Backed by Washington Venture Firms, Connecticut’s InstallFree Could Help Remake the Fabric of Computing

8/14/08Follow @gthuang

Lately I’ve been hearing a lot about how software startups don’t need as much venture capital as they used to. But someone forgot to tell Stamford, CT-based InstallFree, which last week closed an $8.5 million financing round led by Ignition Partners and Trilogy Equity Partners, both of Bellevue, WA. It was a second-round deal to add to the $1.7 million raised by InstallFree in 2007. So I followed up with the East Coast startup and its Seattle-area investors to see what made the deal tick.

The size of a software venture deal depends, of course, on the type of software and the stage of the business. InstallFree’s product, which launched in April, is “virtualization” software for desktop computers. Virtualization has become a huge area in the past few years, with big players like VMware and Microsoft getting involved. So far, InstallFree’s software has been targeted at IT departments and corporate users, primarily in financial and government organizations. It already has several large customers, including a 60,000-user institution (it’s too early to reveal the name) in New York.

InstallFree’s basic idea is to eliminate the problems of compatibility and security involved when users install Windows programs or upgrades on their desktops—everything from Office or PowerPoint to sales spreadsheets and databases. If you think installing programs on your PC is a headache, multiply that by 60,000 for a large IT department—so there’s plenty of demand out there for a work-around. “In today’s world, if you can’t build it, you can go buy it,” says David Karofsky, InstallFree’s vice president of marketing.

And InstallFree is selling it. The company’s expertise originally comes from its founders, CEO Yori Gabay and CTO Netzer Shlomai, who were leaders at Gteko, a Windows software company bought by Microsoft in 2006. Their experience working with software applications in Windows led them to develop an efficient way of virtualizing desktop applications so they can be secure and portable across different operating systems—and without big changes to a customer’s hardware or software infrastructure. So InstallFree was born in early 2006 and spent its first year and a half getting its product ready.

Enter Ignition Partners, which has been tracking virtualization companies for the past two years. Richard Fade, a partner at Ignition and former senior VP at Microsoft, says virtualization “has the potential to fundamentally remake the fabric of computing and software.” Fade was introduced to InstallFree through his network of contacts and was “really impressed” with the company, which he says “addresses a lot of pain points from end users.” Of particular note, he says, is that its software comes “without the high cost and complexity of other approaches in the market.” (InstallFree says its virtualization software “bridge” costs about $100 per user.)

Together with fellow Ignition partners Cameron Myhrvold and John Connors, Fade worked to structure a deal. Trilogy Equity Partners was re-upping from its first-round investment, and the two VC firms have done a few deals together, so it was a good fit. As for the size of the latest investment, Fade says it’s nothing unusual, given the needs of the company and the stage it’s at. “They are building out a U.S. sales and marketing team and need to address large customers,” says Fade, who has joined the startup’s board of directors.

Karofsky of InstallFree echoes this sentiment (but how many entrepreneurs think they got too much money?). He adds that the funds will be used to continue to grow the company, which currently numbers about 20 people, including a development and engineering team in Israel. “Our pipeline is very, very healthy,” he says. “We’re building for the long term.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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