Phurnace Lands First $5 million in Venture Backing

By Lori Hawkins
AMERICAN-STATESMAN STAFF
July 21, 2008

With life sciences and Web 2.0 companies in the venture capital spotlight, Austin-based Phurnace Software Inc. had to move fast to get attention, said chief executive Larry Warnock.

The 18-month-old company, which sells software that accelerates the deployment of Java applications, plans to announce today that it has completed its $5 million first round of venture backing.

"It used to be an enterprise software startup could raise $15 million to $20 million before it even got its first customer, but those days are gone," he said."In this new era, you have to build your product quicker and capture customers quicker."

Warnock said Phurnace relied on free open-source software to speed development of its products and made signing paying customers an early priority. That's because investors invest in software deals with different expectations than they had a decade ago, he said.

"The industry has matured, and the exits" — through initial stock offerings or acquisitions — "are no longer what they used to be," he said. "So you've got to get to that point as soon as you possibly can."

Phurnace raised the money, which it will use to expand sales and marketing, from S3 Ventures of Austin and DFJ Mercury, a Texas-based venture fund affiliated with Draper Fisher Jurvetson of Menlo Park, Calif.

Brian Smith, managing director at S3, said Phurnace has proved it can succeed by signing 20 customers, including American Airlines, the State of Texas, and commercial truck maker Navistar.

"We invest in companies that solve real problems and have significant customer traction, and when we looked at Phurnace, we saw both," Smith said.