Start-up Digital Fuel has raised $20 million in its fourth financing round, one of the largest round in the last quarter. Apax Partners led the round with a $10 million investment. Existing investors Benchmark Capital, Israel Seed Partners, and Sigma Partners also participated.
Digital Fuel develops software solutions for managing outsourcing projects. Based on its performance in the past three quarters, the company seems to have grown by an order of magnitude.
Digital Fuel was founded in 2000 by VP product management Yakov Kogan, CTO Gilad Raz, CEO Yisrael Dancziger, and the late Benny Lehmann. Dancziger has been CEO for the past three years at the company's headquarters in the US.
Dancziger said the financing round was intended, among other things, to consolidate the company's financial standing, and enable it to meet its orders backlog. "The company has been growing rapidly in the past three quarters. We're positioning ourselves in the field of service business management. We've doubled in the past year, and we expect to almost triple this year. We've done in-depth work in communications, distribution, customer relations, and with service vendors, which have given us follow-on contracts. One deal has led to more, as our customers expand use of our product."
Dancziger said the current financing round would be the last. "Digital Fuel is backed by leading Israeli and US funds. We have quite a few deals in Europe, so we sought a European investor. Apax was definitely a serious candidate. This was a substantial financing round, as we believe that it will be the last. The company is close to breaking even. It didn’t happen sooner because we were expanding. We'll get nearer much sooner now."
"Globes": What kind of exit are you dreaming of?
Dancziger: "We believe in growing a stable and profitable business. Whatever happens afterwards will be the result of that."
What exactly are you selling?
"Our product focuses on the ability to manage service contracts, and business commitments surrounding these services. Outsourcing contracts are complex. We manage several projects valued at several billion dollars. If you look at service contracts, they have aspects that link the level of service performance, the cost of services, regulation, and payments. In recent quarters, we've also begun to see customers using our cost management system, comparing invoices and receipts with contracts, within the enterprise itself, and not just vis-a-vis vendors. Such customers include General Electric and Proctor & Gamble. In every such project, there is a need to verify that invoices and receipts conform with the contract, and that performance meets budget targets. These are huge projects."
How does an enterprise use this internally?
"They take a large deal and distribute tasks among various business units. We focus on outsourcing, because that's where the greatest business value lies, and there's money that has to be managed. But managers see its advantages, and adopt the product for internal use."
Dancziger says Digital Fuel aims at vertical markets. In other words, "Anyone carrying out or outsourcing projects is a potential customer."
In its April 2004 issue, Red Herring listed Digital Fuel as one of the 100 most promising companies.
Published by Globes [online], Israel business news - www.globes.co.il - on February 2, 2005