Venture Update Vol III, #6, June, 1999

Done Deals

Morrisville-SciQuest.com (www.sciquest.com), a provider of electronic commerce and marketing solutions for the scientific industry, closed on $37.5 million in venture financing in May 1999. Investors included ABS Capital Partners, GE Equity, Partech International, Vector Fund Management, Trinity Ventures, Bessemer Venture Partners, Noro-Moseley Partners, H&Q Access Technology Partners, the Wakefield Group and Comdisco Ventures Contact: Peyton Anderson (919. 281-2100).

Durham-BuildNet Inc. (www.buildnet.com), a developer of software for managing home construction, closed on $37.5 million in venture financing for the acquisition of four software suppliers in the home building industry in May 1999. Investors included GE Capital, GE Appliances, Piedmont Venture Partners and Southeast Interactive Technologies Fund. Contact: Keith Brown (919.941.6269).

Research Triangle Park-Xanthon (www.xanthoninc.com), a developer of micro-electrochemical systems with applications in genomics, drug discovery, and clinical diagnostics, closed on $8 million in third round venture financing in May 1999. Investors included Aurora Funds, Centennial Capital, Cordova Ventures, Franklin Street/Fairview Capital, Intersouth Partners, Noro-Moseley Partners and North Carolina Technological Development Authority. Contact: James Skinner (919.572-0707).

Cary-Emissary Software (www.emissary.com), a developer of software discovery, tracking and delivery of web information via email, closed on $2.5 million in venture financing in May 1999. Investors included Aurora Funds, Cordova Ventures, Intersouth Partners and individual investors. Contact: Michael Jones (919.460.7668).

Durham-NetGift Registry (www.netgift.com), a developer of online, all-occasion gift registry, closed on $1.5 million in second round financing from individual investors in May 1999. Contact: Stephen Furst (919. 688.4488).

Raleigh-Giant Semiconductor Corp., a developer of devices that extend the life of batteries for electronics, closed on $500,000 in seed financing from Centennial Venture Partners in May 1999 . Contact: Glen Kline (919.485.8844).

Cary-Timeline Studios, an electronic gaming company that uses Virtus Corp's 3-D technology, received $17 million from Eidos Electronic Entertainment in exchange for 19% of Timeline stock in May 1999. Timeline closed on an additional $2.2 million from an undisclosed source. Contact: David Smith.

Durham-Triangle Biomedical Sciences, a developer and manufacturer of analytical instrumentation, software, apparatus and diposables for laboratories, received a $2.5 million asset-based line of credit with the CIT Group/Credit Finance in May 1999. Contact: Jack McGlinn (919.384.9393).

Durham-Southeast Interactive Technologies Fund, a venture fund focused on information technology companies, closed on an additional $27 million for its fund in April 1999, bring the total of Southeast Interactive Technologies Fund II to $35 million. Contact: David Blivin (919.558-8324).

Raleigh-nTouch Research Corporation, a clinical trials service provider, acquired Carolina Physicians' Research, Inc., in May 1999 for an undisclosed amount. Contact: Penny Miller (919.872.7223).

New Developments
Research Triangle Park-Synergy Vaccines, a developer of a vaccine booster that increases its effectiveness and safety, has formed an alliance with Becton Dickinson Technologies. Under the terms of the alliance, Becton Dickinson will finance the development of the Vaccine using Synergy's technology with the option to license the vaccine in Asia and Africa. Contact: Richard Mueller (919.361.0410).

Cary-SpectraSite (www.spectrasite.com), a builder and operator of wireless communication towers, will become a publicly traded company through a reverse merger upon the completion of the acquisition Westower, a Vancouver-based builder of wireless towers. Contact: Stephen Clark (919.468.0112).

Research Triangle Park-Celotek Corporation, a developer of encryption technologies for classified and unclassified communications over ATM networks, has formed an agreement with GTE. Under the agreeement, GTE is an authorized reseller of Celotek's CellCase crytographic systems to Federal customers. Contact: Ingrid Arkeilpane (407.896.3288).

