StarCite has engaged a third-party firm to assist in
exploring financial options, a process that could result in additional
investment or the sale of the meetings technology company, CEO Greg Dukat
confirmed to The Beat. The confirmation follows two years of declining revenues
for StarCite, which remains unprofitable.
The company currently is owned by several investment firms,
including Internet Capital Group, TPG Growth, Norwest Venture Partners and TL
Ventures.
Dukat, who in 2008 joined StarCite as CEO, stressed that the
goal of the process was not to sell StarCite, but to explore additional
financing options, including finding new investors. "We are very pleased
with the level of interest we've received, and given that, early indications
are that this will be a very positive process for us, but it is much more about
finding a strategic partner and not just selling the business," he said.
"If we just wanted to do that we could have done that many times over the
three years I've been running the company."
Dukat said the decision to engage in the process was made a
few years ago, during the economic downturn, but shelved until StarCite's
finances improved. It was prompted by a search for "organic and inorganic
growth," he said.
Existing StarCite investors "have some limitations in
their funds relative to where they are to invest potentially more in the
business," Dukat said. "It doesn't mean it will happen for sure, but
we have facilitated some advisement around looking at additional partnerships
with additional investors that could enable us to fulfill a strategy that's
much broader than anyone in the marketplace, that will elevate StarCite to a
huge player in this segment." Sources identified the advising investment
firm as ArchPoint Partners of San Francisco.
"We felt like the timing is right for current investors
to reinvest or exit and better monetize their original investment," Dukat
said, "and the timing is right for third parties to be more interested in
our business."
StarCite in 2010 posted an operating loss of about $3.8
million, smaller than the $6.2 million and $18.4 million it recorded in 2009
and 2008, respectively, according to a March filing with the U.S. Securities
and Exchange Commission by publicly held Internet Capital Group (which owns 36
percent of StarCite, according to a SEC filing posted last week).
However, revenues have declined as well, to $44.7 million
last year from $50.6 million in 2008. Dukat cited the economic recession, which
"we felt a bit more than our main competitors, because most of our
customers are large and cut meetings in a much broader and more significant
way."
"Our top line is down a bit, but we were engaged in
several lines of business that added to the revenue line but weren't profitable,"
Dukat explained. "We shed operations that were less profitable. We did
credit card processing for customers. We were big into destination management
and solutions—which is still part of our offering, but not as large as it was.
That took expense out of our business and helped us improve the bottom
line."
Dukat pointed to other indicators that he said show
StarCite's more stable financial footing. "If this is an issue about the
health of the company especially from a competitive standpoint, the time would
have been two or three years ago," he said. In late 2008, candidly, the
company was really struggling from a bottom-line perspective. We've improved
that dramatically. We had very little cash and no line of credit; today, we
have a nice cash balance and a nice line of credit. The company is very
healthy. Customer retention is strong." The firm this month introduced a new technology platform and last week announced a 68 percent
year-over-year jump in first-quarter room night volume booked through its
systems.
StarCite was formed in 1999 and has been a prominent player
in the corporate meetings technology segment. The company is no stranger to
M&A; years ago it played a key role in consolidating a once-oversupplied
market through acquisitions of and mergers with such competitors as B-there.com
and OnVantage. Today, StarCite's competitive set includes Cvent, SignUp4 and
Certain Software. Whether StarCite's current exploration leads to its own sale
remains to be seen, but Dukat acknowledged the possibility.
"Every company is for sale at a price," he said.
"Sabre was bought by a private equity firm, and they are still in their
core business, but that private equity firm is enabling them to do different
things. What we're trying to accomplish and the time we're spending on this is
more likely to [lead to] new investment or stay as we are and potentially
revisit it another time than it [would lead to] us looking to sell the
business. That's not really the reason we entered this process."
Source: The Beat