Radnor's Cross Atlantic Capital Partners invests in RootStock Software, is raising new fund

Radnor-based VC firm Cross Atlantic Capital Partners, which I profiled last year, announced earlier this month it had invested in RootStock Software, a San Ramon, CA-based developer of SaaS (Software as a service) manufacturing software for the mid-market. The amount of the investment was not disclosed.

Founded in 2008, RootStock's principal go to market strategy to this point has been through a partnership with SaaS Cloud ERP vendor NetSuite. Cross Atlantic was also an investor in NetSuite prior to its going public, although that relationship is not how its investment in RootStock came about, according to Cross Atlantic (XACP for short) Chairman, CEO and founder Donald Caldwell. Rootstock currently has 12 employees and 24 customers, according to Pat Garrehy, its founder & CEO. NetSuite has been actively marketing it as a "white label" solution under the Netsuite umbrella for about six months.

While its relationship with NetSuite has limited the amount of resources RootStock has had to invest so far on client-side activities, Garrehy says the company is definitely looking to expand to other SaaS platforms, including those of Salesforce and possibly Workday. Caldwell says Cross Atlantic probably would not have invested in RootStock if it wasn't for the additional opportunities these other platforms offer.

Rootstock provides applications such as manufacturing requirements planning (MRP) and other functions related to production management for discrete manufacturers. Its principle (more) established competitor in the SaaS manufacturing space is Plex. Other more traditional competitors coming from the on-premise side are trying to make the transition to SaaS, with varying degrees of success. Of course, SAP AG, with its Business ByDesign platform, would like to become a major factor there. But everything I'm hearing about SaaS indicates that the pace of adoption is quickening, even in mission critical applications, despite the skepticism of some (see Is SaaS the key to cloud revenues? ).

Rootstock's value is in its very specific manufacturing expertise (Garrehy previously founded ERP software firm Relevant Business Systems, which was later acquired by Consona). Although Rootstock has been marketed through Netsuite, it built its own proprietary SaaS technology, one that "pushes a lot of data in-memory", Garrehy says. Although many applications probably don't do as much work in-memory as is sometimes implied, he says, in-memory techniques
have helped Rootstalk significantly reduce processing times for many tasks.

Although an article in Forbes early this year had listed Cross Atlantic among "Zombie Venture Capital Firms" because it had not announced a fund raise since 2005, Caldwell is at work on the early stages of raising a new fund. Pension & Investments reported (registration required) this month and Caldwell confirmed that a previous partner, the Pennsylvania State Employees’ Retirement System (PennSERS) has committed up to $20 million to Cross Atlantic Technology Fund III.

Two Philly-area portfolio companies worth watching are Voxware of Hamilton, NJ and InsPro Technologies of Eddystone, PA. Voxware, which provides a voice-picking application for warehouses, had gone public and perhaps expanded too quickly before its market was ready, so Cross Atlantic took it private again late last year, scaled it back and invested an additional $2 million. It remains a promising venture. InsPro Technologies grew out of an insurance agency for health, life, and annuities insurance; the company developed a SaaS platform to manage the sales/service process and eventually jettisoned the agency to focus on marketing the technology.

As for the "bubble" question, Caldwell thinks there may be signs of that in the social media and green tech sectors, but Cross Atlantic focuses mostly on the enterprise sector which has been relatively immune to this point.


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