Monday, February 11, 2008

Hardware vets Stata, Chatter launch software firm NeoSaej

By Christopher Calnan

Ray Stata, best known as co-founder of chipmaker Analog Devices Inc., and Mukesh Chatter, best known as founder of backbone router company Nexabit Networks Inc., are leading the charge at e-commerce startup NeoSaej Corp., which is set to make its public debut within the next six to eight weeks, said Chatter.

The two successful, respected hardware entrepreneurs are poised to turn to the e-commerce software market with the launch of the Burlington company that's promising "innovative architecture" addressing inefficiencies in online marketplaces.

Chatter, Stata and NeoSaej investors say they aren't ready to reveal much more. But a June 2007 filing with the U.S. Securities and Exchange Commission reveals the business has been operating in stealth mode since August 2006 and has raised $2.7 million of a $3 million round of venture capital.

NeoSaej investors named in the SEC filing include Stata and Chatter, along with Rohit Goyal of Cambridge (also vice president of engineering for NeoSaej), NeoNet LLC of Concord, Stata Venture Partners II LLC of Dover, and MBPP LLC (listed c/o Boston law firm Bowditch & Dewey LLP). NeoSaej's website reveals another investor, Gorham Savings Bank of Maine. Gorham COO Dan Hunter said while it is unusual for the bank to invest in a technology company, he wouldn't discuss details of the banks' investment, citing NeoSaej's stealth mode.

But other details on the company's website begin to paint a clearer picture of the startup's business direction. For instance, NeoSaej has posted openings for 12 jobs including a vice president of infrastructure and client support in charge of a "24/7 production environment, including but not limited to datacenters, networks, call center and field support activities" and a QA lead with offshore experience to "manage and coordinate the day-to-day activities of the offshore development team."

Combine the call for that talent with a call for a regional director for banking sales to "source (NeoSaej) products to banks and assist in partnering with banking platforms" and a vice president of consumer marketing in charge of marketing and other strategies for NeoSaej's online e-commerce product, and an online consumer-focused payment model begins to emerge.

If NeoSaej does plan to enter the online payment industry, credit cards have captured 85 percent to 90 percent of the market, said Jennifer Roth, a senior analyst for the Tower Group Inc., a Needham-based research firm. The remaining portion of the business, called "alternative payments," is dominated by PayPal, with about 6 percent of the market, not including auction sales, she said.

"There's still room, but how are you going to attract the customers?" Roth said. "What are you going to do differently to attract customers?"

But exactly what NeoSaej has up its sleeves still remains to be seen.

Chatter and Stata most recently teamed up to found Marlborough router maker Axiowave Networks Inc., which launched in 2000 and closed in early 2005 after reportedly raising $120 million in venture capital. The 156-employee Axiowave closed shop after its sole customer was acquired by a company partially owned by competitor Cisco Systems Inc.

However, Chatter's previous startup, Nexabit Networks, had a better outcome. He founded the switch router company in Marlborough in 1997, with an investment from Stata. Two years later, Lucent Technologies Inc. bought Nexabit Networks for $900 million.

Chatter subsequently worked for Lucent until 2000, when he started Axiowave.

Analog Devices, a company Stata co-founded in 1965 and where he still serves as chairman, posted revenue of $2.5 billion during 2007. The company employs 9,000 workers. Stata is also a co-founder of the Massachusetts High Technology Council. Last year, the Massachusetts Network Communications Council inducted Stata to its Network Communications Hall of Fame.

Although Chatter and Stata are known for their hardware-related work, at least one NeoSaej team member has retail software history. Board member Tom Ebling is a former CEO of ProfitLogic Inc., a Cambridge retail software developer acquired for a reported $160 million by Oracle Corp. in 2005. ProfitLogic, founded in 1983 as Technology Strategy Inc., developed software used by 30 large retailers to analyze customer-demand patterns.

Ebling is a former entrepreneur-in-residence at Battery Ventures, a Waltham venture capital firm that was one of firms to invest a total $38 million in ProfitLogic from 1998 to 2002.

One of NeoSaej's executives, Bob Watterson, has the title vice president of bank partnerships. Watterson has been in the banking industry since 1983 and founded First Financial Inc., a Wellesley mortgage company.

Through an Analog Devices spokeswoman, NeoSaej board member and investor Stata also declined to comment on NeoSaej.