com 
Montreal, Quebec 
FUNDING:   $30M 
PRIOR FUNDING:   $38M 
CATEGORY:   Optical networking components 
DESCRIPTION:   Provides passive optical components for 
networking gear. 
INVESTORS:   Fidelity Management & Research Co.; Celtic 
House; Tyco Ventures; Essex Investment 
THE HERRING TAKE:   There's no doubt that optical components 
are the next big thing. Over the last few months we've seen 
a populous procession of optical components upstarts pulling 
in big dollars. That has to make you wonder how long it will 
take to reach a saturation point. But so far the 
technologies have remained diverse. ITF makes a wide range 
of passive components using its "All-Fiber" technology. The 
process involves the fusing and tapering of optical fiber in 
a way that makes it retain more light. The enhanced 
performance makes it a good medium for amplification and 
transmission systems because it can squeeze more channels 
onto fiber and is less complex than other methods. The 
funding will be used to ramp up capacity at the company's 
manufacturing plant, hiring, and R&D. 

NEW EDGE NETWORKS 
http://www.newedgenetworks.com 
Vancouver, WA 
FUNDING:   $76.9M ($63M debt) 
PRIOR FUNDING:   $77.7M ($85M debt) 
ROUND:   3rd 
CATEGORY:   DSL 
DESCRIPTION:   Provides wholesale broadband DSL services 
nationally to small, mid-sized, and rural markets. 
LEAD INVESTOR:   GS Capital Partners 
OTHER INVESTORS:   Crosspoint Venture Partners; Accel 
Partners; Greylock; other undisclosed strategic and 
institutional investors 
THE HERRING TAKE:   The public markets are savaging all 
things DSL. Yesterday, for instance, Covad Communications' 
already decimated stock was chopped down to $3 9/16 after 
announcing it was shorted $11.5 million on accounts 
receivable, citing the financial straits of nine of ISP 
customers. Given that context, investing in New Edge 
Networks seems like a flyer. The company sells exclusively 
through channel partner ISPs, thus exposing it to the same 
risks as Covad. But CFO John Hesse says the company has an 
edge. It's targeting smaller, less competitive markets, he 
says. And that translates to less pressure on pricing, 
higher margins, and most importantly, less-troubled ISPs. 
Many of the cities the New Edge operates in are EBITA 
positive, Mr. Hesse says. The company also operates its own 
nationwide ATM network, giving it another source of revenue 
besides wholesale DSL access, including private line 
connections and voice services, he says. All that said, the 
company is still dependent on the fortune of its ISP 
customers. And no matter how good New Edge's management team 
may be, there's no stopping profligate service providers. 

INTERNET 

EDGIX 
http://www.edgix.com 
New York 
FUNDING:   $50M 
PRIOR FUNDING:   $15M 
ROUND:   2nd 
CATEGORY:   Internet 
DESCRIPTION:   Tools to run Internet infrastructures of IT 
companies. 
LEAD INVESTOR:   Chase Capital ($25M) 
OTHER INVESTORS:   Battery Ventures; Venrock Associates 
THE HERRING TAKE:   Finally, a CEO who harbors no ridiculous 
plans about quick profits and an IPO - especially not in the 
current market. "An IPO is not an event, it's just another 
avenue for raising capital," says CEO Rangu Salgame. "That's 
not a company goal. Building a business is the goal." Edgix 
provides the necessary ingredients, such as routers, servers 
and software, that enables IT enterprises to develop an 
online presence. Using Intel, Unix and Novel systems and 
components, Edgix spent $20 million developing the software 
that is the muscle behind its application. The success of 
Edgix depends on many things, not the least of which is 
market conditions, but also the generosity of venture 
capitalists, and whether wary customers with tightened belts 
decide Edgix is what they need. The burn rate stands at over 
$1 million per month. 

NEW VENTURE FUND 

ST. PAUL VENTURE CAPITAL 
http://www.stpaulvc.com 
Eden Prairie, MN; Redwood City, CA; Andover, MA 
FUND:   St. Paul Venture Capital VI 
FUND CHIEF:   Pat Hopf, managing general partner 
FUND SIZE:   $1.3B 
FOCUS:   Early stage in the Boston, Silicon Valley and 
Minnesota markets; emphasis on communications, business 
Internet, consumer technology and healthcare companies. 
AVERAGE INVESTMENT:   $2M to $10M 
PITCH URL:   See http://www.stpaulvc.com/our_team/index.html 
for appropriate partner and 
http://www.stpaulvc.com/contact_us/index.html for contact 
info. 
THE HERRING TAKE:   The newest billion-dollar-plus fund is 
different from the rest of the pack: St. Paul Venture 
Capital has just one limited partner, St. Paul Fire and 
Marine Insurance Company, which writes the checks for its 
funds. "If they are happy with the returns, which they are, 
we go to them and say, 'Look, this is what we think is the 
appropriate amount for the types of entrepreneurs we want to 
work with,'" says general partner Michael Gorman. The 
twelve-year-old firm expects to stretch the fund over three 
or four years, and take about 100 companies into the 
portfolio. Although it began in the Twin Cities (and is 
Minnesota's most active investor), St. Paul plans to invest 
up to 80 percent of its capital in the Boston and Silicon 
Valley areas, according to Mr. Gorman. In every market, 
though, the firm will stick closely with the capital- 
intensive (but scorching-hot) communications sector, where 
portfolio companies, including Minnesota's Optical Solutions 
and New Hampshire's Granite Systems, have hit it big. 

