In August of 1998, local interest began to coalesce around auction software company OpenSite Technologies. Although the potential market for Internet auctions seemed appealing, the technology was immature and the company was generating little revenue. Led by an enthusiastic but inexperienced management team, the company set out to raise money.
An investment syndicate, including Intersouth Partners, raised $6 million for the company. Intersouth partner Mitch Mumma, who took a seat on OpenSite’s board of directors, recruited Kip Frey to become the company’s new CEO. Frey had previously served as president for Intersouth portfolio company Accipiter and had the critical industry and transactional experience the company would need to grow.
Frey began the task of creating a world-class management team while rebuilding the auction software product to enterprise-class level. With Intersouth’s help, OpenSite raised another round of financing – $26 million – at the time the largest technology venture capital transaction in Research Triangle history. By the end of 1999, OpenSite had revenues of $7 million and investment bank Goldman Sachs had been brought on to take the company through a public offering.
Shortly before its IPO, OpenSite was approached by Siebel Systems of San Mateo, California. Siebel offered to buy the company for a price that eventually reached $550 million. In March, 2000, valuations for Internet technology companies had peaked, and $550 million was viewed by some on the board of directors as too low a price for the company. The IPO option appeared to offer greater potential upside and the Siebel offer created real tension.
“Mitch was absolutely critical in developing board consensus around taking the Siebel offer,” said Frey. “Eventually, we did sell OpenSite to Siebel – a significant software company with real profits that was well-positioned to weather the early stages of the Internet downturn. Had we gone public, I have no doubt that the outcome would have been very different for everyone involved.”