10:oo AM Central/11:oo AM Eastern/8:oo AM Pacific
Conference call
instructions:
Call-in number: (800)
779-3103
Passcode: Tonic
Conference leader: Brian Phillips
Participants:
Tonic CEO Brian Phillips
Tonic CTO Steve Marcie
Tonic CMO Debbie Yount
Tonic PR Director Gwen Smith
Springbok account team onsite at
Tonic (Melanie Buck, David B. Schlosser)
News media: 5 participating
publications
Analysts: 4 participating groups
Agenda:
Welcome
News
Market
Technology
History
Q&A
Wrap-up
Closing
Welcome, my name is David
Schlosser, of Springbok Technologies, representing Tonic Software. It is my pleasure to welcome everyone to hear
Tonic’s exciting news, a brief outline of their target market, a short
discussion of their technology and an outline of their history. But first, I’d like to introduce the
executive team at Tonic.
Brian Phillips, president and CEO,
Steve Marcie, CTO, formerly a
founder at Tivoli Systems, and
Debbie Yount, chief marketing officer, formerly with Grey Global
Advertising.
We are also fortunate to have with
us today, Kate Mitchell, managing director of BA Venture Partners.
I’ll now pass the discussion over
to the executive team, and specifically Brian Phillips, president and CEO, to
kick off the announcement.
News: Brian Phillips
Hello everyone, and thanks very
much for joining us this morning.
I’m Brian Phillips, president and
CEO and also a co-founder of Tonic Software.
We are very pleased to announce
today that Tonic has closed a very successful second-round of funding for $28
million.
The round was led by BankAmerica Venture Partners,
and I’m also pleased to announce that Sevin Rosen,
who led our first-round, is also participating in this second round. Additional investors participating in the
round include CXO Media, Dain Rauscher
Wessels, Dell Ventures and Intel 64 Fund.
We plan to use the funds to
accelerate product development and expand our sales efforts, specifically to
double our development and sales headcount in the first quarter of next year,
add professional services resources and expand internationally.
Debbie Yount,
our chief marketing officer, will talk about the market opportunity for Tonic
Software.
The Market: Debbie Yount
Traditionally, when customers
think about managing their website, they’ve used testing and monitoring tools,
or what we call point products, a product that solves a single problem. When we defined our solution, as we talked to
customers, and we target the “C-Titles or CXOs, the CTOs, CEOs, CIOs, CFOs, within an
organization and we found a strong need for products that span the entire
life-cycle of a web application.
Tonic Software is the first
company to address web applications management end-to-end, from a user
perspective. To understand the market
for web applications management, we’ve taken a portion of the software testing
and monitoring market, and the automated software quality assurance markets, and
taken a conservative 25% slice of the two segments that address specifically
web applications management and come up with $636 million dollar market
opportunity in 2001, growing to $1.7 billion in 2004.
In the past applications supported
the business; today, applications are the business. We continue to see a growing opportunity for
the kinds of products that ensure that ebusiness is
business as usual.
Steve Marcie, our CTO, is here to
talk about Tonic technology and how Tonic’s approach is helping our customers
effectively enhance their ebusiness ROI.
The Technology: Steve Marcie
We’ve been talking to customers
like UBS Warburg, Citigroup, EDS and others, and what we’ve heard over and over
again is that companies want insight into what’s going on end to end from the
user perspective, insight into what’s the integrity of the website, what’s the
scalability, and, on an ongoing basis, how is the web application performing.
What it means to manage an
application involves three different components, problem identification, root
cause analysis and automated corrective action.
These are pretty self-explanatory, first is you have to detect when
there’s an error or a problem, and you want to identify it before your customer
or your business partner. Then figure out what caused the error or problem,
then third, and this is the real management capability, you have to be able to
fix that problem without human intervention, that’s what we call automated
corrective action. This final capability
enables companies to free up their expensive IT resources, to keep them from
repetitive web site “fixes” and refocuses them on tasks that can build
additional value for the web application, like creating new features, or new
functionality.
