Venture Capital to Trigger Wave of Hiring at OpenX

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OpenX Technologies Inc. in Pasadena, which last week announced it had raised $20 million of venture capital in a new round, said it will use the money for a hiring binge.

The company, which puts display advertisements on Groupon and other websites, grew its revenues by 600 percent last year. But Chief Executive Tim Cadogan believes hiring about 25 sales people will accelerate growth even faster. The company currently has about 100 employees.

Lorrie Thomas, chief executive of Web Marketing Therapy in Santa Barbara, said OpenX has lots of competition in the digital ad space, but its connection to Groupon will help attract business. The Chicago-based coupon site announced plans for a $750 million initial public offering last week.

“When it comes to OpenX, they have folks like Groupon that they can point to,” she said. “That speaks volumes to potential customers. OpenX can hire the best of the best in digital sales. That could help the company go to the next level.”

OpenX’s business has two parts. First, it sells software that allows Web publishers to track how much money they’re making from display advertising regardless of whether the ads were sold by the publisher or third parties such as ad exchanges or ad networks. The company uses a “freemium” business model: It provides basic software for free but charges for upgrades.

Cadogan said the company only has a few hundred publishers that pay for its software, mostly sites with 50 million ads or more each month. In addition to Groupon, clients include Japanese ad agency Dentsu, Orange-France Telecom, Huffington Post and TheStreet.com.

The second part is the OpenX ad exchange. Each month it places more than 350 billion ads on about 200,000 sites and takes a 20 percent commission on the transactions.

Last week’s round of financing was led by SAP Ventures, a venture capital arm of German enterprise software firm SAP.

Cadogan said SAP doesn’t plan to take an active role in OpenX management, but does have a strategic interest in the company’s technology.

“They think this real-time application will become important in other industries for supply-chain management, although for now digital advertising is the first one to use it,” Cadogan said. “They are fascinated with real-time enterprise software, where a computer gets data, analyzes it and makes decisions instantaneously.”

But Nino Marakovic, an SAP Ventures managing director and new OpenX board member, said it was both technology and revenue growth that attracted him to the company.

“We see digital advertising rapidly becoming an integral part of the enterprise ecosystem as it becomes more and more core to businesses,” Marakovic said in a statement. “We believe that OpenX will become an industry-defining platform in this rapidly growing sector.”

Cadogan said that revenue has gone from zero three years ago to “tens of millions of dollars” last year. He expects the company to reach breakeven before the end of this year.

In addition to SAP Ventures, the latest round of financing included AOL Ventures, Mitsui & Co. Global Investment Inc. and Presidio Ventures. They joined prior investors Accel Partners, Index Ventures and DAG Ventures.