Network Engines Closes $8M Round Two

In another example of venture firms backing a company devoted to making the Internet operate more quickly and efficiently, Network Engines Inc. received $8.3 million in a first close on its most recent private equity funding. The company is seeking an additional investor before holding a final close.

“We most likely will add an East Coast-based venture firm or a corporate partner before the round technically closes,” said Chief Executive Larry Genovesi.

Genovesi did not indicate when the round will formally close, although he said he expects it to exceed $10 million.

First-time investors in the company include Memorial Drive Trust Advisors Inc., Egan-Managed Capital and Corning Capital. Ascent Venture Management, which had provided the company with initial funding in April 1997, returned at pro rata.

Proceeds from the investment will go toward research and development and sales and marketing.

Network Engines uses a proprietary clustering technology to build Web servers for its e-commerce customers, which include Microsoft Corp. and its subsidiary, Web TV. Concurrent with the financing, the company released its beta-testing product, which streams video and audio for Web sites.

Genovesi said Network Engine’s primary competition comes from in-house divisions of e-commerce companies.

Prior to joining the company, Genovesi had been an executive at Digital Equipment Corp. and Microsystems International.

Network Engines will likely raise a mezzanine round later this year, Genovesi said. He added that the company, which expects to break even in September, is planning an initial public offering in 2000.

“If the market stays crazy with Internet stocks, and we continue at our rapid growth rate, an IPO for next year will be very attractive to us,” he said.