Traditionally, the IS/IT community
responsible for web applications has been very vertical, organized by
functional groups. But the departmental
walls are breaking down, and the groups are having to
work more closely to ensure the success of the website. The capability to manage the web application
life cycle provides a key benefit for our customers and represents a terrific
opportunity for Tonic. If you think
about what the life cycle of an application is, there’s three phases, the
development phase, creating the components and tying them together, the
verification phase or qualification phase and then the production phase. During the development phase, we’ve actually
built our product to be very lightweight and non-intrusive. You don’t have to go install this product on
every machine within your network to be able to do content and functionality
integrity assessment, scalability assessment and monitoring. You can install it on just one machine if you
want. Tonic has a small footprint and
doesn’t take up a lot of resources. This
incents developers to use this product right on their
development machine along with their other tools. As they’re creating the pieces and as they’re
tying the pieces together and starting to integrate them, they can use Tonic
alongside their other products to start developing new tests to start
simulating user transactions or to be downloading and retrieving data from the
web applications. They’re building up a
set of verification capabilities against the web application in the form of
real user transactions, and they get to pass that along to the QA group so the
QA group can build on that base that the developers created. So they’ve increased the amount of code
coverage of the application and QA has a better ability to ensure the
application is functioning as it was intended, then they can do that same thing
as they pass it to the production group, they take what QA and development
staff have, maybe even extend those user functionality tests and use that on an
ongoing basis to do real time monitoring, say ok, now that we’ve verified all
the pieces, let’s continue that those pieces continue working and schedule
monitoring for every day or every hour, so that’s how full life cycle
management affects an organization to deliver full web applications
management., across a company and across all the functions of a web
application.
Our CEO, Brian Phillips, will
address more of the company’s history.
The
History: Brian Phillips
Brian: Tonic was founded in December 1999; nearly
all of us on the Tonic executive staff have our roots in enterprise systems
management. Our first round of funding
came from Sevin Rosen, for $5 million. We are very pleased that BA Venture Partners
led this round of funding for $28 million, which was filled out, as I said, by Dain Rauscher Wessels,
Dell Ventures and Intel 64 Fund.
Tonic Software is also very
pleased to have Kate Mitchell, managing director of BA Venture Partners become
a member of Tonic’s board. Kate Mitchell
is here with us today, and we’d like to have her say a few words on behalf of
the investors.
Kate Mitchell:
As you know, it’s been a tough
year for startups and for investors.
Tonic’s seasoned management team, innovative product, market potential
and existing customer commitments all help to mediate the risk that investors
face. BA Venture
partners is pleased to be able to help Tonic seize the opportunity it
has before it.
Brian: Thank you, Kate. Continuing on with our discussion, Tonic is
very focused on building a business, and hiring the best of the best. We currently have 50 employees on staff and
plan to double the engineering and sales headcount in the first quarter of
2001.
We target the fortune 2000, and we
sell direct, in teams of two, a sales executive and a sales engineer in six
We also plan to add professional
services to our organization for implementation services.
Our pricing model is a monthly
subscription, and we did this for a couple of reasons, one to realize recurring
revenue, as companies are wary of investing huge amounts of money in an
outright software purchase, which also helps with budgeting, but also because
this keeps Tonic very focused on continuously delivering value to the customer
– our revenue model requires a good ongoing vendor/customer relationship.
Q&A: Moderated by Springbok ~
20 minutes (probably shorter)
When does Tonic plan an IPO?
What is Tonic’s financial outlook
given the weakness in the market today?
Who are your customers?
Wrap up: Springbok wrap up
questions, bring discussion back to Brian for closing.
Closing: Brian
Recap the news (in case someone
joined late), so the news today was $28 million in funding from BA Venture
Partners, CXO Media, Dain Rauscher
Wessels, Dell Ventures and Intel 64 Fund. We plan to use the money to expand our
leadership in web applications management.
We’re excited about the
opportunity that Tonic has before it, I invite you all to visit our website for
more detailed information on Tonic, our staff and our product. Thanks very much for taking time out today to
join us.