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DEALFLOW DASHBOARD/ September 19
ASP: ComScore, $31M
B2B: Ework Exchange Sweden, undisclosed amount
BIOTECH: Transmolecular, $9M
INTERNET SERVICES: StorageWay, $36M
WIRELESS: Mobilesys, $36M
NEW VENTURE FUNDS: Convergent Investors, $64M; Sterling Venture Partners, $150M
DEALFLOW DIGEST: Business.com, $61M; Cosmocom, $40M; FunBug, $3M; Global Factory, $13M; Habama, $12M; Yack, $18.5M
DEALFLOW DISH: Shadow cast over iCast
ELEVATOR PITCH: Offerlab, $2M

DEAL OF THE DAY: VIVECA, $14.5M
We've seen a lot of B2B exchange software companies funded over the past couple months, so when we got word of Viveca (www.viveca.com), there seemed little reason for excitement. But Viveca has a common-sense business model and a service that meets a real need. The company came out of stealth mode Monday morning with the announcement of its funding and its management team.

Based in Boston, Viveca sells an ASP-type service that aggregates catalog content from multiple sellers for B2B exchanges. Normally, Webifying that content is a laborious process that B2B exchanges either leave to suppliers or pay for themselves. The process consists of lifting information from text-based catalogs and databases through a combination of data entry and optical character recognition (OCR) software. Viveca automates the process, sitting between the supplier and the Net market, pulling content from traditional publishing software such as Quark and Adobe Photoshop. Viveca then streams the data to the exchange for publication, regularly updating the information as a supplier's catalog changes.

Viveca bills B2B exchanges for the services, charging a setup fee ranging from a few hundred dollars to thousands and a monthly fee of $10,000 for hosting the service. The high cost may be Viveca's biggest challenge to sign up customers. CEO Patricia Stimpson reckons that won't be a problem because "product information is the lifeblood of B2B exchanges." With three companies, Viveca is on its way.

--Steve Silverman

ASP

COMSCORE
www.comscore.com
Reston, VA
FUNDING: $31M
PRIOR FUNDING: $9M
ROUND: 2ND
CATEGORY: ASP
DESCRIPTION: Develops surveillance software applications that allow clients to track consumer spending and buying habits.
LEAD INVESTOR: Lehman Brothers Venture Fund ($10M)
OTHER INVESTORS: Accel Partners; Flatiron Partners; Institutional Venture Partners; Comdisco Ventures; Siebel Systems; Brinson Partners; Divine Interventures; and Forrester Research.
THE HERRING TAKE: "Right now, as I speak, I'm looking at a building used by the CIA and one used by the NSA," says Comscore's CEO, Magid Abraham. It's fitting that he should be near those agencies, since his startup has developed surveillance software that allows clients to gather information on consumer spending and buying habits. "We're not selling lists of people's names and addresses," Mr. Abraham says in defense of his snooping software. Comscore, which launched last September, makes money by charging customers annual subscription fees and consulting fees. Customers, such as Pets.com, spend an average of $3,000 to $2 million per year. With 15 customers and 120 employees, Comscore has a monthly burn rate of around $1.5 million per month. Mr. Abraham pulls down a $250,000 salary that's very generous by startup standards. "We're not a bunch of 18-year-olds with no experience trying to run a company," he says.

B2B

EWORK EXCHANGE SWEDEN
www.ework.se
Stockholm, Sweden
FUNDING: Undisclosed
ROUND: 1st
CATEGORY: B2B
DESCRIPTION: Matches companies and project workers through its site, providing services such as invoicing, project management, and online collaboration.
LEAD INVESTORS: Telia Business Innovation, a venture capital firm in the Swedish telecommunications group Telia.
THE HERRING TAKE: Transferring to Silicon Valley from Stockholm is not such an unusual concept anymore, at least not to eWork Exchange Sweden, a company based in Stockholm that matches independent professionals and projects. Contractors can post info about themselves for free on the site while the startup charges corporations a fee to post their projects. It also charges corporations for providing payroll services to their individual contractors (from $2 on up), taking a cut from the contractor's hourly fee. The company, with 76 employees, expects the capital to last a year and a half. The company's competitors on the media side include Guru, which also connects independent professionals with contract projects, and Monster Talent Market, an auction market for independent contractors, says Perry Boyle, a partner in equity research at Thomas Weisel Partners. On the software side, it competes with Opus 360 and Niku, Mr. Boyle says.

