Copyright 1997 Danialle L. Weaver. All rights reserved. The following article appeared in the Summer 1997 (premiere) issue of digitalsouth, a new regional technology business publication. Reprint rights to this article are available. For information, please contact Danialle Weaver .---------------------------------------------------------------- ----------- Heat Is On Haht By DanialleWeaver The money is there. So is the brain power. Can this Raleigh software developer live up to expectations? It's a company that seemingly has it all: a product described by industry analysts as one of the most innovative corporate Web site development tools available. A management team with start-up experience and a successful track record of raising money from high-profile Silicon Valley firms. A list of clients and strategic relationships that includes SAP, Computer Associates, Oracle, Informix and Deloitte & Touche. A slew of awards from all the leading computer magazines. And a clever acronym of a name tailor-made to boost corporate name recognition. But even star credentials like those don't guarantee instant success in the mercurial world of venture financing, where today's while-hot Internet play could wind up lead wallflower at the dance tomorrow. Just ask executives at Raleigh, N.C.-based HAHT Software (pronounced 'hot,"), which quickly has become one of the most closely watched companies in North Carolina's Research Triangle Park. Despite the company's success in raising $6.7 million in two previous rounds from Hummer Winblad Venture Partners, Menlo Ventures, JMI, High Street Partners and Sippl-Macdonald Ventures, it still took longer than expected to raise the $10 million the company sought to secure by April. Now, the checks probably won't clear until at least mid-summer, says Richard Holcomb, the company's co-founder, chairman and CEO. For most companies, a delay of four months isn't even worth mentioning. But it's quite a comedown for a high-flying software company that literally raised its first million in an hour. Okay, concedes Holcomb, a 35-year-old entrepreneur somewhat given to hyperbole. An hour was a slight exaggeration. Maybe it took all of a week. "The first two rounds of financing we raised were unbelievably easy--it must have been a fluke," Holcomb says. "It was extremely easy, partly because of our reputation--we had successfully built and sold a company before--and partly because we had a product in an area many companies wanted to invest in." Holcomb says he--repeat, he--picked three or four venture firms out of several that were willing to invest in the company. "Of course, the ones that didn't fund us went and funded somebody else, so now most venture capital firms have already placed their Internet bets, at least in our category," he adds. And so it was that the company found itself struggling to raise its third round of financing. For the first time, it had to work as hard as everybody else. Of course, it still doesn't hurt to have well-connected millionaires providing the introductions, such as Ann Winblad (who is also a friend of Microsoft's Bill Gates) and her founding partner, John Hummer. The two Hummer Winblad principals had met Holcomb several years earlier, while he was running Q+E Software Inc., a leading supplier of client server database access technology. In 1994, Q+E was gobbled up by Rockville, Md.-based Intersolv for $34 million in cash and stock. After the sale, Holcomb and two other Q+E alumni found themselves unemployed--and bored. Meanwhile, Archer, now 44, started working on a Web tribute to The Allman Brothers Band. He had a database of all the dates the band played while all its members were still alive, and he wanted to find a way for other fans to query it. "Existing tools only tackled part of the problem," says Archer, now HAHT's COO. "I spent more time gluing pieces together built with different tools than I did actually building the meat of my Web app." And then Federal Express put up its Web site, which allows a package to be tracked in real time from origin to destination. Holcomb and his pals were awed by the possibilities. Ultimately, the men set about producing an integrated tool for creating, deploying, developing, publishing, maintaining and managing dynamic, interactive Web sites for real-world functions, such as selling tickets online. Along the way, the three entrepreneurs sunk "a few hundred thousand" in the company and persuaded Jim Hebert, 45, a former Data General colleague, to sign on as president. "Work on the first release of HAHTsite "took 14 months of beating our brains out," recalls Hebert. The company had 10 employees, "who all pretty much worked without salaries for six months to a year," Holcomb says. So why are all the critics raving about HAHTsite? Put simply, it allows the technically challenged to produce a dynamic Internet or intranet presence without knowing how to write code--or buying a whole bunch of applications and cobbling them together. Some of the more oft-cited features include a WYSIWYG HTML editor and interface. The product sits between existing corporate applications and the Web server. That means HAHTsite allows companies to link their legacy databases to the Internet and intranets behind the requisite firewalls. HAHT site "goes beyond any other editing and developing tool on the market," says Phil Brown, a software developer with Bridgestone/Firestone in Nashville. The company's Web site allows users to find which size tires fit their cars, then tracks down the nearest retailer selling them, along with the price. Reviewers also cite a few drawbacks. One is its price: HAHTsite costs a bit less than $2,000, while the application server costs an additional $5,000. In April, HAHTsite Integrated Publisher was released; the add-on product costs another $700. Also, a research report by The Meta Group, a Stamford, Conn.