Updata Partners Begins 2005 With Significant Activity: The first half of 2005 was a very active period for Updata Partners, with four new investments ... read more>>
Circuit Sector Focus: Interactive Advertising Technology: On the heels of Google’s successful IPO, the search wars, like the browser wars before them, have been front-page news. read more>>
Former Brivo Systems CEO Joins Investment Team: We are very pleased to welcome Carter Griffin to Updata Partners. read more>>
Updata Capital M&A Market Update: Updata Capital had an active first half of 2005, advising on transactions across multiple software and IT-services sectors. read more>>
UPDATA PARTNERS BEGINS WITH SIGNIFICANT ACTIVITY
The first half of 2005 was a very active period for Updata Partners, with four new investments across a variety of sectors including security, analytics, interactive advertising and education. "We had an exciting first half of 2005, and will continue our sector-driven approach to identifying new investment opportunities," said Conor Mullett, a General Partner in the New Jersey office.
Updata started the year with an investment in McLean,VA-based Secure Software. Secure helps organizations cost-effectively eliminate and prevent insecure code in software applications. The company's CodeAssure product suite automates the discovery and prioritization of insecure code fixes while improving code quality. As part of the Series B investment, John Burton, a General Partner in Updata's Reston office, joined the company's board with existing investors Valhalla and Charles River. Along with e-Security, Object Video and CoreStreet, Secure Software further strengthens Updata's position as a leading investor in the security space.
Updata made their second investment of 2005 in March in Rockville, MD-based Appfluent. Appfluent is the leading provider of data usage and query performance tools designed to help IT organizations reduce the number of databases they maintain, improve performance of Business Intelligence (BI) solutions, and deploy new applications quickly. The company provides a suite of products that clean up and consolidate data, optimize BI performance based on usage, and rapidly analyze applications for both test and production environments. As part of the financing, Tim Meyers, a General Partner in Reston, will join the board and Carter Griffin will act as an Observer.
Updata made two investments in May. The first was in New York City-based ContextWeb and the second in Towson, MD-based 4GL School Systems. ContextWeb provides real-time contextual advertising solutions to publishers and advertisers. The Series B financing was led by Updata with participation from existing investor, DFJ. The investment provides ContextWeb with $9 million of growth capital to build out their sales team and more aggressively grow their base of advertisers and publishers. As part of the financing, Conor Mullett joined the board of ContextWeb.
4GL School Systems provides software to school districts that helps them ensure the state and federal compliance of their special education programs. In addition to increasing revenues associated with these programs, the software allows for significant reduction in administrative time and expense. 4GL is a strong company with an experienced management team that is well-poised to further their position as a market leader in the education software space. Tim Meyers joined the board post financing. The Series C round, which was led by Updata, included participation from existing investors Novak Biddle and Warburg Pincus. The financing provides 4GL with additional capital to build out of suite of offerings as well as to selectively consider acquisition opportunities.
On the heels of Google's successful IPO, the search wars, like the browser wars before them, have been front-page news. Whether through acquisition or R&D, Microsoft, Yahoo and others are fighting to climb the ranks of search engine prominence. And while Google revolutionized the way people access information, at its core, the company is an advertising business delivering billboards in the digital age. While the algorithm made Google famous, the true pillars of the company's advertising success are AdSense and AdWords, their advertising delivery technology. With the playing field of search technology now fairly level, the next leg in race for online advertising dollars will likely center on these types of delivery technologies.
AdWords allows advertisers to bid for inventory generated when people input a search term into Google's search box. For example, each time you search on 'movies', advertisers like Blockbuster, Netflix and Moviefone bid to have their message and link included in the text box that appears down the right-hand side of the results page. In their most-recent quarter, 53% of Google's $1.2 billion of advertising revenue was generated through AdWords inventory. Far and away the most coveted inventory on the Web, the power of AdWords lies in the contextual relevance that it delivers to advertisers. And while advertisers are willing to pay a significant premium for that context, there are only so many searches conducted each day. According to the Online Publishers Association, Web users spend only 5% of their time performing pro-active searches. The other 95% of their time is spent surfing content. This surfing inventory, while less valuable than search-generated inventory, is nevertheless big business for Google's AdSense and other online ad networks.
AdSense and competitive networks like Fastclick serve as a broker between Web publishers and advertisers, delivering advertisements to Web sites within their network. AdWords success was initially driven by Google's unique approach to relevance. AdSense has further leveraged the underlying search engine to gain market share. Going forward, however, Google's success may be driven as much by the size and scope of their network-both on the publisher and advertiser side-as technology.
Over the last two years, however, a new generation of ad networks that leverage technology has emerged. These vendors can be classified into two primary categories: contextual and behavioral networks. Contextual networks focus on analyzing the contents of a page and delivering an ad based on that information. Vendors in this space include ContextWeb, Chitika, Kontera and Quigo as well as Google and Yahoo's Overture. Vendors like ContextWeb and Chitika differentiate themselves through their real-time contextualization capabilities, which allow them to deliver relevant advertising to Web pages that are changing in real-time. Behavioral networks include companies like Tacoda and Revenue Science. These networks target ads based upon information that is stored within the database of their network sites. Such data can come in the form of registration information as well as types of sites their users have previously visited within the network.
