Translations.com: Speaking Your Language –

NEW YORK – In a New York University dorm nine years ago, business school students Phil Shawe and Liz Elting took out a $5,000 credit card advance and developed a business plan on a rented computer.

A few months later, they had a Park Avenue office for their company, TransPerfect Translations Inc. Six months after that, the company signed its first million-dollar client, international retailer J.C. Penney Co.

By 1996, 3,200 corporate clients had registered for TransPerfect’s document translation services. The company’s capacities to localize Web sites across international borders and create multi-lingual enterprise-wide Web portals, however, fell far below its clients’ demands. So, the company spent the next three years creating a technology platform capable of translating and localizing digital files, as well as hiring a staff with the language and technical skills to establish a foothold among companies reaching out to international clients through the Internet.

“If you’re a Fortune 500 company, you have to have a multi-lingual presence. It’s not just about the Web site, you need localization of design and Web graphics,” says Thomas Pennell, general partner with Pennell Venture Partners, a small New York-based venture capital firm. “You can’t be an international company and just function in English.”

The trend toward Web globalization – the practice of adapting corporate Web content to foreign cultures and international markets – began to grow with the rise of e-commerce. Berlitz International Inc. launched e-business solutions provider BerlitzGlobalNet as a wholly-owned subsidiary to complement its suite of offline translation and language instruction products. Uniscape Inc. of Sunnyvale, Calif. has developed a line of enterprise software for localizing Web content in 42 languages.

“The Web has been an incredible catalyst for driving business,” says Steve Adams, Uniscape’s chief executive. “There’s a need for globalization, and just the sheer volume of information [transmitted on the Internet] and the frequency with which that information changes…must be solved from an enterprise-level perspective.”

Venture capitalists, too, have been quick to jump into technology-driven language solutions. Idiom Technology Inc. of Waltham, Mass. raised a $17 million series C round from Banc of America Securities, Eastman Chemical Co. and Oracle Corp. In its most recent round of venture financing, Global Sight Inc. of San Jose, Calif. attracted the attention of Draper Fisher Jurveston, Deutsche Bank Capital Partners, 3i Group PLC and Protege.

For its part, growth in TransPerfect’s digital media group soon outpaced that of its core document translation services. Still, revenue from the high-growth area lagged. Not only did the group need to develop new processes for translating information stored in electronic databases and localizing Web graphics, but it also had to come up with new work flow and project management systems – and an accounting structure to reflect these changes.

Soon the group had strayed so far from its parent, that in the fall of 1999, translations.com was spun off.

After adding its own roster of clients to those left over from the company’s TransPerfect days and expanding from nine staffers to 85, translations.com recently made its first official foray into the VC market.

Following a $1 million seed round last May, the company slowly expanded its list of contacts before coming up with a mix of individual and institutional investors.

“The market has been in a state of chaos through much of this,” says Roy Trujillo, translations.com’s chief operating officer. “We had informal discussions with investors since last May. We got a list of magazines and such and a list of people we knew and some of the individuals in the angel round knew either myself or Phil [Shawe] personally.”

The round, which closed at $3.1 million, was led by a $2.5 million equity commitment from Deutsche Asset Management through its affiliate, Deutsche Bank Sharps Pixley Inc. Pennel Venture Partners also participated. Individual investors, like advertising heavyweight Jay Chiat, Scient Corp. Founder Eric Greenberg and Homestore.com Inc. CEO Stuart Wolff, also invested in the deal.

Unlike its competitors, translations.com is not a technology-driven company. Instead, it relies on a network of 4,000 freelancers and an in-house production and project management team to oversee all work. The company will use the capital infusion to continue to build out its staff, to extend marketing efforts and to expand its network of offices.

“If we were a football team, we wouldn’t even be buying new uniforms – maybe some pads. We’re just blocking and tackling and doing work everyday,” Trujillo says. “We’re concentrating on getting high-level talent and making sure we can keep them. We’re not going to have any blimps out there or introduce new wacky software that changes the sounds that come out of your mouth.”

Currently, the company’s efforts are concentrated in eight languages: Chinese, French, German, Italian, Japanese, Korean, Spanish and Portuguese. Based in New York, the company maintains 14 offices. New offices are planned to open in San Francisco and London.

Meanwhile, the company is “imminently cash-flow positive,” Pennell says. Over the next several months, the company will concentrate its efforts on adding more blue-chip names to its client roster. It is not likely to dip back into the venture markets. Nor will the company take the road of its competitors to become a technology-driven solutions provider – hoping that choice will push it ahead of the crowd of competitors.

“It’s different than a stand-alone product business,” Pennell says. “It’s a consulting business with a technology component. As far as the nirvana of real-time translation goes, never say never, but it’s not an imminent reality – especially when you need professionals.”

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