BIOTECH

TRANSMOLECULAR
Birmingham, AL
FUNDING: $9M
PRIOR FUNDING: $575K
ROUND: 2nd
CATEGORY: Biotech
DESCRIPTION: Develops therapies and diagnoses for diseases of the central nervous system and related tissues.
LEAD INVESTOR: TVM Techno Venture Management
OTHER INVESTORS: Tullis-Dickerson & Co.; President Life Sciences Co.; Pacific Horizon Partners; Portrush Group; Suttle Brothers Investments
THE HERRING TAKE: The Giant Yellow Israeli Scorpion may sound like one heck of dangerous creepy-crawly, but TransMolecular has figured out a therapeutic use for its sting. The company uses the scorpion's toxin to deliver therapeutic payloads to brain cancer patients in a highly precise manner. Although the toxin paralyzes insects, it is relatively harmless to humans. The toxin is able to pass through the blood-brain barrier, which normally blocks anti-cancer drugs. What's more, it's able to bind to an ion channel found only on metastatic tumors. That makes it a great delivery vehicle for therapeutic compounds. "It's like a little rocket with a homing device in the scorpion toxin," says CEO Matthew Gonda. The 12-employee company expects to enter Phase 1 and 2 trials next year, with FDA approval possible within 2 1/2 years. The company is also developing treatments for other forms of cancer, strokes, and neuropathic pain. TransMolecular plans to partner with pharmaceutical companies for marketing and sales.

INTERNET SERVICES

STORAGEWAY
www.storageway.com
Fremont, CA
FUNDING: $36M
PRIOR FUNDING: $12.3M
ROUND: 2nd
CATEGORY: Internet services/storage service provider
DESCRIPTION: Provides managed storage services for Internet businesses
LEAD INVESTOR: Worldview Technology Partners.
OTHER INVESTORS: Redpoint Ventures, Matrix Partners, Montreux Equity Partners.
THE HERRING TAKE: While trying to sell high-end enterprise storage systems, Storageway founder and CEO Peter Shambora realized there was something wrong with the model. "It was almost like you or me trying to manage our own PG & E [utility] usage," he says. One-year-old Storageway sells virtual storage to Web-based companies with big storage needs, such as rich-media content providers and application service providers. It installs storage hardware systems in co-location facilities, which are owned by phone companies. It is in 12 co-location sites in the U.S. today and plans to be in 35 domestically and internationally by the end of March. It resells its service through Exodus. Storageway was founded at about the same time as its only direct competitor, Storage Networks, which has snagged high-profile customers (Yahoo and Merrill Lynch) and raised $243 million in a June IPO. Storageway has no immediate plans for an IPO. It expects to raise a third round by year's end, but it won't name customers.

WIRELESS

MOBILESYS
www.mobilesys.com
Mountain View, CA
FUNDING: $36M
PRIOR FUNDING: $20M
ROUND: 3rd
CATEGORY: Wireless software
DESCRIPTION: Wireless message delivery software for cell phones, pagers, and PDAs.
LEAD INVESTOR: Norwest Venture Partners ($20M)
OTHER INVESTORS: Angels laying low.
THE HERRING TAKE: David Coelho can't shake the entrepreneurial bug. After starting three IT companies and taking two of them public (Silvar-Lisco and Vantage Analysis Systems), he's still chugging away. The 42-year-old started MobileSys, which makes wireless solutions for enterprise customers, back in 1996. He's had no difficulty raking in $56 million in three rounds of funding, including $36 million in his latest. Mr. Coelho is so confidant of his product he offers limited money back guarantees to his 700 customers if messages delivered between their PDAs, cell phones, and laptops disappear into the ether. Apparently the service is highly reliable: MobileSys has more than 1.5 million wireless subscribers at more than 650 companies, including Cisco, Qualcomm, and Hewlett-Packard. Mr. Coelho boasts that his technology blows the doors off competing products from JP Systems and Net Tech. The new funding should last for a while: Mr. Coelho says his burn rate is about $1.5 million per month. That should give him plenty of time to set up for his planned IPO.

