WebMethods Integrates $12M Financing

In the interest of leveraging the ubiquity of the Internet for business-to-business supply retailers, WebMethods Inc. of Fairfax, Va., raised $12 million recently in a third round of venture financing.

Goldman Sachs Group Inc. led the financing, joining existing investors Mayfield Fund and FBR Technology Venture Partners LP and one new institutional investor, said Caren DeWitt, a WebMethods vice president. The company has raised more than $22 million in venture financing since being founded in 1996.

WebMethods has endeavored to develop an integration solution that supports the execution of business-to-business applications over the Internet. DeWitt said the company saw trading using a variety of methods to complete transactions, ranging from phone and fax to in-house fulfillment programs, and saw an opportunity for an Internet application that could ease the integration problem.

“Their strategy has stayed focused since we first invested two years ago,” said Gene Reichers, a principal with FBR.

Currently, WebMethods’ service distinguishes itself from competing applications by basing the programs on the XML standards of the Internet.

The company has more than 100 customers in high technology and financial services industries.

“Our goal is to develop solutions … that enable large corporations to do business with each other over the Internet,” DeWitt said. “But the problem of interoperating with trading partners is shared by large and small companies alike.”

Proceeds from the financing will target continued product development, including finalizing a new product due in September that will feature a capacity for integration with enterprise resource planning programs. Further proceeds will be used to hire additional staff – DeWitt said the staff would likely double from its current 110 by year-end – and in sales and marketing, which will include implementation of a marketing program.

“There have been moments where we have reached cash flow, but we think it is more important [at this point] to gain market share rather than be profitable,” DeWitt said.

Both Reichers and DeWitt said the company should not require additional private financing prior to an initial public offering.