Management vendors attract venture capital dollars

Venture capitalists continue to invest in low-cost network and systems management software makers

As more IT customers demand easier to use and less costly management tools, venture capitalists continue to invest in network and systems management software makers that promise to monitor enterprise infrastructure without breaking the bank.

This week GroundWork Open Source and SolarWinds separately garnered venture capital funding to further develop their products. For its part GroundWork brought in US$12.5 million in Series C financing from JAFCO Ventures, SAP Ventures, Canaan Partners and Mayfield Fund. SolarWinds received US$7.5 million in funding from Austin Ventures, which joins Bain Capital and Insight Venture Partners as an investor in the company.

The investments show that not only are venture capitalists interested in the ease of use products promised by newcomers -- compared with industry veterans BMC Software, CA, HP and IBM -- but also the vendors' potential appeal to a largely untapped market, the small-to-midsized customer.

"We invested because there is a tremendous untapped market opportunity in the mid-market for GroundWork's solution," said Tom Mawhinney, general partner at JAFCO Ventures in a GroundWork press release.

GroundWork, which develops software that is an extension of an open source monitoring application Nagios, offers its products under both commercial and open source licenses, depending on customer requirements. The company had raised US$3 million in May 2004 and another US$8.5 million in March 2005, and company executives say GroundWork has had a fivefold increase in subscription revenue, with some 200 customers.

Separately SolarWinds, known for its Orion product suite, was founded in 1998 and has some 40,000 customers and another 600,000 freeware users today. SolarWinds in December 2005 received initial funding for an undisclosed sum from Bain Capital Ventures and Insight Venture Partners.

The company last fall updated its Orion NetFlow Traffic Analyzer and this week updated Orion Network Performance Monitor with SNMPv3 support and advanced alerting capabilities. The products, investors say, could be ideal for mid-market customers.

"We believe SolarWinds is at the forefront of how to effectively bring network management to mid-market businesses," said John Thornton, general partner at Austin Ventures, in a SolarWinds press release. "Its innovative operating model and approach to developing and delivering shrink-wrapped enterprise software is changing the rules of how network management software is viewed and adopted by the mid-market."

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