-based IT consulting firm, notes platform coverage is largely limited to UNIX, although HAHTsite also will run on Microsoft Windows NT. The application server and the HAHTtalk scripting language are compatible with Visual Basic 3.0 but not the latest release, the report says. And a recent Information Week article complained about the "long edit-publish-test cycle" and said HAHTtalk Basic "is incompatible with JavaScript," a claim Holcomb rejects. Still, the company is going after a market that's huge, and growing fast: The Fortune 1000 spent $90 million on Web development tools in 1996, which could grow to $1.2 billion annually by 1999, according to a Forrester Group estimate. How much of that market is HAHT's is difficult to judge, primarily because the company refuses to release revenue figures, as HAHTsite has only been shipping for less than a year. HAHT will say only that the company is not profitable and will not break even until at least year's end. And, although sales are growing by about 10 percent each month, they're not as strong as expected. But maybe early expectations were too high, Holcomb says. Early boasts that employment would double in a year also were not realized. Holcomb says that's because the company changed its business plan in mid-stream. Now, HAHT plans to sell the product largely through outside vendors, rather than internal sales people. Currently, about half the product is being sold by resellers. Still, HAHT has gathered impressive and early support through partnerships with Glaxo Wellcome, Goldman Sachs, EDS, TravelNet, Lante and the U.S. Postal Service. In fact, before the first version of HAHTsite was even released, the company had relationships with CADIS, Compaq, Microsoft, Progressive Networks, Sun, Sybase, Verity and Visigenic. The icing on the cake, however, is the company's relationship with software giant SAP, which used HAHTsite to create a suite of employee self-service applications, such as electronic expense account filing. HAHT also has received a lot of overwhelmingly positive ink and glowing reviews in the computer trades. So glowing, in fact, that awards from those very same trades have followed, from the likes of Windows Magazine, NetGuide, Software Magazine, PC Week, PC Computing, ZD Net and Byte. Last October, Upside named HAHT one of its "High Five Companies," meaning it got multiple votes from venture capitalists as a company they were "excited about in 1996." This June, The Red Herring predicted HAHT would go public by year's end, although Holcomb says that's unrealistic. If an IPO does occur, HAHT would likely have a market value of more than $33.5 million. That was the latest valuation, prepared before the third round of financing was complete. That's old news to Emeryville, Calif.-based Hummer Winblad, a software only venture firm with $95 million under management that was the first to back HAHT. "We've known Richard for a long time, and we were comfortable that he knew how to build a good team," says Hummer. "Yes, it is more difficult for us to invest on the East Coast, but we've had great success investing in Powersoft (Burlington, Mass.), so we know it can be done." VCs generally like Holcomb's resume and his public relations and marketing savvy. But the buzz is this: it's high time to see if the product measures up to the hype. And at least one firm says privately that Holcomb is creating hard feelings in the Triangle because he's been flaunting the company's money-raising success. Many analysts also have openly questioned how well a startup can compete with deep-pocketed rivals such as Adobe, Microsoft and Netscape. Although Holcomb says the company competes with just about everybody in the corporate enterprise space, HAHT's Web site contains a blow-by-blow competitive analysis of HAHTsite 2.0 and Microsoft's Visual InterDev. Many others, including Holcomb himself, believe the company is destined to be gobbled up by a larger rival, though whether that will happen before or after an IPO is anyone's guess. "The truth is that I give absolutely no thought at all to the 'when will we go public' question. It's right up there with 'when will I die,' 'when will I get married,' and 'when will I have children,''' he says. If you want to get married then you should concentrate on dating, not worry about when; if you want to have children then concentrate on sex, and if you want to go public then you should concentrate on running your business the best you possibly can. Do your job right, and the answer to when will become obvious." And many wonder whether the "soup-to-nuts" approach is the correct one for companies still gun-shy about being locked into proprietary systems. As justification for the integrated approach, Holcomb points to the evolution from stand-alone, or point, applications like word processing to integrated approaches such as Microsoft Office. "No one buys Microsoft Word or Word Perfect anymore," he says. Holcomb believes the key to success in the future is product support. "We learned from the last company that if you don't do support right, you'll kill the company," he says. "You can release a buggy product, but if you have good support, you can get around it. We have, by far, the best technical support staff on the Internet--our investors are saying that, and our customers are saying that after they've done their due diligence." "The challenge is the unbelievably rapid growth of the overall Internet market, having to successfully integrate the product and to support all the bits and pieces that go along with that, and to provide a level of service and support that corporate IS customers demand," Holcomb says. Stay tuned.