Springs-based XAware gets $7.4 million

Colorado Springs-based software developer XAware Inc. landed $7.4 million in venture capital last week in the biggest such investment locally since 2006.

XAware plans to use the money to finance its switch to an open-source business model in which the company will make its software available at no cost and generate revenue by offering service and support to users, said Tim Harvey, XAware’s chief executive.

The investment by vSpring Capital, Sequel Venture Partners, ITU Ventures Inc., BMJP LLC and GMT Capital Corp. is the most money secured by a Colorado Springs company since Accellos Inc. scored $20 million in October 2006. XAware last raised $3.35 million in 2006.

“Integration has been, is today and will continue to be one of the biggest problems in information technology,” said Ed Ekstrom, vSpring’s managing partner. “We believe open source and data integration represent a tremendous opportunity, and XAware is well positioned to become the market leader.”

Atlanta-based hedge fund GMT is a new investor in XAware; the other four investors have previously combined to pump nearly $18 million into the company since 2002. Venture investors own a majority of XAware; the rest is held by management and employees.

“The open-source model gives us a way to reach thousands of customers we couldn’t have afforded to reach any other way,” Harvey said. “We want to get as many people as possible using the software so they can come back and buy service and support from us.”

XAware moved in November to the open-source model for its data integration software, a strategy the company had been developing since early 2007. As a result, about half of its 25 local employees went to work for customers or became independent developers, Harvey said.

The latest investment should be the last the company needs until it becomes profitable and can support itself, Harvey said. While he declined to speculate how long that would take, he said the investment “certainly gives us several years worth of runway.”

More than 60,000 users have downloaded a free version of XAware’s software at www.xaware.org during the past two months, which Harvey said is a promising start for the new strategy, which also has been used by Red Hat Inc. for the Linux computer operating system.

“More and more of this kind of middle-ware is bought and not sold; companies want to try it before they buy it,” Harvey said.

The additional funding will be used to promote the free version of XAware’s software and add features and functions to it, he said.

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ABOUT XAWARE

More than 60,000 users have downloaded a free version of XAware’s software during the past two months.