Hostcentric Scores $33.5M

Hostcentric Inc., one of the largest privately held managed service providers offering a full range of Web hosting services, e-commerce solutions and technology infrastructure, announced Monday (Jan 29) that it has secured $33.5 million in its second round of funding.

The round was led by Thomas Weisel Capital Partners, L.P., Notre Capital Ventures III, L.L.C., BNP Europe Telecom & Media Fund II, L.P. and Compaq Computer Corporation (NYSE: CPQ). This financing augments the first round of approximately $25 million in May 2000. In addition to Compaq’s equity investment, Compaq Financial Services extended an equipment lease financing line of $10 million.

“We are extremely excited that Hostcentric was able to exceed its goal of $25 million for the round with high-quality investors and at a premium to our first round in May 2000,” said Fred Pounds, CEO of Hostcentric. “This significant investment will allow us to expand our market reach and accelerate the growth and capabilities of our managed services.”

Hostcentric’s unique suite of enhanced, integrated managed services enables its customers to enjoy the benefits of top-tier applications and network infrastructure solutions in a quick and cost-effective manner. Hostcentric currently hosts more than 50,000 Web sites for about 21,000 customers on approximately 1,500 servers.

“We see Hostcentric as a company that has a solid management team that can successfully execute their business strategy, even in the midst of this difficult market,” said Bill Bunting, Partner in private equity at Thomas Weisel Partners. “Because of their deep technical expertise in managed services, ASP hosting and Web hosting, Hostcentric is well positioned in the marketplace to offer comprehensive solutions to its customers.”

Hostcentric offers services in applications infrastructure management, e-commerce systems and support, streaming media, Web hosting and global domain name registration. One of the first companies to be designated as an Oracle Authorized Application Provider, Hostcentric provides application services and infrastructure support for the Oracle E-Business Suite, as well as Oracle’s database products.

Much has changed in the financial landscape since Hostcentric’s first round of funding in May 2000, but this round was even more successful for Hostcentric, Pounds told ASP News. The amount raised went up by 29 percent, and the implied company valuation increased by 49 percent, he said. Meanwhile, the NASDAQ has gone down by 24 percent, and an index of 7 hosting companies has gone down by 54 percent, he said.

“Our combined infrastructure, deep experience, and the fact that we handle a full spectrum of clients make us successful,” he said. “Our investors, particularly those in the second round, believe our story and are willing to invest capital at a time when the markets are in retreat.”

This funding puts Hostcentric in a good financial position, Pounds said. “With this, we have the tools to implement and execute our strategy. Our goal is to become EBITDA-positive by the third quarter of 2001.”

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