Priceline founder Jay Walker, once hailed by the world press as a man who "got" the Internet, is now being sued by the State of Connecticut for illegally throwing about 106 of his Walker Digital (http://www.walkerdigital.com) employees into the streets without severance pay.
The lawsuit accuses Mr. Walker of violating state and federal employment laws stipulating that people being dismissed are entitled to severance packages. Connecticut Attorney General Richard Blumenthal is seeking $1 million in back pay for the Walker employees, who were shown the door last November.
"We're seeking 60 days' back pay for each Walker Digital employee who was let go," Mr. Blumenthal told Red Herring Friday. "The lawsuit is really a simple one. Walker Digital violated federal law." The State of Connecticut would be amenable to settling the suit before it hits the courts, he added, saying, "Our door is always open."
Walker Digital is Mr. Walker's personal incubator and boasts around 300 technology patents. These days, its staff consists of a skeleton crew of about 15 employees. And its future, now being heavily scrutinized by Connecticut's powerful attorney general, is again in doubt.
FUNDING DETAILS: Location: Stamford, CT; Status: Being sued by the State of Connecticut for violating federal labor laws; Total VC: over $50M; No. of rounds: 3. Backers at risk: General Atlantic Partners; Allen & Company; Bain & Company; Vulcan Ventures; Goldman Sachs; Wit Capital.--Richard Byrne Reilly
PARTMINERhttp://www.partminer.comNew YorkFUNDING: undisclosedPRIOR FUNDING: $140MROUND: N/ACATEGORY: B2BDESCRIPTION: Maintains a database of more than 15 million electronic components, and sells a suite of tools around that database so buyers and sellers can communicate and transact and manage excess inventory.LEAD INVESTOR: Dell ComputerOTHER INVESTORS: N/ATHE HERRING TAKE: Partminer CEO Dan Nissanoff won't give up the goods on how much Dell put into the company, but calls the amount "substantial." Alongside the investment, Dell will now use Partminer's services for a variety of component needs, including excess inventory management. Stacking this strategic investment alongside similar deals from Celestica, e2open, and Cahners, Partminer is looking solid these days. According to its most recent SEC registration document (filed in April 2000), Partminer brought in nearly $100 million in revenues from 1995 through 1999. Mr. Nissanoff isn't able to disclose profitability projections because of SEC regulations. Unlike many companies that build or operate B2B marketplaces, Partminer doesn't take a cut of its customers' transactions with regular suppliers. Instead, Partminer's market maker, Partminer Direct, jumps in when a supplier can't fulfill an order, and takes a cut on that transaction. The company also makes money from building proprietary applications for customers. --J.L.
HARDWARE
SANDCRAFThttp://www.sandcraft.comSanta Clara, CAFUNDING: $35.5MPRIOR FUNDING: $24.5MROUND: 3rdCATEGORY: SemiconductorsDESCRIPTION: Makes MIPS-compatible microprocessors for embedded communications products such as routers, switches, and control planes.LEAD INVESTOR: Vantage Point; Wasserstein PerellaOTHER INVESTORS: Cisco Systems; U.S. Venture Partners; Chase H&Q; Van Wagoner Capital Management; Tallwood; Hikari Tsushin Capital; Pacific Ventures.THE HERRING TAKE: Sandcraft may be the next microprocessor maker to be purchased for $1 billion or to stage an IPO in a dead market -- as long as it executes on its plan to launch 600-MHz processors in April. Its MIPS-based rivals include QED, which was acquired in July by PMC-Sierra for $2.3 billion, and Sibyte, which was acquired by Broadcom in November for $2 billion. Sandcraft was founded in 1996 by four former Silicon Graphics engineers who created low-cost chips for the Nintendo 64 video game system. They targeted the digital television and digital set-top box market, but that market was slow to take off. CFO Sidney Faulkner says the company repositioned itself in the past year to focus on data communications, and the first of its code-named Johan family of chips will be available as prototypes in April and in volume shipments this fall. The data communications market has taken a hit in recent months, but acquisition prices still remain high. Sandcraft has an architectural license from MIPS Technologies, and big potential customers like Cisco, which provided the most money in the current round. That should allow it to make a big splash in the market this year. --D.T.
