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Online research collaboration company InnoCentive Inc. closed last month on a $950,000 investment from Germany-based SAP AG as part of a $7.5 million first tranche of a $15 million Series B round of financing, InnoCentive officials confirmed.
SAP (NYSE: SAP), which announced a partnership with Waltham-based InnoCentive in September, had previously not disclosed the specific amount of its investment in the company. However, officials confirmed the amount that was listed in a filing with the U.S. Securities and Exchange Commission.
InnoCentive CEO Dwayne Spradlin plans for the company to receive the $7.5 million second tranche of the Series B financing during the first quarter 2009.
The company operates a website where researchers from various sectors can collaborate on scientific problems. InnoCentive said it has solved about 40 percent of the so-called challenges presented by customers. It has also brokered more than $3 million in rewards paid to problem solvers, Spradlin said.
InnoCentive generates revenue through challenge posting fees that are usually $15,000 coupled with back-end success fees that are 40 percent of the total paid by customers.
The backing by SAP, which generated $13.7 billion in revenue last year, is expected to increase the number of InnoCentive buyers and sellers, Spradlin said. “We think it means we’ll be able to accelerate our growth of customers for InnoCentive and our global community of innovators,” he said.
InnoCentive doesn’t disclose revenue figures, but Spradlin said the company is on pace to increase its top line this year by 50 percent versus last year.
The InnoCentive investment was made out of SAP’s $125 million NetWeaver Fund, which was established in 2006 to focus on companies that develop software based on the SAP NetWeaver platform. Stamford, Conn.-based Aris Global LLC is the only other New England company to receive financing from the NetWeaver Fund, said Kevin Ichhpurani, SAP’s global vice president of business development, who manages the fund.
In 2001, a separate SAP division, SAP Ventures opened an office in Waltham and now manages the company’s East Coast investments from a Burlington office, SAP Ventures partner Jennifer Scholze said in an e-mail. SAP Ventures has invested in local companies such as Lexington-based Imprivata Inc., Lowell’s Virtual Iron Software Inc. and Cambridge-based software maker Endeca Technologies Inc.
InnoCentive, which was founded by Indiana-based Eli Lilly & Co. in 2001 and spun out in 2005, has attracted 75 investors, including New York-based Spencer Trask Ventures Inc. and California-based Omidyar Network, according to an SEC filing. In 2006, the company completed a $9 million Series A round of funding by Spencer Trask, Lilly Ventures and Omidyar Network.
After its initial use by pharmaceutical and life sciences companies, InnoCentive’s approach has been adopted by most other sectors, said Steve McGrath, CEO of Spencer Trask & Co.’s emerging technologies group.
“It’s a question of getting customers to embrace a different way of doing product development and research,” he said.
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