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Infusion Software Inc. raised $9 million in Series A venture capital from MDV-Mohr Davidow Ventures of Menlo Park, Calif., to accelerate marketing of customer relationship management software aimed at small businesses. The deal comes on top of $1 million in equity investment from friends, family and angel investors, and will allow the six-year-old Phoenix-based company to dramatically boost promotion of its Web-based products through direct sales and channel sales through small business consultants and service providers. Infusion CEO Clate Mask said the company decided early this year to take on additional funding, and that the money will likely carry Infusion for about two years at which time it expects to raise additional private investment. Infusion was formed as a custom software provider for small businesses, but Mask said that a few months after he joined the company in July 2002 he convinced partners to shift focus to products. "I quickly realized we had some really smart developers and what they were doing for small businesses was not really available as a product," Mask said. "We decided early on that it had to be a Web-based product, even though customers had security concerns and issues with bandwidth, the developers insisted that hosted services was the direction the software industry was moving, and that's where we needed to build our IP platform." Mask said most CRM software was developed for Fortune 500 companies, and that versions sold for small business are watered down from the original design. Rather than focusing on extensive customer profiling features that large-company CRM programs address, Infusion set out from the beginning to concentrate on business process automation. "We took a completely different approach for customers that don't have ERP [Enterprise Resource Management] systems, but can link CRM functions to simple accounting software such as QuickBooks," Mask said. Infusion aims its products at what it terms "truly small business," of fewer than 100 employees. Mask said the company's principal target aims even lower, with businesses of 5 to 25 employees comprising its market sweet spot. To reach those customers, Infusion's marketing has primarily been Web-based, but the company also has tried to build relationships with business coaches, consultants and management gurus to introduce its products to clients. He said Infusion will put a large emphasis on expanding that network of affiliates in expanding its marketing focus with the new capital. Nancy Schoendorf, a general partner with MDV, said the firm has had experience in CRM since the 1990s, with an investment in Vantive, one of the earliest CRM providers, which was eventually acquired by PeopleSoft Corp. She said the firm was actively looking for software services companies when it discovered Infusion before the company had decided to raise money. Mask said Infusion worked with Santa Clara, Calif.-based Silicon Valley Bank to identify potential investors, but did not formally use a placement agent in putting the round together. The company did not disclose a valuation for the deal, but Mask said he had several competing term sheets, and that MDV stepped forward with a preference for taking the entire round. Infusion had legal work on the deal from Thomas Curzon and Clark Porter of Osborn Maledon PA in Phoenix, andMichael Kagnoff of Heller Ehrman LLP in San Diego represented investors.  Deal Video
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