SOFTWARE
DYNAMICS DIRECThttp://www.dynamicsdirect.comLos AngelesFUNDING: $12.5MPRIOR FUNDING: $6MROUND: 4thCATEGORY: Customer resource management (CRM)/e-commerceDESCRIPTION: Provides multimedia direct email marketing services for businesses.LEAD INVESTOR: Botticelli Venture Funds; Mofet Venture Capital FundOTHER INVESTORS: Poalim Capital Markets Technologies; Polaris Venture Capital; Eucalyptus Ventures; Concord VenturesTHE HERRING TAKE: Two years ago, Dynamics Direct was a B2C concern. The company, then called MixMe Networks, ran a Web site that beamed out animated greeting cards via email with rich media and personalization technologies. "It was a consumer eyeballs business model," says CEO Russell Gillam. "When they hired me in February [2000] I strongly suggested they change course." In fact, the only way the former exec from Walt Disney's Internet unit, Go.com, would join the firm was if it switched its course to a B2B direct email marketing model. It was a good fit, because while at Go.com, Mr. Gillam led Disney Direct, the company's employee catalog and direct mail operation. So, with a name change and a bit of software tweaking, Dynamics Direct now uses its animated greeting card technology to deliver direct e-mail campaigns for businesses. So far, things are going swimmingly. Dynamics has run direct email campaigns for MCI Worldcom, New Line Cinema, Disney, and TriStar Pictures, and purchase rates from Dynamics's email campaigns hit around 3 percent to 4 percent, compared to around 1.5 percent to 2 percent with text- and HTML-based emails, Mr. Gillam says. With a burn rate just under $1 million per month, Mr. Gillam reckons the firm will break even by year's end. But Dynamics's long-term success hangs on how fast the market adopts its "rich media" email. Even Mr. Gillam admits that's something no one can predict. --S.S.
PEPPERS AND ROGERS GROUPhttp://www.1to1.comNorwalk, CTFUNDING: $10MPRIOR FUNDING: $20MROUND: 2ndCATEGORY: Consulting services/CRMDESCRIPTION: Provides CRM consulting services to Fortune 500 companies and publishes CRM trade magazines.LEAD INVESTOR: Integral Capital PartnersOTHER INVESTORS: Mohr, Davidow VenturesTHE HERRING TAKE: "We have reached Utopia -- and it sucks." Thus read a Financial Times headline a few weeks back. The newspaper went on to describe how the world has progressed from a place of few businesses and little customer choice to one where companies have proliferated and businesses battle tooth and nail to stick around. That's the world the Peppers and Rogers Group helps Fortune 500 companies adapt to. "Most companies are built on principles dating back to the Industrial Revolution," says CEO Steve Skinner. "If you get big enough, your costs go down and brand equity goes up." But that's not enough nowadays, he says. Businesses need to have a "one-to-one" relationship with their customers. Peppers offers management consulting services to Fortune 500 firms that allow them to foster those kinds of relationships. Customers include corporate behemoths such as Verizon and Ford Motor Company. With 300 employees, monthly costs are around $6 million. But monthly revenue compensates for those high expenses, Mr. Skinner says. Profitability? Sometime fourth quarter 2001, he says. --S.S.
