April has been anything but cruel for NetLedger, a San Mateo, Calif., application service provider that this week launches a new suite of application services for small companies. Earlier in the month, NetLedger announced $30 million in funding, a good chunk of that coming from Oracle boss Larry Ellison, an early backer.
"We didnt even go on the road because this is the worst environment to be raising money in," says NetLedger founder and CEO Evan Goldberg. Not only is money scarce, he says, but wary investors want to keep the reins uncomfortably tight on the companies they do choose to back. "We thought their level of due diligence would suck a lot of time from our management team, so we got together with Larry and decided that this was the way to keep moving the company forward."
NetLedger will spend most of its April windfall on product development and marketing. "A good fraction of the money goes to building the application," Goldberg says. The company has acquired the bulk of its 3,000 paying customers in the last six months, using channels including accountants and professional service firms as well as its own direct sales force to drum up business. Several thousand other small businesses use a free, basic version of its software.
"Small businesses dont have a high barrier to entry — they can usually just import their QuickBooks file and be up and running," he says.
The integrated application suite to be introduced this Wednesday (coincidentally, Goldbergs 35th birthday) goes well beyond NetLedgers original Web-based accounting capabilities to include functions such as Web-store transactions, accounting, finance and customer relationship management.
"Its like something from SAP or Oracle that is accessible for small businesses," Goldberg says. The market will determine whether the suite, built on the Oracle 8i database, actually moves NetLedger past other Web start-ups such as Intacct and Rivio, but Goldberg says that going forward he sees his direct competition coming from Microsoft and Intuit.
Rival ASP Intacct announced $21 million in funding from some A-list investors in mid-February, bringing its total funding to $32 million. Rivio — formerly Biztro — hauled in over $34 million in funding last year and is co-branding its small-business services with Microsofts bCentral portal.
While Goldberg says the recent cash infusion will sustain his company well into 2002, he does plan to hit the road toward the end of this year in hopes of raising additional cash. An eight-year Oracle veteran who joined the future database giant in 1987, he credits Ellison with NetLedgers original focus on accounting as the core application for reaching small businesses, and for insisting on the ASP model.
Says Goldberg: "Larry was involved from the beginning, and he continues to be a great adviser on strategy." Especially when the strategy involves raising money in a bear market.