Venture Update Vol IV, #1, January, 2000

Done Deals

Raleigh—BTI Telecom Corp. (www.btitele.com), a provider of integrated telecommunications services to business customers concentrated in the Southeastern United States, is receiving a $200 million investment from Welsh, Carson, Anderson & Stowe VIII, L.P. BTI will issue 200,000 shares of Series A Preferred Stock, which may be converted to Common Stock, to Welsh Caron, giving them a 19.5% ownership of the company. In addition, BTI will issue Welsh Carson 4.5 million warrants, which may be canceled based on BTI's future performance. BTI will buy back $65 million in common stock from Chairman and CEO Peter Loftin, reducing his ownership of the company to slightly less than 80%. Two Welsh Carson general partners will join BTI's Board of Directors. Contact: Brian K. Branson (919.863.7025).

Morrisville—Cronos Integrated Microsystems, Inc. (www.memsrus.com), a developer of MicroElectroMechanical Systems (MEMS) components for the telecommunications, microinstrumentation and biotechnology industries, closed on $8 million in first round financing in December 1999. Investors included Intel, Knickerbocker and Spacevest. Contact: Robert Bratter (919.380.1316).

Durham—Inspire Pharmaceuticals (www.inspirepharm.com) a company focused on the discovery and development of novel therapeutics based on mucosal hydration and epithelial cell biology, formed a partnership with Genentech potentially worth $78 million. Under the agreement, Genentech will provide Inspire with capital and marketing assistance for its cystic fibrosis and bronchitis treatments. Contact: Gregory Mossinhoff (919.941.9777)

Cary—TaskPoint.com, a host of an e-commerce Web site for construction equipment and services, received $1 million in first round financing lead by Gray Ventures in December 1999. TaskPoint was formerly known as Centrigen. Contact: Bill Dears (919.573.0007)

Cary—Microcosm Technologies (www.memcad.com), a developer of MicroElectroMechanical Systems (MEMS) CAD software and services, received a strategic investment of an undisclosed amount from Intel Corp. in December 1999. Contact: Michael Jamiolkowski (919.677.9272).

Raleigh—MindLever.com (www.mindlever.com), a developer and provider of Internet-based software training programs, closed on $4 million in venture financing in November 1999. Investors included Alliance Technology Ventures. Contact: Salim Bhatia (919.875.0033).

Durham—BuildNet Inc. (www.buildnet.com), a developer of software for managing home construction, received investment from Owens Corning in December 1999 as a part of its third round of venture financing. The amount of the investment was not disclosed. Contact: Keith Brown (919.941.6269).

Cary—Relativity Technologies (www.relativity.com), a provider of solutions for the transformation of legacy software assets to e-business computing, closed on an undisclosed amount in third round financing in December 1999 from Intel's venture capital fund, Intel 64. Contact: Rich Cronheim (919.678.1500).

New Developments
Morrisville—AuctionRover.com (www.auctionrover.com), a host for online auctions, signed a licensing agreement with eBay, Inc., in December 1999. Under the agreement, bidders using AuctionRover.com can search through and connect with auctions on eBay. Contact: Michael Jones (919.465.5680).

Raleigh—StreamServe (www.streamserve.com), a provider of intelligent output management and e-communications software, formed a partnership with Oracle in December 1999. Under the partnership agreement, StreamServe is an accepted software complement to Oracle's enterprise resource planning solution, Oracle Applications. Contact: Mindy Hamlin (919.786.7319).

Charlotte—LendingTree Inc. (www.lendingtree.com), a host for Internet-based loan research, named former Coca-Cola USA Vice President-Consumer Marketing Tom Reddin as its chief marketing officer in December 1999. Contact: Doug Lebda (704.944.2110).

Cary—LIPSinc. (www.lipsinc.com), a developer of animation software products for animated character lip synchronization, has licensed its product Echo to Timeline, a computer game company co-founded by Michael Crichton. Contact: Michael Helpingstine (919.468.7005).