DEALFLOW DIGEST
BEDSTAThttp://www.bedstat.comAtlanta, GAFUNDING: $500KPRIOR FUNDING: N/AROUND: N/ACATEGORY: Vertical applications/healthcareDESCRIPTION: Provides a patient-placement system that links patient needs with the appropriate nurse.LEAD INVESTOR: N/AOTHER INVESTORS: NextStart CapitalMORE INFORMATION: Business Wire
CYBERPIXhttp://www.cyberpix.comNew YorkFUNDING: $4MPRIOR FUNDING: N/AROUND: 1stCATEGORY: B2BDESCRIPTION: Offers online photo services.LEAD INVESTOR: Fusient Media VenturesOTHER INVESTORS: Interactive Media Ventures; Candid Color SystemsMORE INFORMATION: Cyberpix
DISPENSOURCEhttp://www.dispensource.comRancho Santa Margarita, CAFUNDING: $10MPRIOR FUNDING: N/AROUND: 1stCATEGORY: B2BDESCRIPTION: Offers online management systems for office supplies.LEAD INVESTOR: Mission VenturesOTHER INVESTORS: Forrest, Brinkley & BrownMORE INFORMATION: N/A
FITLINXXhttp://www.fitlinxx.comStamford, CTFUNDING: $10MPRIOR FUNDING: $40MROUND: 4thCATEGORY: Vertical applicationsDESCRIPTION: Provides interactive electronic training systems to gyms and health clubs.LEAD INVESTOR: N/AOTHER INVESTORS: Canaan Partners; UBS Capital Americas; Whitney & CompanyMORE INFORMATION: Business Wire
PAMGENEhttp://www.pamgene.comThe NetherlandsFUNDING: $6.4MPRIOR FUNDING: N/AROUND: 1stCATEGORY: Biotech/genomicsDESCRIPTION: Develops a microarray platform and gene expression profiling system for biotechnology and pharmaceutical applications.LEAD INVESTOR: N/AOTHER INVESTORS: Alta Partners; GIMV Venture Capital (Belgium); Life Sciences Partners (The Netherlands)MORE INFORMATION: PRNewswire
ELEVATOR PITCH
GLOBAL MARKET INSITE, $6.5Mhttp://www.globalmarketinsite.comIssaquah, WATHE PITCH: "Global Market Insite (GMI) is a leading provider of e-business applications for global market research. Founded in July 1999 by a former executive from Procter & Gamble, GMI has developed and launched an advanced suite of Web-based solutions for managing multi-country market research. Patent-pending technology includes integrated tools for respondent management, project management, data collection, and data analysis. The company's client list includes several of the world's largest market research companies, including Taylor Nelson Sofres and AC Nielsen."WHY WE LIKE IT: Has already snagged one of the largest market research firms, AC Nielsen, as a customer.WHAT THEY'RE UP AGAINST: Other market research firms may already have such tools in place.CONTACT: Cliff Beer, CFO and counsel, cbeer@gmi-mr.com
(Looking for funding? Drop us a line at elevator@redherring.com. Let us know who you are, how much you're seeking, the funding sources you're targeting, your contact info, and, of course, your pitch. Please keep the pitch to no more than 100 words. Do not send attachments. One tip: pretend you're actually pitching a VC in an elevator. Submissions should have "Seeking Funding" in the subject line.)
DEALWOE
IDEALABhttp://www.idealab.comPasadena, CA; New York; London, EnglandSTATUS: The incubator has laid off about 10 percent of a staff of 170, across all offices.TOTAL VC: At least $1 billionNO. OF ROUNDS: 1BACKERS AT RISK: Bancboston Capital; Dell Computer; Hikari Tsushin; Kline Hawkes; Petersen Properties; Sumitomo; T. Rowe Price; 24/7 Media.THE HERRING TAKE: It's happening everywhere, so it's no surprise that Idealab has joined the pink-slip parade. The company, which builds Internet companies and provides them with in-house services, laid off about 10 percent of its staff of 170, an Idealab spokeswoman confirmed Friday. She declined to specify what positions were cut or exactly how many, saying only that the cuts happened across the board and in all of Idealab's offices. Idealab's portfolio companies were not affected. --J.L.
Dealflow is reported and written by Matthew A. DeBellis, Julie Landry, Richard Byrne Reilly, Steve Silverman, and Dean Takahashi. The Elevator Pitch is selected and written by Julie Landry.
Have a tip? Drop us a line at dealflow@redherring.com.
Dealflow archive
Dealflow -- Intelligence for EntrepreneursTM