Andale, Honesty.com merge
July 17th, 2000
by Michael Marois
mmarois@thedailydeal.com

Privately-held auction management software maker Andale Inc., a one-year-old startup widely believed to be on a fast track toward an initial public offering, said it plans to merge with Honesty.com in a cash and stock transaction.

Andale CEO Munjal Shah declined to provide financial details but said an announcement was planned for today.

Andale has raised $62 million in venture money since its inception but now carries a valuation of several hundred million dollars, Shah said. He declined to give a specific valuation for either Andale or Honesty.

Honesty has raised only $1 million, but is a popular online auction destination.

Pronounced AHN-du-lay, the Silicon Valley company develops software for small businesses to manage inventory and customers, track sales and finances and automate the auction process for sellers using on line auctions sites such as San Jose, Calif-based eBay, Amazon.com of Seattle and Yahoo! Inc. of Santa Clara, Calif.

Honesty.com, with headquarters in Northbrook, Ill., lets sellers in online auctions display products and track the number of hit. It also operates a popular message board called Online Traders Web Alliance, or OTWA. The 1-year-old company pioneered the auction counters used on eBay, Amazon and Yahoo! and gets more than 5.2 million Web hits weekly, more than any other auction community and support site.

"What we've done is put the two companies together, [and] merged them to create a single platform," Shah said. "The combined company is going to be the number one auction services company, without a doubt."

Andale, Shah said, expected to reach profitability early next year and planned to go public around then. "As we combine these two entities... it is going to get us to profitability even faster than it would have before," Shah said. "I'd pull it up a quarter, maybe two quarters."

Andale officials said the merged company will be home to more than 600,000 online auction sellers. It said it will account for $1.7 billion in annual e-commerce transactions on auction giant eBay alone and will service one of every three ads appearing on eBay.

Andale already has 200,000 merchant members who conducted $100 million worth of transactions last year using its software. Andale's customers pay the company a 2.95% transaction fee on all successful sales.

The merged company will operate under the Andale name but will maintain both brand names. Together, they employ 130 people. San Francisco law firm Brobeck, Phleger & Harrison llp, advised Andale on the deal. Chicago law firm Shefsky & Froelich Ltd. advised Honesty. No investment advisers were hired.

Andale has received its financing from Bowman Capital Management of San Mateo, Calif.; Tarrant Venture Partners in Fort Worth, Texas; Accel Partners in Palo Alto, Calif.; Mohr Davidow Ventures in Menlo Park, Calif; and Oak Hill Venture Partners in New York.

"A good 75% of that is still sitting in the bank," Shah said. "We are in a great position ... to do this."