Start-up Metreo gets $15 million in VC funding

Big-name venture capital firms have awarded $15 million in venture capital to Palo Alto's Metreo, a software start-up that claims it can help companies become profitable.

Talk about good timing. The prolonged economic downturn has hurt the bottom line at many companies. A good number are struggling to reassess which projects to continue, and which to drop.

Metreo's chief executive officer, 38-year-old Daphne Carmeli, who hails from earlier jobs at valley companies Netscape, Healtheon and Silicon Graphics, says her company's software is embedded with a complex mathematical algorithm that helps companies make such decisions and to maximize profits at the same time.

Over the last year, Carmeli has managed to negotiate million-dollar contracts with several large corporations. She has also convinced venture capitalists.

Sand Hill Road's Redpoint Ventures led the financing round. Stanford University, and existing investors, including Prospect Venture Partners, Sequoia Capital and Mentor Capital Group, also invested.

In another good sign, the company's valuation was kept the same as its value during the last funding round -- made during the bubbly days of 2000. The firm was started in February 2000.

One Metreo customer is Eaton, a Cleveland manufacturer that serves the vehicle, construction, aerospace and semiconductor markets, which does $8 billion a year in sales.

Metreo says it will announce three more large customers in the coming weeks.

In a typical year, Eaton receives 250,000 requests from customers a year, for products that can each include 300 different line items -- for such things as electronic components and systems. Before, Eaton's pricing managers would manually assess the requests, and take five to 10 days to respond. Now, Metreo's software scans the list in real time, Carmeli says, and matches the request with manufacturing costs, capacity at Eaton's factories, product availability and strategic considerations, such as the importance of the customer and competitive environment.

The company's secret sauce derives from the work of Metreo's chief technology officer, Nachum Shacham. Shacham developed his ideas in a very different field, data networking. There, he worked on ways to optimize how routers used available broadband. He spent 20 years working at the Stanford Research Institute and at University of California-Berkeley.

``All of this boils down to math,'' said Jeffrey Brody, managing director of Redpoint Ventures. Brody said he was pleased that large companies were spending ``real money'' on Metreo's product.

In recent years, he said, corporations have bought software that automated information about their customers and suppliers. But until Metreo's product came along, there was no bridge between those two, he said.