Critical Path Raises $33M Venture Funding –

SAN FRANCISCO – Critical Path Inc., a developer of business-to-business electronic mail solutions that seeks to secure its position in the domestic market and expand overseas, in January closed on $33 million in venture capital financing.

The sizable second round, which had an initial target of $25 million, primarily came from existing investors. Strategic investor E*Trade led the financing, which drew Attractor Investment Management Inc. as the only new financial investor, said David Thatcher, chief financial officer at Critical Path.

Additional strategic investments came from USWest, @Ventures and Network Solutions Inc., while existing financial investors – Benchmark Capital, Mohr Davidow Ventures and Hambrecht & Quist – made follow-on commitments, Mr. Thatcher said. Hambrecht & Quist also provided advisory services for the company’s second round.

“This could be our last private equity round, as I currently see no need to raise additional capital for some time,” he said. “We always look at the IPO possibility, but more from a marketing perspective.”

Proceeds from this financing will be coupled with remaining capital from Critical Path’s $9 million first round, which closed in April 1998, to fund an expansion of the sales and marketing infrastructure. In particular, Critical Path’s continued push into Europe and plans for subsequent entry into the Asian market require heavy investment in additional talent, Mr. Thatcher said.

“We want to develop and enhance the technology such that we hope to be on the front edge of the product offering,” he added.

Expenditures on technology development also will increase following the round, as the company intends to continue research on its service solution, Mr. Thatcher said. In this era of branding, Critical Path’s solution allows customers to maintain their identity while using the company’s technology.

Customers that use the solution are able to offer users a higher quality service at a lower cost to the company than when it is outsourced. The savings derives from Critical Path’s absorption of maintenance and equipment costs.

“We service customers within a data center, where security is of prime concern and the walls between customers are very well-defined,” Mr. Thatcher said.

The company currently has offices in New York, Boston and Munich, Germany.