Is this a sign of the big thaw? Or the perfect example of a company that’s able to loosen some greenbacks from tight-fisted venture capitalists because it’s already generating enough revenue not to need it?
Software and services provider ChannelAdvisor has secured $5.7 million in venture capital funding, the company’s first institutional round since being spun out from Pasadena, Calif.-based GoTo.com. Boston-based Genesis Venture Partners, L.P., led the round, with participation from online auction behemoth eBay, and Triangle angel investment firms Southern Capitol Ventures, Tri-State Investment Group and The Atlantis Group.
ChannelAdvisor is not a fledgling startup. It has a list of prominent customers, after all, and expects $4 million in revenue in 2002.
“We went out looking for $3 million … and it just started to snowball, and we ended up doubling it, says Scot Wingo,” chief executive officer and president of ChannelAdvisor. “This gives us the chance to be more aggressive, still hit profitability this year and have a nice cushion moving forward. In this environment, a cushion feels like a good thing to have.”
In its short 2 1/2-year life, ChannelAdvisor has undergone a metamorphosis. Founded as AuctionRover in July 1999, by Scot Wingo and Aris Buinevicius, the company was sold in eight months to publicly traded GoTo.com for $166 million in stock. Sixteen months after becoming GoTo Auctions, GoTo.com spun off the division’s assets to ChannelAdvisor in exchange for an 18.5 percent ownership stake, putting Wingo back in control.
Ben Brooks, managing partner of Southern Capitol Ventures, says he’s known Wingo for many years and wanted to be a part of his next company. “His team is a formidable one, and he’s a real visionary. He knows his customers and competitors, and has a strong pipeline of clients. I think he can revolutionize the niche he’s in.”
Wingo says although the company didn’t need the cash infusion, it will enable ChannelAdvisor to deepen its traction in the computer and consumer electronic categories, as well as expand aggressively into others, such as travel, autos, and home and garden. That expansion will include beefing up the company’s sales team, which will grow the company to 60, from about 45.
ChannelAdvisor provides software that helps small and large businesses, retailers and manufacturers manage online auctions. ChannelAdvisor Pro, a product aimed at individuals and small firms, sells for $20 a month and has over 4,000 users. ChannelAdvisor’s enterprise software links directly to e-marketplaces such as eBay to sell or auction products, giving large retailers and manufacturers a new sales channel to move products. Customers pay an upfront integration cost to connect their e-commerce infrastructure with the ChannelAdvisor network, pay a monthly service fee in the neighborhood of $5,000 a month and share a percentage of sales, ranging from 5 to 15 percent, with ChannelAdvisor. The software automates the transfer of information about inventory, products and pricing, relieving clients of the time consuming process of manually posting and updating merchandise. Clients include IBM, Handspring, Samsonite, Omaha Steaks and Rollerblade.
“[Reaching profitability] is a delicate balance,” Wingo says. “We want to continue to invest a good deal upfront, so we don’t think it makes sense to get profitable too fast right now. You either grow really rapidly or just shoot for profitability, so we’re trying to aim in the middle.”