GroundWork Open Source Solutions Digs Up $3 Million in Series A

Date: May 26, 2004

GroundWork Open Source Solutions Inc., a provider of open source IT management software, said that it has raised $3 million in Series A funding. Canaan Partners provided the financing. Robert Fanini, chief executive officer of GroundWork, said that the funding will be used to accelerate the company's growth. He also said that the funding should last GroundWork into 2005. He said he anticipates raising an $8 million to $10 million Series B in early- to mid-2005 to accelerate growth further.

As a result of the financing, Caanan Partners representatives Skip Glass, venture partner, and Deepak Kamra, general partner, join GroundWork's board, which includes the founders, Fanini and Dave Lilly, the company's chief operating officer. There is one vacancy on the board.

GroundWork was founded roughly one year ago by Fanini and Dave Lilly, the company's chief operating officer. Both were the co-founders of Emeryville, Calif.-based SiteROCK Corp., a provider of remote performance monitoring later acquired by Avasta Inc. Fanini still sits on the board of Tokyo-based SiteROCK KK, the company's former Japanese subsidiary. Fanini said that his experience with SiteROCK and another former company, Pleasanton, Calif.-based Foglight Software, a developer of performance managing applications, taught him the importance and possibilities of open source software.

Fanini said the trick to making money from open source is to develop enough add-on products and services to generate revenue without harming the flexibility and independence of the code. He said that GroundWork has racked up a list of 20 customers in its first year and is poised to double that number by the end of 2004. In addition, he said that the company has seen half of its customers return — often to purchase additional functions or roll out GroundWork's software within additional departments.

While similar to its intellectual ancestors SiteROCK and Foglight, GroundWork is trying to carve out a niche with an open source backbone. "We want to become the open source solution for IT management," Fanini said. Customers pay for installation and for maintenance, about 18% of the initial cost, he said. The company has also been developing its own set of proprietary software packages designed to work in conjunction with its open source products that customers can purchase as add-ons. Chief among these are a series of "dashboards," which he said provide a management-level look at a company's IT infrastructure.

Fanini said that GroundWork's software is largely vertical-neutral. While the company is still solidifying its marketing strategy, he said that he has had the best luck selling to small- to medium-sized companies. Fanini defined medium as a company with revenues between $500 million and $1 billion. GroundWork's customers include Phoenix Technologies Ltd., LSI Logic Corp., the Contra Costa Water District, StubHub Inc., and Nuasis Corp.

Oakland, Calif.-based GroundWork Open Source Solutions was previously funded by its founders. The company currently has just under 20 employees and expects to have 35 to 40 by the end of the year.