February 3rd, 2009
Got Capital? Lumigent got plenty in a rough market
Good ideas trump an even dismal economy
Recently, Lumigent, a software firm in the GRC space closed a recapitalization round of $6 million (USD). Lumigent, an eight-year old firm, expects this to be its last venture backed round of capital as it anticipates profitable operations by next year. The company has approximately 500 customers.
Lumigent is clear about its value proposition in the GRC space. Their top three marketing messages are:
- driving down the cost of compliance
- ease of installation and setup (versus the software deal turning into a long, expensive consulting or implementation services gig)
When I spoke with CEO John Capobianco, I got a bit more insight into their success on both the sales and venture raising fronts. Lumigent wins new work as they realize that governance, regulation and compliance are expensive activities and they work to minimize that cost. In contrast, I’ve heard audit partners gloat over the full employment, fat fees and oversized partner earnings that regulations like Sarbanes-Oxley have brought to their industry. The audit industry should be ashamed at their greed while doing little to prevent frauds, financial meltdowns, etc.
But I digress.
Lumigent works on two levels. First, the solution is designed as a plug-in of sorts for major ERP solutions. This effort creates a ready-made product for users of these ERP products. From my notes, the company supports PeopleSoft Financials, Deltek and other products. Newer versions will support Lawson, Great Plains and Kronos application software users. An SAP solution is not ready at this time. Second, the software reads the database recovery file to understand all of the changes (before and after) that are occurring to the production systems. This approach lets them monitor GRC activities without being a drag on the production databases.
How did Lumigent get this round of capital financed? It certainly helped that the firm is in a growing area of business application software. Moreover, the investors and executives at Lumigent are betting that more regulation will soon inundate businesses as Congress, taxpayers, etc. will demand more accountability from businesses. The numbers of business failures, bailout recipients, job losses, etc. will doubtlessly drive new requirements in governance and regulation.
But more regulation, etc. is very costly and may exacerbate the lack of profitability U.S. businesses possess today. The only logical solution is to create GRC solutions that are no more costly (or less costly) than current solutions and yet do a lot more. That’s the message Lumigent has pitched to investors and to its customers. It apparently worked for investors and the current crop of customers. Let’s see how they do in this tough economy.
This blog explores the intersection set between services and technology. If it impacts either space, it will be covered here. Brian Sommer is a former Accenture partner. He did an 18-year tour of duty there and ran three small practice units (Finance Center of Excellence, HR Center of Excellence and Software Intelligence). He’s sold service projects in almost every continent and remains just as current on both services and technology today as ever before. Brian is currently CEO of TechVentive, a strategy consultancy servicing technology providers, and a research analyst with Vital Analysis. See his full profile and disclosure of his industry affiliations.
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