DEALFLOW DIGEST 

BROADBEAM 
http://www.broadbeam.com 
Princeton, NJ 
FUNDING:   $29M 
PRIOR FUNDING:   $15M 
ROUND:   4th 
CATEGORY:   Software 
DESCRIPTION:   Allows companies to license or rent their 
wireless enabling software. 
LEAD INVESTOR:   ABS Capital Partners 
OTHER INVESTORS:   Nassau Capital; The Co-Investment 2000 
Fund; Starvest Partners; Allegra Partners; Dime Capital 
Partners 

LOCKSTREAM 
http://www.lockstream.com 
New York 
FUNDING:   $15M 
ROUND:   3rd 
CATEGORY:   Software 
DESCRIPTION:   Develops software that allows content owners 
to deliver digital media of audio, video, and text on 
wireless, laptop, and desktop devices. 
LEAD INVESTORS:   Encore Venture Partners; Audax Ventures 
OTHER INVESTORS:   Time Warner's Digital Media Investment 
Fund; Artisan Entertainment's iArtisan investment vehicle; 
ING Barings 
MORE INFORMATION: 
http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104
<http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/10
-18> &STORY=/www/story/10-18 
-2000/0001342651&EDATE= 

PRESENTER.COM 
http://www.presenter.com 
Santa Clara, CA 
FUNDING:   $5M 
PRIOR FUNDING:   $6.5M 
ROUND:   3rd 
CATEGORY:   B2B2C 
DESCRIPTION:   Provides companies and individuals with 
online presentation services. 
LEAD INVESTORS:   WI Harper Group; Fortune Venture 
Investment Group 
MORE INFORMATION: 
http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104
<http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/10
-18> &STORY=/www/story/10-18 
-2000/0001342632&EDATE= 

STEMCO BIOMEDICAL 
Durham, NC 
FUNDING:   $4M 
ROUND:   1st 
CATEGORY:   Biotechnology 
DESCRIPTION:   Generates reagents, kits, cell populations, 
and procedures for stem cell research and transplantation 
purposes. 
LEAD INVESTOR:   Intersouth Partners 
OTHER INVESTORS:   The Aurora Funds 
MORE INFORMATION: 
http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104
<http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/10
-18> &STORY=/www/story/10-18 
-2000/0001342661&EDATE= 

DEALFLOW DISH 

IDEALABS SAYS ADIOS TO AN IPO 
Don't look for the ILAB ticker on the Nasdaq anytime soon. 
Six months after it registered last April to go public, 
Idealab finally decided this week to tell the world its IPO 
is on hold. (No, really?) "Over the past several months, we 
have seen dramatic shifts in the market and determined that 
it is in the best interest of the company, its employees, 
and investors that we not proceed with the offering during 
this volatile time," said Idealab CEO Bill Gross in a press 
release. "We will continue to do what we have always done 
best, build great companies." For a supposed hatchery of 
startups, though, we haven't heard much out of Idealab 
lately. Its most recent announcement (in early October, its 
first in nearly three months) was about Stayhealthy.com 
acquiring one of its companies, MyLife.com. 

ONE LESS OLYMPIAN 
It's time to subtract one American Olympian from the roster: 
Olympic Venture Partners of Kirkland, Washington. Due to 
pressure from the U.S. Olympic Committee, the firm's name 
has officially been changed to OVP Venture Partners. Several 
months ago, the firm received several written cease-and- 
desist notices from the USOC, which has broad Congressional 
protection for its trademark. Exceptions include companies 
doing local business only near Washington's Olympic mountain 
range, or that have been using the name since 1950 -- but 
OVP's investments reach as far as Minnesota, and the firm 
has only been using the name since 1986 (it was formerly as 
Ranier Venture Partners, for Mt. Ranier in the Cascades 
mountain range, from 1983 to 1986). 