NEW VENTURE FUNDS

CONVERGENT INVESTORS
www.convergentinvestors.com
Austin, TX
FUND NAME: CONVERGENT INVESTORS VI
FUND SIZE: $64M
FOCUS: First and second rounds for telecommunications and e-commerce companies.
AVERAGE INVESTMENT: $1M-$5M
PITCH EMAIL ADDRESS: info@convergentinvestors.com
CONTACT PERSON: Chris Yeoman, associate
NUMBER OF PARTNERS: 7
THE HERRING TAKE: Investors in the fund include 35 private individuals. The fund expects to invest in up to 20 companies over three years -- an average of $3.2 million per deal. It will primarily invest in startups based in Texas, although it won't limit investments to that geography, says Chris Yeoman, an associate at the firm. The firm's ideal investment has high growth potential, serves a large market, and creates significant change in an industry, Mr. Yeoman says. The firm has done one deal out of the new fund: it invested $500,000 in Austin-based Isochron Data, a manufacturer of wireless connectivity and analytical software.

STERLING VENTURE PARTNERS
www.sterlingcap.com
Baltimore, MD
FUND NAME: Sterling Venture Partners
FUND CHIEF: Managing partners Eric Becker, Michael Bronfein, and Steven Taslitz
FUND SIZE: $150M
FOCUS: Telecommunications, information technology, business services, e-commerce, and health care technology
AVERAGE INVESTMENT: $2M - $10M
PITCH ADDRESS: http://www.sterlingcap.com/contact.html
THE HERRING TAKE: The 17-year-old investment and LBO firm has started its first venture capital fund. Whereas Sterling Capital raised its money company by company from wealthy individuals and focused more on buyouts, its founders decided to harness the power of those investors into one big early-stage fund for Sterling Venture Capital. Its limited partners include Sterling's principals, traditional institutions, and 56 rich CEOs, including Nelson Carbonell, CEO and founder of Cysive, and Tom Scholl, CEO and founder of Telogy. Based in Baltimore, the firm's emphasis is simple. "We are very focused on the technologies that make things work and bring substantial productivity gains to business," says Eric Becker, a managing partner. The firm is targeting investments in the mid-Atlantic and Midwest areas. In addition to bringing in its LPs for strategic advice, Sterling Venture Partners's partners (many of whom overlap with Sterling Capital) have built big businesses, such as its $3 million investment in Sylvan Learning that turned into a $640 million company. The fund, which had its first close in May, has already made three investments: TidePoint, Versient, and Woodwind Communications. It will close on two investments later this week, one in telemedicine and one an optimization engine for e-procurement.

DEALFLOW DIGEST

BUSINESS.COM
www.business.com
Santa Monica, CA
FUNDING: $61M
CATEGORY: B2B
DESCRIPTION: Online directory for e-businesses.
LEAD INVESTOR: Financial Times Group and Cahners Business Information.
OTHER INVESTORS: Industryclick and McGraw-Hill.
MORE INFORMATION: Business.com

COSMOCOM
www.cosmocom.com
Melville, NY
FUNDING: $40M
CATEGORY: B2B
DESCRIPTION: Contact technology for e-customer relationship management applications.
LEAD INVESTOR: Intel Communications
OTHER INVESTORS: Marconi Ventures and Technology Crossover Ventures
MORE INFORMATION: Cosmocom

FUNBUG
www.funbug.com
San Francisco, CA
FUNDING: $3M
CATEGORY: B2B
DESCRIPTION: Distributes cash prizes via the Web to consumers through weekly sweepstakes drawings.
LEAD INVESTOR: Maroon Bells Capital Partner
OTHER INVESTORS: Sterling Payot and Irwin Federmen, an angel.