Research Triangle Park—Research Triangle Park-The Council for Entrepreneurial Development (www.cednc.org) is accepting applications to present at VENTURE 2000, its 17th annual venture capital conference, to be held May 10-11, 2000 on the campus of UNC-Chapel Hill. Past presenters from diverse industries such as Internet, biotechnology, software manufacturing, pharmaceuticals and healthcare have raised more than $600 million. Applications are due February 25, 2000. To apply, visit the CED Web site or call Cathy Trask at 919.549.7500 ext. 121.

On The Up
SAFFRON TECHNOLOGY
Saffron Technology is an emerging company that makes scalable, cost-effective software that captures personal and expert knowledge for real-time usage. There are multiple vertical applications, and Saffron is focusing on the red-hot e-commerce space for its first market.

Saffron's technology creates an entirely new kind of database. Relational databases are what allow a site like SciQuest.com to track what you purchase. By using tools such as data mining and collaborative filtering, the site makes recommendations for related products. But Saffron's solution takes that a step further. "It's more than just recording what you buy - we empower sites to learn what users do and say leading up to a transaction completion or abandonment," notes Clay Dunnagan, Saffron's CEO. The result? "A very rich user profile that's 5-25 times more accurate than current personalization technology." And despite the power, it doesn't eat up a lot of real estate - good news for site administrators concerned with performance.

The company, founded by IBM veterans Jim Fleming, vice president, and Manny Aparicio, CTO, closed an initial round of Series A preferred stock at $190,000 and recently completed a bridge round of over $2 million, which included institutional and private equity investors. A Series B round is imminent in the first quarter. The money is being used for sales and marketing as well as continued technology development.

"Our beta will be ready in early January," Dunnagan notes. "We expect three to five sites to be involved in the beta program, with the production version shipping by the end of the first quarter."

Featured Fund
PETRA CAPITAL PARTNERS
"We like the Research Triangle area because it has a good concentration of resident management talent and a good venture capital community," asserts Michael Blackburn, partner in Nashville-based Petra Capital Partners, LLC. "The region has really developed over the past five years into one of the leading entrepreneurial centers in the country."

Petra Capital has made three investments in RTP: $3 million in Interactive Magic (now public), an interactive gaming company; $3.5 million in Virtus (private), the 3-D application development tool for CD-ROM developers; and $2 million in BuildNet, the ecommerce company for the building industry.

The firm has two funds under management. The first fund, at $60 million, is not currently making any new investments. However, a second fund, which closed in June, will have $75 million available for investment. "We like information technology services, healthcare services, ecommerce and telecommunications companies," Blackburn notes. "Our typical investment is between $2 and $4 million."

Petra Capital Partners seeks to invest in growth companies with the following characteristics: managers with a track record of success, markets that are large and clearly targeted, above average business-model economics, and strategic positions in industries experiencing fundamental change.

Blackburn feels the Research Triangle region has a lot of companies which meet these characteristics. "Outside of Atlanta, RTP is probably the premier community for technology start-ups in the Southeastern United States."

Mark Your Calendar!

Mergers and Acquisitions Seminar
January 11, 2000
Noon - 6:00 p.m.
Washington/Duke Hotel, Durham

Executive Series: Session 2: Negotiating Skills and Strategies
January 27, 2000
7:30 - 10:45 a.m.
CED Entrepreneurship Center, RTP

Conference on Entrepreneurship
February 5, 2000
8:00 a.m. - 5:00 p.m.
The R. David Thomas Executive Conference Center, Duke University Campus

STREAK Luncheon
February 24, 2000
Noon - 1:30 p.m.
Holiday Inn, RTP

Venture 2000
May 10 - 11
UNC Friday Center, Chapel Hill

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 organization supported, in part, by corporate contributions, including funding from Atcom Business Telephone Systems, Carolina Power & Light and Capitol Broadcasting Company, Inc.

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