Metagenix has sliced its onion, but the move has the president of the software developer smiling instead of in tears.

The four-year-old company, which produces software that monitors the quality of data in client’s enterprise systems, this spring came up with a novel financing strategy that has shifted it from the position of searching for venture capital to not needing any outside funding for the foreseeable future. But the move hasn’t stopped the venture firms from calling.

Rather than hold on tightly to its intellectual property, Metagenix sold its flagship product, “MetaRecon”, to Westboro, Mass.-based data integration firm Ascential Software for $4.6 million. MetaRecon automates data profiling, which involves deciphering data from disparate information systems and mapping it into a common format for easier use. This allows companies to slash the time needed to deploy large-scale enterprise systems, such as customer and supply chain management, business intelligence and data warehousing.

“We came to the conclusion last fall that maybe the product wasn’t going to be it for us,” Metagenix President and Chief Executive Greg Leman says. “With the way the IT market has become, it’s tough for a 20-person company to sell a $300,000 product. Companies don’t want to write a check like that unless they’re dealing with a major vendor.”

Part of the proceeds of the sale paid off a $1.4 million bridge loan Metagenix took out early last year while it was trying to put together a second-round venture deal. Leman says the company scrapped plans for the round last summer when it couldn’t line up a lead investor in a tight market for raising capital.

New program in works

With the money from the MetaRecon deal and revenue from consulting projects and development work for Ascential and other clients, he says the company now has enough cash to last through next March. The only need for venture money now would be to expand, and the company hopes to be in that position soon.

But the story doesn’t stop there.

Metagenix also has licensed back part of the underlying computer code from MetaRecon to begin building a new data quality program, Leman says. The product, which for now is dubbed “CDQM” for “consistent data quality management,” watches data traffic in a network to find where problems occur and recommends how to fix them.

“This gets at the root cause of the problem so you can repair it instead of just putting a bunch of Band-Aids on,” he says, noting that existing data quality programs just “cleanse” systems by looking for data errors and correcting them as they are found.

Leman predicts the company will be much more successful selling CDQM because its $25,000 price tag “is easier to digest,” Metagenix already has a network of systems integrators and resellers in place and the concept behind the product is easier to understand.

“I could explain the functions of MetaRecon for two hours, and some people still wouldn’t get it,” he says. “This can be sold in a 30-second elevator pitch. We’re already seeing a lot of customer interest.”

The product will begin beta testing in August, and Leman hopes to have it ready for shipment by the end of the year.

VC firms come calling

The bridge loan, the MetaRecon sale and Metagenix’s re-licensing of its former intellectual property is “a little unusual sequence of events,” but reflects an increasingly popular concept among technology companies known in industry argot as “slicing the onion,” says Jim Verdonik, a tech lawyer in the Raleigh office of Kilpatrick Stockton.

“They cut their technology into different pieces, use some of it and get what they can for the rest,” Verdonik says. “They way things shook out for them – taking the loan and repaying it by selling the technology – is just indicative of the funding environment we’re in right now.”

Unlike most young software companies these days, though, Metagenix likely won’t have trouble attracting interested investors this time around. Leman says he already has received four calls from venture firms following a presentation he gave at the Atlanta CEO High Tech Council Investor Forum on June 18.

What attendees heard in the presentation went beyond the details of its recent financial maneuvering. They also heard of Metagenix’s financial history, which Leman says includes revenue since inception that is five times the amount of outside investment the company has taken plus historic earnings that also exceed outside investment.

The company raised $1.6 million in its first venture round two years ago from Cupertino, Calif.-based Berg McAfee, Alignment Capital CO-Investment Partners II of Austin, Texas, and a group of investors affiliated with Rifkin & Associates of Denver. It was funded before that by Leman, who built and sold a mapping company that worked with 911 emergency operators and law enforcement agencies before founding Metagenix. Its next venture round will likely be in the $5 million range.

“We went down (to Atlanta) on a lark,” Leman says. “We weren’t really searching for money, and now my phone is ringing off the hook and I’ve got to tell these guys that I’m just not ready for them.”

Metagenix website: www.metagenix.com