Sign-on software a win for Aussie developer
Australian Financial Review – Special Report – PRIVATE EQUITY AND VENTURE CAPITAL
Wedgetail Communications began in 2000 as a spin-off from a link between academia and industry, and was sold for $100 million earlier this year, writes Miriam Hechtman.
When Quest Software, a Nasdaq-listed global software house, recently acquired the company Vintela, it was the end of a short but very successful journey for Vintela’s primary investors Uniseed and Allen & Buckeridge. The development, then sale of Vintela, a company involved in new security software products, is also typical of the life cycle of a private equity investment. The Australian Financial Review spoke to Uniseed’s chief executive, Gareth Dando, about the events that led to the company’s successful $100 million sale earlier this year.
In 2000, the company was founded as Wedgetail Communications, as a spin-off from the security division of the Co-operative Research Centre (CRC) for Enterprise Distributed Systems Technology one of the many CRCs now operating as links between academia (usually the universities) and industry. Uniseed, a commercialisation fund operating at the Universities of Melbourne and Queensland and Allen & Buckeridge, a venture capital firm, jointly invested $3.3 million dollars in the company in early 2001. “We do the early stages of the work,” says Uniseed’s Dando, “getting the technology out of the university, getting it into a real business format and getting it ready to be picked up by investors.”The next step, he says, is looking to partner with investors who will add value to the next stage. “In this case, Allen & Buckeridge were particularly good at getting the links with the US that were vital for this company.” The IT market was particularly difficult in 2002, but the company continued to look for new customers. Wedgetail had a range of security-related products, some of which were security products for enterprise systems. “They had a range of products, a bunch of different customers, and they set out to go and start selling those products and try and build up a customer base. “They ran independently for a couple of years and they sort of evolved that strategy over that time and I think that was one of the keys to their success.”
The adaptability of the underlying technology coupled with the group’s skills and capabilities meant they were able to meet whatever needs they could identify in the market. In 2003, the company hired chief executive Jennifer Zanich, who came from a background with Microsoft. “She was really good for marketing and again helping them redefine their strategy and exactly what the core of the company is,” says Dando. Along with Allen & Buckeridge’s Bob Christiansen and John Scull (US-based), Zanich assisted in the process of finding the product that gave the company a real advantage, which involved building relationships. Says Dando: “They engaged a couple of consultants and advisers in the US who were security experts and really helped us to redefine the company and focus on what became their successful product line, single sign-on software.”
This technology, sign-on software, which allows companies with different systems to be able to work securely together, became the company’s niche product. Says Dando: “Wedgetail, up to that point, had some good relationships with big companies like IBM, but the difficulties with getting into those markets was turning those relationships into new product sales.” One of those relationships was with Utah-based security company Vintela. By 2004, the Vintela/Wedgetail relationship was functioning well and “it was pretty obvious that the two companies were really quite complementary,” says Dando.
Discussions regarding a merger began and by mid 2004 Vintela acquired Wedgetail. Allen & Buckeridge and US venture capital firm the Canopy Group jointly invested approximately $US2 million ($2.6 million) to $US3 million into the newly combined company. The merged company created a good relationship with Microsoft, which invested in the company a couple of months later. Chris Skilling, who was the chief executive of Vintella, remained CEO of the merged company. “Jennifer did a fantastic job,” Dando says. “She came in at a time of turmoil in the market. She really helped the company refocus on what was the right strategy and helped set up the merger and then she didn’t stand in the way of the merger with her personal objective. She stood back aside from that and let the company go on to better things.”
In early 2005 Vintela went into discussion with California-based Quest Software, which ultimately bought the business out entirely within six months. Dando says it was a combination of things that led to the final exit of the company. An effective route to get the technology out of the research centre was the first step, he says. Good management by the whole team (by Zanich in particular, he says) was also important, as was the flexibility of the team.
Road to riches
· Wedgetail developed sign-on software that allowed companies with different systems to work securely together.
· Utah-based security company Vintela acquired Wedgetail in 2004.
· Quest Software, a Nasdaq-listed global software house, acquired Vintela in 2005 for $100 million.
