Despite already reaching profitability, human resources software maker Cornerstone OnDemand Inc. plans to grow aggressively with $32 million in new funding from venture investors.
The company's new Series D round is actually its first formal venture funding, featuring contributions from first-time investors Bessemer Venture Partners of Larchmont, N.Y., and Bay Partners of Menlo Park, Calif.
Cornerstone chief financial officer Perry Wallack said the closely held company had been largely bootstrapped, with outside money coming from hedge funds and private individuals.
Continued flow of venture money into specific areas of the human resources software sector prompted Cornerstone OnDemand to opt for a new equity deal that would spur aggressive growth, Wallack said. He said the company is one of a few that combine performance management capabilities with a component that manages online learning, as well as one of a handful that deliver its product via the software-as-a-service model.
Founded in 1999 as CyberU, the company has considered taking in venture money for about two years, Wallack said. By early 2007, it began having conversations with "dozens of firms" on both coasts, he said, with several formal offers coming in.
Cornerstone chose its syndicate to combine Bessemer's contact base with Bay Partners' specialized focus on the software-as-a-service sector. Wallack said the software maker expects to form alliances with resellers and information technology consulting agencies, with which Bessemer can make inroads.
Wallack would not discuss the company's valuation or the terms of the deal, and he would not provide revenue figures. He said Cornerstone has been profitable "for a couple of years," and that it expects to remain cash-flow-positive during the upcoming period of growth.
Much of the new money will be used for both domestic and international marketing, with considerable emphasis on alliances. Santa Monica, Calif.-based Cornerstone has established a presence in the U.K., Germany and France.
Cornerstone targets both large organizations and small to midsized businesses. Another on-demand software provider that has experienced rapid growth, SuccessFactors Inc. of San Mateo, Calif., competes among smaller customers and is backed by investors including Emergence Capital Partners and Greylock Partners of San Mateo and Granite Global Ventures of Menlo Park.
Two other companies, Learn.com Inc. of Sunrise, Fla., and Plateau Systems Ltd. of Fairfax, Va., are making the transition from a licensed software model to the on-demand model, according to Wallack.
Offerings provided by SAP AG of Walldorf, Germany, and Oracle Corp. of Redwood Shores, Calif., lack the capabilities of Cornerstone's specialized products, Wallack said, noting that eventually, either one could acquire a smaller company in the sector to stay competitive.
Wallack said another venture round is unlikely, but that the company hopes to raise additional capital through a public offering. He declined to speculate when that might occur, however.
Wilson Sonsini Goodrich & Rosati PC represented Cornerstone as the round was completed. The software maker did not retain financial advisers.