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Stuart Garfield Photo
Netezzas
chief executive, Jit Saxena (left) and Foster Hinshaw, the companys
chief technology officer, look forward to its
expansion. |
Four term sheets later...
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| 03/11/2002 09:45 AM |
| By Jeff
Miller |
Many entrepreneurs dread looking
for their next round of venture capital funding, fearing onerous
terms or a sharp decrease in valuation.
Not Jit Saxena.
Netezza Corp.’s chief executive and co-founder, didn’t call a soul
in his company’s funding search. Instead, the venture capitalists
called him.
By the end of last year, Saxena had four term
sheets from top-tier VC firms who were bidding up the company’s
valuation in hopes of getting in. Battery Ventures, which won out,
led Netezza’s $20 million B round, which closed In January.
Neither investors nor the company would provide exact
valuation figures, but all described it as a big increase over the
previous round.
Saxena wouldn’t say whether Battery gave his
company the highest valuation, though he did say that Battery’s
portfolio companies played a role in their winning the lead.
“They had many companies that could be potential partners
for us down the road,” Saxena said.
With so many of the $1
billion venture capital funds inactive last year, the pressure is
now on to put that money to work, despite investors’ lingering fears
about the health of the technology marketplace.
“There’s a
lot of money looking for the highest-quality deals. So deals like
Netezza get auctioned while 98 percent of the other deals go
hungry,” said Ollie Curme, a general partner at Battery. “It’s a
bubble in the desert.”
Netezza is designing a server and
associated software to tackle the problem of analyzing the
ever-growing mountain of raw business data.
“It’s basically a
high-performance, high-scale database appliance,” said Ted
Dintersmith, a general partner at CRV.
The company has
quietly grown to 70 employees since it was founded in the September
2000. In December 2000, Netezza raised an initial round of $8
million from Matrix Partners and Charles River
Ventures.
Battery’s interest in Netezza is part of a
concerted effort to invest in companies that play a role in business
intelligence and pricing.
“This is a major theme for us,”
Curme said. “Corporations are still essentially pricing by the seat
of their pants. The big growth over the next 10 years is in business
intelligence applications.”
In early January, for instance,
Battery led a $20 million third round for ProfitLogic, a Cambridge
company that develops pricing, demand forecasting and product
allocation software for the retail industry.
The Netezza
investment is also a further sign of Battery’s evolving investment
strategy.
In the 1980s through the mid-1990s, Battery
invested evenly in both startups and more mature companies, though
the firm was usually the first institutional investor.
In
the late 1990s, however, companies were going public after just one
or two rounds of financing, so Battery became almost exclusively an
early-stage firm.
Post-bubble, the firm is returning to a
50-50 strategy of early and growth capital investing, but with a
significant difference, Curme said. Battery now is investing in
companies previously backed by other venture capital
firms.
Matrix Partners, a firm that Saxena knew well,
originally seeded Netezza in its Waltham office in September 2000.
Matrix had backed Saxena’s first company, Applix Inc., a customer
relationship management company in Westboro that is now publicly
traded.
Saxena remained with Applix for 17
years.
“He’s no flipper,” Dintersmith said.
Saxena
began looking for another startup after he stepped down as Applix
CEO to become the company’s chairman. He met with several
entrepreneurs, but nothing interested him until he met with Foster
Hinshaw, a Cornell University-trained electrical engineer with a
Harvard MBA.
Hinshaw, now Netezza’s chief technical officer,
had been working as a consultant to a number of large companies
wrestling with the problem of analyzing terabytes of data to support
business decisions.
“This is a foundational platform where
(database) applications will be royally speeded up in terms of
performance,” said David Schantz, a general partner at Matrix.
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