With a few exceptions, behavioral and contextual networks are still in their infancy. However, for an indication of the dollars companies are willing to spend to reach qualified customers online, you need to look no further than the disreputable cousin of contextual and behavioral vendors, Adware. Established in the early days of the Internet, Adware vendors like Claria (FKA Gator) and WhenU, have had significant success attracting customers despite the stigma that they carry. Even with the spread of anti-spyware software packages, Adware-which tracks user behavior through a piece of software downloaded onto the host computer-has been amazingly resilient. Claria is generating more than $100 million in annual revenue, and was also recently rumored to be on the Microsoft shortlist of potential acquisitions. Given Microsoft's position in the world of online media, this should come as no surprise, especially when one considers the market opportunity that exists. According to Jupiter, the online advertising market was $10 billion in 2004 and is expected to grow to $16.1 billion by 2009. Compared to the growth rate of Microsoft's MSN division, which declined from $1.8 billion to $1.7 billion over the nine-months-ended March 31st, Microsoft's interest in new ways to increase advertising revenue is understandable.
In the coming months, companies capable of delivering qualified online buyers will see significant growth. Whether it is Microsoft or another company, we also expect that these networks will be prime acquisition targets. Out of this group, we may even see the next big internet IPO that will give Google a run for their money-at least for half of it.
We are very pleased to welcome Carter Griffin to Updata Partners. Carter joined the team earlier this year to source and lead new investments, as well as work with existing portfolio companies to meet their objectives. He is a board observer to Appfluent and is working closely with 4GL and CoreStreet.
Prior to joining Updata Partners, Carter co-founded Brivo Systems in 1999 and served as Chairman and CEO until selling the company to a unit of Duchossois Enterprises Group in December 2004. Brivo Systems pioneered the software-as-a-service model in the physical security market by introducing the first-ever on-demand system for facility access control. During his tenure at Brivo, Carter raised over $30M in multiple rounds of equity and debt financing from venture capitalists, strategic partners and angel investors.
Before starting Brivo Systems, Carter spent four years as a Senior Vice President at Kaiser Associates, where he advised Fortune 500 clients on competitive positioning and new-market entry strategies. Earlier in his career, Carter worked in London for the Coca-Cola Company and held positions at American Management Systems and Arthur Andersen.
Carter holds a bachelor's degree in business administration from the University of North Carolina at Chapel Hill and an MBA in finance and marketing from the J.L. Kellogg Graduate School of Management at Northwestern University. He can be reached at cgriffin@updata.com.
Updata Capital had an active first half of 2005, advising on transactions across multiple software and IT-services sectors.
In June, Updata Capital advised MarkeTech Systems, a provider of software, data and services that helps retail banks enhance branch network sales, on its sale to MapInfo. The acquisition will further MapInfo's capabilities in the financial services market and reinforces Updata's leadership position in the financial technology and analytics space. In January, JPMorgan Chase acquired Updata Capital client Vastera, a leading provider of global trade management solutions. Updata's rich experience in the supply chain vertical was instrumental in facilitating the transaction. Also in January, Updata Capital advised Vicarious Visions in its sale to Activision. The transaction represents Updata Capital's first effort in gaming, an emerging and exciting sector that we will continue to closely monitor.
For a complete list of 2005 transactions, please visit the press release section of our Web site. Additional market information and research, such as Don More's July Compliance Market Note, can also be found on our Website.
If you have interest in discussing an acquisition or exit strategy with Updata Capital, please email Lisa Lombarde at llombarde@updata.com.
Updata started the year with an investment in McLean,VA-based Secure Software. Secure helps organizations cost-effectively eliminate and prevent insecure code in software applications. The company's CodeAssure product suite automates the discovery and prioritization of insecure code fixes while improving code quality. As part of the Series B investment, John Burton, a General Partner in Updata's Reston office, joined the company's board with existing investors Valhalla and Charles River. Along with e-Security, Object Video and CoreStreet, Secure Software further strengthens Updata's position as a leading investor in the security space.
Updata made their second investment of 2005 in March in Rockville, MD-based Appfluent. Appfluent is the leading provider of data usage and query performance tools designed to help IT organizations reduce the number of databases they maintain, improve performance of Business Intelligence (BI) solutions, and deploy new applications quickly. The company provides a suite of products that clean up and consolidate data, optimize BI performance based on usage, and rapidly analyze applications for both test and production environments. As part of the financing, Tim Meyers, a General Partner in Reston, will join the board and Carter Griffin will act as an Observer. 
Updata made two investments in May. The first was in New York City-based ContextWeb and the second in Towson, MD-based 4GL School Systems. ContextWeb provides real-time contextual advertising solutions to publishers and advertisers. The Series B financing was led by Updata with participation from existing investor, DFJ. The investment provides ContextWeb with $9 million of growth capital to build out their sales team and more aggressively grow their base of advertisers and publishers. As part of the financing, Conor Mullett joined the board of ContextWeb. 
4GL School Systems provides software to school districts that helps them ensure the state and federal compliance of their special education programs. In addition to increasing revenues associated with these programs, the software allows for significant reduction in administrative time and expense. 4GL is a strong company with an experienced management team that is well-poised to further their position as a market leader in the education software space. Tim Meyers joined the board post financing. The Series C round, which was led by Updata, included participation from existing investors Novak Biddle and Warburg Pincus. The financing provides 4GL with additional capital to build out of suite of offerings as well as to selectively consider acquisition opportunities.
On the heels of Google's successful IPO, the search wars, like the browser wars before them, have been front-page news. Whether through acquisition or R&D, Microsoft, Yahoo and others are fighting to climb the ranks of search engine prominence. And while Google revolutionized the way people access information, at its core, the company is an advertising business delivering billboards in the digital age. While the algorithm made Google famous, the true pillars of the company's advertising success are AdSense and AdWords, their advertising delivery technology. With the playing field of search technology now fairly level, the next leg in race for online advertising dollars will likely center on these types of delivery technologies.
We are very pleased to welcome Carter Griffin to Updata Partners. Carter joined the team earlier this year to source and lead new investments, as well as work with existing portfolio companies to meet their objectives. He is a board observer to Appfluent and is working closely with 4GL and CoreStreet.