GLOBAL FACTORY
www.globalfactory.net
Santa Clara, CA
FUNDING: $13M
ROUND: 1st
CATEGORY: ERP
DESCRIPTION: Provides a Web-based manufacturing management system to the electronics industry.
LEAD INVESTOR: Evergreen Management ($5M)
OTHER INVESTORS: Apax Partners & Co.; Defta Partners; Comsor Investments; Koor CVC
MORE INFORMATION: Businesswire

HABAMA
www.habama.com
Boston, MA
FUNDING: $12M
ROUND: 1st
CATEGORY: ASP
DESCRIPTION: Provides self-service Web site development software for small and midsize businesses.
LEAD INVESTOR: East River Ventures
OTHER INVESTORS: Quan Ventures; New England Partners; Corning Technology Ventures; FIM Securities; Lloyds TSB; Cairnwood Ventures; Crescent International
MORE INFORMATION: PRNewswire

YACK
www.yack.com
New York
FUNDING: $10.2M
PRIOR FUNDING: $18.5M
ROUND: 3rd
CATEGORY: B2B2C
DESCRIPTION: Operates a site that serves as a guide to online programs and events, such as audio and video Webcasts and chats.
LEAD INVESTOR: Trans Cosmos USA
OTHER INVESTORS: Mayfield Fund; Waterview Partners; Blue Chip Ventures; Infinity Capital; Weiss, Peck & Greer Venture Partners.
MORE INFORMATION: PRNewswire

DEALFLOW DISH

SHADOW CAST OVER ICAST
They said it would come and it has. CMGI (www.cmgi.com; Nasdaq: CMGI), in the midst of pruning its unruly garden of holdings down to a neat patch of 5 to 10 by the end of the year, acknowledged in August that there would be layoffs as a result of the internal consolidation. Last week, portfolio company Altavista faced a fresh round of layoffs as 225 employees got their walking papers. This week, the Pink Slip of Fate struck again, nailing 30 out of 250 employees at iCast, an entertainment site. The announcement comes just one month after the company trumpeted four new executive hires in marketing and ad sales. A spokesman for the company told CNet that the cuts are unrelated to CMGI's overall restructuring and have been pending for several months. Investors will let CMGI know what they think of all this on Friday after it reports its earnings.

ELEVATOR PITCH

OFFERLAB, $2M
Connecticut
www.offerlab.com
THE PITCH: "Offerlab is creating the technology infrastructure and partnering marketplace/network to enable co-promotions between two parties. The promotional advertising market on the Web is expected to grow to $8 billion by 2003. There is currently no third-party provider popularizing and providing the tools for integrated co-promotions that we are aware of. It's an effective direct marketing technique that can be used to lower acquisition expenses, increase retention, and introduce incremental revenue streams. We closed on $1.05 million in seed funding in May, put our heads down and got to work, and are now looking for an additional $2 million to $2.5 million from strategic investors or early-stage institutions to close out our startup stage. $850,000 of the original funding came from non-family investors."
WHY WE LIKE IT: Founders have loyalty program experience at FreeRide; for better or worse, direct marketing still makes money.
WHAT THEY'RE UP AGAINST: Competitors include GetRelevant, Webloyalty.com
CONTACT: Tricia Kemp, 203-622-5899, tricia@offerlab.com.

(Looking for funding? Drop us a line at mailto:elevator@redherring.com?subject=Seeking_funding. 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.)

Dealflow is reported and written by Karie Atkinson, Julie Landry, Richard Byrne Reilly, and Steve Silverman. The Elevator Pitch is selected and written by Julie Landry.

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