ELEVATOR PITCH 

ZOOM2NET, $5M - $7M 
New York City 
http://www.zoom2net.com 
THE PITCH:   "Zoom2net.com is an online strategic partner 
for nonprofit organizations (NPOs) and an ISP that lets 
subscribers donate $5/month ($60/yr) of the $19.95 monthly 
access fee to their favorite charity. Zoom2net partners with 
NPOs, which use their relationships and clout to promote 
Zoom2net's service to their supporters. With over 600,000 
NPOs in the U.S., Zoom2net can potentially access millions 
of people at a relatively low cost. In addition to this 
valuable fundraising tool, Zoom2net attracts NPOs by 
creating community building, customized portals for free. 
These relationships can then be leveraged to create other 
revenue streams such as web hosting and design, consulting, 
and high-speed access. Zoom2net has raised close to $1 
million and is seeking another $5M to $7M." 
WHY WE LIKE IT:   Partnering with non-profits and then 
upselling other services. 
WHAT THEY'RE UP AGAINST:   Is there really room for yet 
another ISP out there? 
CONTACT:   Vik Kathuria, chief catalyst, 
vkathuria@zoom2net.com 

(Looking for funding? Drop us a line at 
elevator@redherring.com. Let us know who you are, how much 
you're seeking, the funding sources you're targeting, your 
contact info, and, of course, your pitch. Please keep the 
pitch to no more than 100 words. Do not send attachments. 
One tip: pretend you're actually pitching a VC in an 
elevator. Submissions should have "Seeking Funding" in the 
subject line.) 

The Elevator Pitch is selected and written by Julie Landry. 

DEALFLOP 

Hypermedia Communications 
San Mateo, CA 
BURNED BACKERS:   MK Global Ventures II and MK GVD Fund 
owned a combined 83 percent of the company. 
DESCRIPTION:   Publisher of a news and information Web site 
for Web developers. 
THE HERRING TAKE:   Hypermedia Communications, one of the 
grandaddies of the Internet content industry, called it 
quits this week, prompting its chairman and CEO Richard 
Landry to say, "I think I'm the longest lasting CEO in 
Silicon Valley." 

On Tuesday, Hypermedia "ceased operations," as its corporate 
recorded message informs callers. The company couldn't raise 
venture capital to keep itself alive. Hypermedia published 
NewMedia Magazine in the old days of the early '90s, until 
it shifted to a Web-only publication last year. One VC firm 
is taking the brunt of Hypermedia's closure. MK Global 
Ventures II and its affiliate MK GVD Fund together owned 83 
percent of Hypermedia, according to government documents. 
Mr. Landry declines to say how much venture capital MK 
Global invested in Hypermedia over the years. The VC firm 
held two spots on the company's four-person board. 

Hypermedia was founded in 1989 and two years later began 
publishing NewMedia Magazine, one of the early trade 
publications that served the early Web developer community. 
Hypermedia went public on the Nasdaq exchange in 1993, Mr. 
Landry says. The company was removed from the exchange a few 
years ago because it wasn't meeting the minimum listing 
requirements. 

Hypermedia started this year poorly. For the quarter ended 
March 31, revenues were $416,000, compared to $1.1 million 
for the same quarter in 1999, according to government 
documents. It lost $1 million for the quarter ended this 
past March. 

--Matthew A. DeBellis 
  matthew@redherring.com 

------------------------------------- 

CORRECTIONS/AMPLIFICATIONS 

Dealflow corrects or clarifies all significant errors. If 
you find an error, please send it to dealflow@redherring.com 
with "correction" in the subject line. 

------------------------------------- 

Have a tip? Drop us a line at dealflow@redherring.com. 

--Karie Atkinson, Richard Byrne Reilly, Steve Silverman, 
  Matthew A. DeBellis, Julie Landry, and Georgeanne Dennison 
  dealflow@redherring.com 

EDITOR'S NOTE: 
Dealflow is a daily newsletter that tracks venture capital 
deals, new funds, comings and goings, and other events in 
the VC community. 

Dealflow -- Intelligence for Entrepreneurs  (tm) 

------------------------------------------------------------ 

RELATED LINKS 

* Alan Baratz returned to the Valley as Zaplet's CEO. 
  http://www.redherring.com/companies/2000/0619/com-headcount061900.html 

* ITF was one of the companies that Corning had in their 
  sights for an acquisition. 
  http://www.redherring.com/insider/2000/0217/tech-corning021700.html 

* New Edge and their competition are all headin' for the 
  hills. 
  http://www.redherring.com/investor/2000/0121/vc-newedge.html 

* Idealab raised a few bucks to tide them over until their 
  IPO. 
  http://www.redherring.com/vc/2000/0314/vc-idealab031400.html 

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