Switching gears can pay off,or at least draw more funding.
Just ask Viacore Inc., an Irvine-based company trying to build electronic exchanges for large companies looking to buy and sell components and supplies online.
After the company shifted strategy,opting to create a private network for companies to exchange goods rather than a public network,Viacore drew a new round of funding totaling $43 million from no less than Cisco Systems Inc., Dell Computer Corp., Hewlett-Packard Co. and Intel Corp.
One of the largest Orange County technology funding wins this year, Viacore’s cash infusion should last the company until it can mount an initial public offering, according to Chief Executive Fadi Chehad & #233;.
“An IPO is definitely on the roadmap. What we raised will lead us to profitability,” Chehad & #233; said.
Chehad & #233; and his staff are trying to make Viacore into the default central exchange where companies go to get their supplies. And one of the main hurdles almost is out of the way: adoption of an international standard of communicating known as RosettaNet, which allows companies to communicate inventory and product descriptions to their partners.
Viacore has been promoting the adoption of RosettaNet as a standard. And, if it becomes the standard tongue in international electronic exchanges, Viacore stands to benefit. With massive shipping and tech powerhouses such as Microsoft Corp., IBM Corp. FedEx Corp. and United Parcel Service of America Inc. coming to the table on RosettaNet, the standard seems likely to prevail.
That’s not to say Viacore isn’t seeing its share of curve balls. In the last year, several potential customers told Viacore they didn’t like the idea of buying their supplies on an open public network. They pointed out that an open network,where all a company’s suppliers come to a single location to swap parts in a public bid-and-ask setting,would reveal the sources of a company’s parts supply. They found that unacceptable.
“We started Viacore with the presumption a network will connect companies to an open, subscribable network. Anyone would be able to connect and do what they need to do,” Chehad & #233; said. “That model is flawed because mostly folks really look at their networks as being quite private. It defines their supply chains and that is something large players had concerns about.”
So late last summer, Viacore decided to close its network by creating security features in the software.
“We made that decision swiftly and I think that is a testament to our ability to make a switch,” Chehad & #233; said.
The move put off some of Viacore’s earlier investors. Last year, Viacore landed $34.5 million in funding from computer products distributors Tech Data Corp. and Ingram Micro Inc. among others. In the most recent round, both Tech Data and Ingram Micro opted out.
With the change in Viacore’s investor lineup, the company has changed the customer it hopes to serve. Chehad & #233; said that where his company had intended its service for distributors, the move to a private network has it now targeting the companies that are on the demand side of the supply chain, such as Dell and HP.
“The shift from public markets to private markets has been radical,” said Lauren Jones Shu, an analyst with Gartner Group Inc.’s G2 unit. “Viacore is definitely a valuable business model.”
The most important event for Viacore in the past six months: landing a major corporate name as a customer. While Viacore executives wouldn’t comment on which company they inked a deal with, a ZDNet report last month indicated they agreed to process transactions for Cisco.
“We were competing with 19 other companies and it wasn’t a one-month affair,” Chehad & #233; said of the corporate account. “It started last summer and ended in February this year. We won that one hands-down.” n
