Despite Losses, Novatel Sees Continued Strong Demand for Its Business
The folks at Akonix are thrilled to be going to a place where they can finally see the light.
“We’re really looking forward to the windows, and getting a view. We don’t have any windows here,” said Adam Jacobs, Akonix’s business development person about the year-old firm’s move to Downtown from the University City area this month.
Akonix is taking over 7,500 square feet of space formerly occupied by San Diego Magazine in the First National Bank building at 401 West A St.
While there’s a good deal of excitement about offices with windows, the really big news is, Akonix is completing its first round of venture capital financing for $5 million from two top-drawer local VCs: Mission Ventures and Windward Ventures.
Akonix is an Internet company that provides a suite of proprietary applications geared to helping large corporations conduct e-commerce.
“Think of it as AOL in a box,” Jacob said.
New President and CEO Larry Spelhaug said the funding will be used to enhance the firm’s sales and marketing effort, for professional services, product development and hiring good people.
Hiring? Now?
“We’re an anomaly, but we’re growing while others seem to be cutting back,” Spelhaug said.
Now at 15 employees, Akonix should reach 30 to 40 employees by the end of this year, Spelhaug said.
Although they declined to reveal revenues, Akonix founders did say the firm is making a profit, and has been since its first week. Current clients include HomeStore.com and its affiliate site, Realtor.com; MatchNet, a Los Angeles-based dating service; and recently signed Virgin Group, the London-based conglomerate.
Akonix founders may be feeling a little giddy these days, but aren’t about to let their initial success go to their heads.
Five of six founders are survivors of CollegeClub.com. The San Diego Web site, geared to college students, went down in flames last year after it was forced to pull a planned IPO and couldn’t line up alternate capital financing.
In addition to Jacobs, other founders are Dmitry Shapiro, Scott Lininger, Robert Polling, Peter Voutov and Eric Cattell. All but Polling worked at CollegeClub.
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Novatel Loses, Then Gains:
Novatel Wireless Inc., the San Diego maker of wireless data modems, released a slew of negative news late last month, including the fact it lost $25 million in its first quarter and would lay off “over 100 full-time and temporary positions.”
Predictably, its Nasdaq stock shot upwards to about $5, after it had sunk to around $2 earlier in April. It was trading at $5.40 as of May 1.
The firm said its loss for the quarter ended March 31 included a $3.9 million charge mostly for severance packages and a write-down on the value of raw materials and obsolete inventory.
Like practically all telecom firms, Novatel has been in a tailspin as its customers retrench in what CEO John Majors calls a softening economy. And yet, he said the company saw continued strong demand for its business, noting new orders in the past quarter “substantially exceeded shipments.”
Net sales for the first quarter were $19.7 million, a 189 percent increase from the prior year’s first.
Things looked rosy for Novatel when it held its IPO last November, going out at $8 per share and pulling in about $59 million. It rose to about $16 earlier this year but took a dive when the tech market hit the skids.
Novatel CFO Melvin Flowers said the breakdown on personnel cuts hasn’t been determined yet, but every department is affected. Novatel has 318 full-time employees, about half of whom work in San Diego. He did not return phone calls on the number of contracted temporary employees.
Flowers, who said the company has about $47 million in cash, predicted that with the restructuring, Novatel would break even by the end of this year.
Learning Framework Gets $5 Million:
Learning Framework, a provider of e-learning software and service, said it received $5 million in second-round funding recently, bringing the total since its inception a year ago to $8 million.
The funds will be used for working capital and to further product development.
Many of the second-round investors came from referrals from those investing in the company’s initial round.
The company was co-founded by Brian Kenner, former chief technology officer and co-founder of InterVu (another San Diego startup that was sold to Akamai Technologies), and by Isaac Willis, an original backer of InterVu.
The firm that creates customized software for providing work-related training has 38 employees.
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Epicyte Pharmaceutical Gets $15 Million:
Epicyte Pharmaceutical Inc., a San Diego-based biotech firm that uses plantibody technology to turn plants into antibody factories, received $15 million in a second round of financing last month from Tullis-Dickerson & Co., a Connecticut-based VC that specializes in funding firms in the biomedical, life sciences and health care technology communities.
Mohomine Receives CIA Capital Funding:
They’re keeping things on the QT over at San Diego-based Mohomine, a maker of software that intelligently searches the Internet. The firm said it obtained $5 million in third-round funding from In-Q-Tel, Inc., described as a “private, not-for-profit venture catalyst chartered by the CIA,” and Windward Ventures of San Diego.
Mohomine, founded in 1999, previously raised about $5.2 million in private capital. The company said it will use the funds to further develop its core technology, product marketing and sales activities.
According to a Mohomine, In-Q-Tel’s basic mission is to identify new high-impact Internet technologies that address the CIA’s priority problems.
Windward Ventures has a more recognizable mission: providing venture capital to Southern California firms “to produce superior investment returns.”
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New Philanthropic Group Forms:
Two local women recently formed a new type of philanthropic organization that would use the venture capital model to get better results from the charitable contributions the nonprofits receive.
Darcy Bingham and Carrie Stone said San Diego Social Venture Partners is based on a concept first introduced in Seattle in 1997 by former Microsoft executives and since adopted in eight other cities. The idea is to provide a structure for philanthropic contributors to nurture their donations by contributing professional guidance to the organizations.
Just like real start-up companies, the nonprofits receiving the funds would be required to meet specific progress goals outlined in five- to seven-year plans. Those charities showing the greatest need and the best use of the funds would receive more funding.
“The Social Venture Partners model is attractive to us because of its educational component,” said Bingham, wife of angel investor and former SimpleNet founder Bob Bingham. “When we were new philanthropists, we needed information, education and a way to ensure our contributions would be utilized well, and make a real impact.”
The SVP expects to obtain “investments” from 200 contributors. It has lined up the San Diego Foundation to provide advice.
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