Virtual data rooms have become almost as ubiquitous in finance as Web sites, hosted by online specialists like Intralinks Inc. or deal-makers like Bank of America Merrill Lynch.
So what makes a start-up in this crowded business stand out? In the case of Lightserve Corp., it comes down to rock bottom pricing. Too, the company’s CEO, David Lipa, has a background in buyouts.
Lipa, who had worked at the private equity secondaries desk at the funds-of-funds firm Pantheon Ventures, had moved on to become a vice president at the fairly esoteric EB Exchange Funds, a private equity exchange fund giving VC-backed entrepreneurs a place to diversify their risks by pooling illiquid stock in start-up companies so they could share in one another’s liquidity events. Lipa said he wanted to provide an online data room at EBX like he had had access to at Pantheon Ventures so investors could share information, but the cost of $5,000 to $10,000 a month seemed “a bit excessive.”
“So we really just built our own,” Lipa said. “That was the impetus for me to develop Lightserve.”
Eighteen months later, Lipa and his brother Bill Lipa, a former Electronic Arts executive who is now chief technical officer, launched Lightserve, with offices in Silicon Valley and New York, taking advantage of a decade’s advances in online technology to provide a single data room for $29 per month, unlimited data rooms for $79 a month and white-labeled, customizable versions for clients for $250 to $1,000 per month.
“You shouldn’t have to pay $5,000 a month to have a data room. The technology is out there,” Lipa said.
Although still small, the angel-funded company is cash-flow positive, and Lightserve is able to offer the same secure access, audit trails, tiered permissions, and limits on document copying or printing that competitors provide, Lipa said. It claims 150 investment banks as customers.
Venture capitalists also are using its data rooms to hold documents for board meetings of portfolio companies, and buyouts firms use them for diligence documents and fundraising, he said. “We’re getting a lot of business off Google right now. It’s almost more than we can handle.”
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