More bucks for the back office: Ceon garners $29 million in financing

California-based Ceon's early round investors returned last week, along with some of its technology partners, to infuse the company with almost $30 million in third-round financing.

Lead investors Sutter Hill Ventures and Technology Crossover Ventures and original investors Accel Partners and Berkeley International Capital were joined by THK and technology partners Antec, BEA Systems and Portal Software.

"The original four VC funds have maintained their position in Ceon through investing in this round as well, which is always a good thing to hear," said Tricia McWilliams, vice president of marketing for Ceon.

The e-business solutions provider specializes in the provisioning, activation and management of bundled multimedia services for broadband providers and will use the money to expand its sales and marketing efforts in South America and Asia and to build its professional services organization.

Ceon may use the funding for strategic acquisitions.

"As contracts come in and we need to staff our various projects, which we have been doing both in Europe and the U.S., we are actively recruiting in that area as well," McWilliams said.

Financing was secured with the help of Douglas Schrier, Ceon's new executive vice president of strategic corporate business development. Schrier previously oversaw acquisitions, joint ventures and minority investment at Science Applications International Corp., the parent company of Telcordia Technologies and others.

In addition to their financial contribution, Antec, BEA and Portal have existing partnerships with Ceon. Portal formed a strategic alliance with Ceon in May in which Ceon will integrate its NetExpress service fulfillment software with Portal's Infranet customer management and billing software. Through this alliance, the two companies will offer service providers the ability to dynamically bundle customized services with real-time billing and activation.

"Portal is primarily a marketing partner at this time, and that relationship will expand over time," McWilliams said.

Antec is both an investor and a sales and distribution channel for Ceon. "Antec is really involved in the cable space in North America. We work with their digital systems division, which, in turn, works with major cable operators to offer telephony and data services over the [existing] cable plant," McWilliams said. "Cable is still one of our top markets and the one we have the most activity in."

Ceon's products also help Antec address new markets. "We have focused on the hardware platform and the delivery side for high-speed data, voice and IP telephony but haven't focused on the fulfillment side," said Mike Wearsch, president of Antec Digital Systems. "Ceon completes the package for us and provides an interface to systems we never had before."

Ceon has started using more BEA technology over the last few months. "It fills in the gaps in areas we were considering doing acquisitions in," McWilliams said.

The amount of individual contributions was not disclosed; however, Sutter Hill and Technology Crossover Ventures continue to be the leading investors.

But the money comes with some danger. When technology companies such as BEA and Portal invest money in a particular vendor from among the many in the same space with whom they may have other partnerships, it could affect those relationships, said one analyst.

"I wonder about trade secrets going back and forth," said Michael Allen, senior analyst for operations support systems (OSSs) at The Aberdeen Group. "I realize there are clearly contractual and legal obligations that prohibit that; however, I would want to be very careful. I also believe it could have somewhat of a modifying effect on other partners."

MetaSolv Software, for example, is in the OSS space and has a working relationship with Portal. Ceon's focus on the cable market and service activation keeps it at arms length for now as a MetaSolv competitor. MetaSolv, which does some investing of its own, appears comfortable with the scenario.

"With the growth in the number of new, start-up suppliers of OSS components, we look at strategic investments as a way to guide partnership activities and direct funding toward building out complementary components and the necessary interfaces to our software," said Dana Brown, vice president of marketing for MetaSolv. "Does this give other partners in related spaces a disadvantage? Not necessarily.

"Generally, these investments are in start-up companies that do not necessarily have a large, installed customer base or established operations infrastructure but do have a technologically sound solution to a specific problem. [However,] traditional forms of partnerships seem to work best where organizations are already established."