Raleigh-Micell Technologies, a developer of an enviromentally-safe dry cleaning process, named Kirk Kinsell as president and CEO in May 1999. Kinsell previously served as president and COO of Avado Brands. Contact: Kirk Kinsell (919.313.2103).

Research Triangle Park-Ganymede Software Inc. (www.ganymedesoftware.com), developer of end-to-end network performance management software, won the Network Magazine 1999 Product of the Year award I the management systems category on May 12, 1999. Contact: Katherine Demacopoulos (919.469.0997 x 325).

On The Up
ELECTRIFIER, INC.
Although most of the buzz about Durham-based Electrifier, Inc., surrounds its first product, Electrifier Pro, the real story is its next offering, according to Mihail Lari, the company's CEO. "We seeded the market with a killer app to serve as a springboard for our next generation of solutions," he says.

Electrifier Pro allows web surfers to experience the richness of high-quality video and audio at all connection speeds, even low bandwidth, thus making high-end sites easier to take to the masses. The product won Best of Show at the annual industry conference, David Coursey's Showcase '99.

On that initial success, the company has received a lot of attention from industry leaders such as Steve Jobs and UPSIDE magazine, which recently awarded the company its 1999 Hot 100 Award for excellence and innovation among the hottest technology industry startups. Investors are taken with the technology advantage as well. To date, Electrifier, Inc. has secured close to $1.5 million in top-tier angel investments. "We're now looking to raise a large round to really attack the space," according to Eric Free, director of business development.

In the meantime, they're settling into their new headquarters down the road from OpenSite Technologies and Red Hat Software. "We're uniquely positioned in the market with customers such as Reebok, Suzuki, Apple Computer and Peter Gabriel," Lari says. Electrifier is preparing to launch its Web-based service later this year to help sellers sell more effectively using rich media. "That's a good place to be since interactive rich media is the cornerstone for the next generation of ecommerce sites."

Featured Fund
THE SPROUT GROUP
With $2 billion under management, The Sprout Group is one of the largest venture capital firms in the nation. The group's last fund closed at $860 million. That buying power allows the firm to make a variety of investments in raw start-ups to later stage healthcare services, IT and consumer services ventures.

Founded in 1969, the firm capitalized its first fund with $12 million. Since then its managed a dozen partnerships and helped finance more than 275 companies with current sales exceeding $40 billion.

Among those investments were noted ventures like Staples, Corporate Express, RHYTHMS NetConnections and Occusystems.

"We generally like to be the lead investor," explains Scott Meadows, a general partner in the firm. "Our minimum investment is $1 million, but we like to have roughly $9 - $20 million in any one project."

Sprout, with offices in New York, Chicago and Menlo Park, recently made investments in two Research Triangle companies: Chapel Hill's InteCardia and AutoCyte. The group was part of an $8.2 million round which helped fund InteCardia's acquisition of the Memphis, Tenn., cardiology operations of MedPartners. Sprout also participated in a $3.1 million round in AutoCyte to fund the company with Hoffmann-La Roche Inc. and Ampersand Ventures.

"We like the Triangle for several reasons," Meadows says. "It has three of the nation's finest universities in one place making it a tremendous place to source early stage projects. And it's such an attractive area in general that it's a place executives want to live.

"We see ourselves as movie producers," Meadows explains. "We're hopeful that we can attract a strong director/CEO like Spielberg and stars like DeNiro to join our productions and then help make those professionals successful."

Mark Your Calendar!
CED Entrepreneurial Excellence Awards and 15th Anniversary Celebration
June 10, 1999
Join CED in recognizing top entrepreneurs while celebrating the 15th anniversary of the nation's largest entrepreneurial support organization.

For more information about these events or to register, visit the CED Web site at www.cednc.org or call 919.549.7500.

CED is a private non-profit supported, in part, by corporate contributions, including funding from Intersouth Partners, KPMG Peat Marwick and Manpower.

Research Triangle Venture Update is published by the Council for Entrepreneurial Development (CED), a non- profit organization located in Research Triangle Park, N.C.
Editor Carolyn Foy, CED
P.O. Box 13353
RTP, NC 27709
Phone: 919.549.7500
Fax: 919.549.7405
Email: mcfoy@cednc.org