| Carlyle
helps Liquid Engines refuel
07:17 PM EST, Feb-10-2004
The deal brings the Sunnyvale, Calif.-based startup's total funding
to $21 million. Liquid Engines declined to disclose a valuation
on the current deal, but said that Carlyle, a new investor, put
up $8 million of the new capital alongside previous investors Advanced
Technology Ventures and Oak Hill Partners, both based in Menlo
Park, Calif., Charles River Ventures of Cambridge, Mass., and Catamount
Ventures of San Francisco. Santa Clara, Calif.-based Silicon Valley
Bank also contributed $1.2 million to the current round. The money is expected to be the company's final private fundraising,
though Carlyle has made a commitment to provide additional funds
a year from now if the company requires more cash. Liquid Engines
began fundraising for the current round last summer; Carlyle invested
in the company while also helping to focus the business. Liquid Engines raised its first round of $1.8 million in angel
investment in March 2001 before raising $10 million from ATV, Charles
River, Catamount Ventures, Oak Hill and Silicon Valley Bank in
January 2001. Charles Rossotti, a senior adviser with the Carlyle
Group, said that while the company has been operating for four
years, it took a great deal of time to settle on a vertical market
that the startup could successfully exploit. "They were first trying to apply the technology to a number
of problems, including how to buy things online and other applications
in addition to tracking taxes of different divisions in multiple
jurisdictions," explained Rossotti. "We saw taxes as
the most promising use, and we saw beyond that to multinational
taxation and worldwide management of cash." Liquid Engines did not use an outside placement agent or financial
adviser in putting the new investment together, and called on Glen
Van Ligten and Amy Paye of Heller Ehrman LLP in Palo Alto, Calif.,
for legal work on the deal. Carlyle enlisted Tom Klein and Shannon
Whisenant of Palo Alto's Wilson Sonsini Goodrich & Rosati PC
as its attorneys. Liquid Engines settled on tax management as its chief focus in
an environment where compliance and recordkeeping is rendering
many in-house tax management protocols obsolete. The company focused
on requirements of the Sarbanes-Oxley Act and other legislative
actions in the area of tax and legal structure in designing the
product and maintains a staff of researchers that provides continual
updates to customers on changes in tax law and reporting requirements. In addition to landing globally and politically connected Carlyle
as a new investor, the company has paid a great deal of attention
to recruiting prestigious and connected advisers to help design
and promote its product. The company boasts 2001 Nobel economics
laureate A. Michael Spence as a director, and has a board of advisers
that includes Walter Hellerstein, a professor of Taxation at the
University of Georgia Law School and a prominent academic authority
on state and local tax law.
Liquid Engines CEO Gwen Spertell said the company's access to tax
experts and the credibility of its investors will ease marketing
to the company's target market of Fortune 100 customers. Rossotti
said Carlyle was attracted to the deal as the only comprehensive
tax management software available.
He said the company has features in its product to account for
mergers and acquisition transactions as well as a variety of changes
in equity structure. He added that the company will release a new
product for international taxation later this year. But with the increasing reporting requirements and demand for
more transparent and independent corporate accounting, Liquid Engines
will likely see competition from new products from startups as
well as established accounting and software companies. Large enterprise resource planning software makers such as Oracle
Corp. of Redwood City, Calif., Pleasanton, Calif.'s PeopleSoft
Inc. and Germany's SAP AG offer features that include tax calculation
and planning functions, but none offer content services that track
tax requirements by jurisdiction. Among startups in the sector are San Ramon, Calif.-based Sabrix
Inc., which landed San Mateo, Calif.'s Trinity Ventures as lead
investor in a in a $10.5 million third round in May 2003 to support
its software products for tax management, with returning investors
Mohr, Davidow Ventures of Menlo Park, and Venture Strategy Partners
of San Francisco also contributing to the round. Other startups
in the sector include the taxware division of Salem, Mass.-based
GovOne Solutions LLP and Berwyn, Pa.-based Vertex Inc.  back to news & events
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