Warburg backs TradeCard again

November 18, 2003
Daily Deal/The Deal, November 18, 2003, by Clifford Carlsen
Supply chain software service provider TradeCard Inc. has raised $10 million in a fourth round from longtime backer Warburg Pincus LLC, which takes total funding of the 4-year-old company to about $100 million.
TradeCard CEO Kurt Cavano said the company talked with investment bankers and potential new investors when it began raising money two months ago, but opted to stick with Warburg in a round that held a valuation flat to its round of financing in October 2002. He said the company kept this round to $10 million with the hopes of raising additional capital at a better valuation next year. "We went out and looked at the market and talked to bankers, and we could have raised this round outside of Warburg Pincus, but not at rates favorable to the company," Cavano said. "We are growing north of 10 a month, and we didn't want to raise too much now, because as we grow our access to capital is improving."
New York-based TradeCard, which used no outside financial adviser, drew upon law firm Wiggin & Dana LLP. Maurice Lefkort of New York law firm Willkie Farr & Gallagher LLP advised Warburg Pincus.
Cavano did not disclose a valuation for the round, but said Warburg has put in about half its total capital, and has been the sole investor in the last two rounds. Warburg footed the company's initial, $53 million round in February 1999, when the company was recapitalized and spun off from the New York-based World Trade Centers Association.
Warburg then led a $25.5 million round in September 2001 which brought in Japanese joint venture partners Mitsui & Co. Ltd. and Mitsubishi Corp. as well as Softbank Venture Capital and other investors. Warburg also put in $10 million in a third round of October 2002.
Cary Davis, a managing director with Warburg in New York, said the firm encouraged TradeCard to keep the current round inside to keep management attention focused on operations.
"Warburg Pincus has a different approach to funding companies because we have about $9 billion under management and only 125 portfolio companies," Davis said. "When we fund a company, we are prepared to fund it to break even, and we know it can take $100 million to build a sustainable stand alone company."
Cavano said the company will require additional capital next year, but he said the existing round supports growth of the company's online platform for fulfillment of supply chain financial transactions. TradeCard operates a third-party clearinghouse primarily for retail companies to track and record invoices and payments.
TradeCard originally had a client-server software product that required both parties to maintain the technology on their own internal IT systems, but now operates the system as a service provider.
Davis said Warburg invested in TradeCard while supply chain automation was drawing a lot of attention, but he said the company has been unique in building a system for the financial end.
"People spent a fortune automating the physical supply chain, but they have focused on automating financial transactions," Davis said. "There are still inch-high stacks of faxes that follow payments around worldwide, and TradeCard operates a service to eliminate that."