Kintera, Inc. - Company Profile, Information, Business Description, History, Background Information on Kintera, Inc.

9605 Scranton Road, Suite 240
San Diego, California 92121

Company Perspectives:

Kintera is dedicated to helping nonprofit organizations fulfill their mission by providing Knowledge Interaction technology to build vibra nt communities of supporters, beneficiaries and staff. By sharing a s et of dynamic data and content, organizations can motivate and engage community members to achieve marketing, programming and fundraising success. With leading edge technology and innovative leadership, Kint era is committed to making a difference in the nonprofit sector.

History of Kintera, Inc.

Kintera, Inc. provides software and services to help nonprofit organi zations raise money online and manage their fundraising activities. K intera generates revenue by taking a percentage of each donation and by charging monthly maintenance fees for operating web sites. The pri ncipal products offered by the company are the "Friends Asking Friend s" fundraising program and "Kintera Sphere," a web-based service prov iding nonprofit organizations with the tools to put together a comple te marketing infrastructure. Kintera serves more than 15,000 accounts in the nonprofit, government, and corporate sectors.


Much of the financial support, faith in, and future hopes of Kintera rested on the reputation of its cofounder and principal executive, Ha rry E. Gruber. For many of those who studied Kintera, analyzing its m oves and progress, the individual behind the company was more importa nt than what the company did--Gruber's accomplishments, his track rec ord, overshadowed Kintera's business model. Gruber completed his medi cal training in internal medicine, rheumatology, and biochemical gene tics at the University of California, San Diego (UCSD). After earning his medical degree, he joined the faculty at UCSD's School of Medici ne, serving as a geneticist, rheumatologist, and a researcher until 1 986, when he left to start a second career as an entrepreneur. The ch ange in direction eventually netted Gruber an immense personal fortun e measured in the hundreds of million of dollars and earned him a rep utation on Wall Street as a shrewd and skillful businessman.

When Gruber left UCSD, he started Gensia Pharmaceuticals, Inc., a bio technology firm that became the first of five companies he founded be fore starting Kintera. Gensia, later renamed SICOR, Inc. and sold to Teva Pharmaceutical Industries LTD. for $3.4 billion in 2003, est ablished Gruber as an entrepreneur of note, fueling his confidence to try other ventures. Over the course of the ensuing decade, he develo ped the technology for three publicly traded companies focused on hum an genetics. Gruber founded Aramed, Inc., a central nervous system dr ug discovery company; Metabasis, Inc., a company developing drugs to treat diabetes and liver disease; and Viagene, Inc., a gene therapy c ompany. After selling Viagene to Chiron Corp. for $150 million, G ruber readied himself for another start-up venture of the same ilk. " I thought I'd take some time off and then do another genetics project ," he reflected in a May 15, 2003 interview with Investor's Busine ss Daily. Gruber's plans soon changed, however. After a conversat ion with a friend, he decided to leave the healthcare field and start a company based on the then nascent technology of the Internet.

In 1995, Gruber started INTERVU Inc. after a friend suggested forming a business that offered online videos to help real estate agents. "T he idea," Gruber said in his interview with Investor's Business Da ily, "was to put together little video vignettes so brokers could look at the clips without having to visit the properties." At the ti me, the Internet had yet to become the bustling hub of information an d commerce its proponents promised it would become, but advances in t echnology would soon turn their vision into reality. Advances in tech nology, aside from moving the Internet into the mainstream, propelled INTERVU in a new direction shortly after its formation. The advent o f streaming technology, which enabled users to watch video as it was being downloaded, prompted Gruber to address a new, larger customer b ase. INTERVU began offering its service to enable companies to provid e audio and video broadcasts of their quarterly financial conference call meetings with analysts and investors. Gruber struck gold with th e idea, quickly gaining numerous corporate clients. Television compan ies NBC and CNN used INTERVU's services to provide video of breaking news stories online. In the midst of the company's widely heralded su ccess and the phenomenal growth of the Internet as a virtual destinat ion, Microsoft Corp. invested $30 million in INTERVU to promote t he use of its media player software. "We got a lot of adoption from t hat relationship," a Microsoft executive said in a May 15, 2003 inter view with Investor's Business Daily. "It's one of the reasons we're the No. 1 media player." Gruber took INTERVU public in 1997 and , at the height of the Internet fervor, sold the company in February 2000 to Akamai Technologies, Inc. in a $3.5 billion deal, a trans action that netted Gruber $245 million worth of stock.

In his late 40s at the time he sold INTERVU, Gruber possessed more th an enough wealth to last a lifetime, but he was ready to strike out a gain on his own. "The bubble Internet was about creating communities, getting people to show up," he said in a May 15, 2003 interview with Investor's Business Daily. "The post-bubble Internet is about transactional communities, getting people to spend money on the Inte rnet." Although his interpretation of the two periods segued to an ag e decidedly more capitalistic in nature, Gruber adopted a somewhat ph ilanthropic stance with his next company. He decided to start a compa ny that would help charities raise money online, an idea that sprang from his work with Senator John McCain. Gruber, who served as chairma n of the development committee responsible for fundraising at UCSD be tween 1994 and 1999, was organizing online town hall meetings through INTERVU for McCain's 2000 presidential campaign when he realized the potential for online fundraising. "At the time," he explained in a S eptember 28, 2004 interview with the Daily Deal, "we were also delivering live music from the House of Blues, but I couldn't get pe ople to spend $10 to hear concerts. But we got people to pay &#36 ;100 to spend an hour in a town hall meeting with John McCain." Grube r, intent on running a company that sold software and related service s to help nonprofits build web sites and collect donations, enlisted the help of his brother Allen Gruber, a physician and early investor in INTERVU, and Dennis Berman, with whom he had attended the Universi ty of Pennsylvania during the early 1970s, and started his sixth comp any. The company was incorporated in February 2000 as VirtualDonors.c om, Inc. and changed its name to Kintera, which stood for "Knowledge Interaction," in July 2000.

As Gruber and his two partners set out, the goal was to develop compr ehensive capabilities for Kintera. U.S. nonprofit organizations colle cted more than $200 billion annually, obtaining a fraction of tha t total--slightly more than $1 billion--online. Gruber was convin ced online donations would increase exponentially in the years ahead, and he intended to make Kintera the premier provider of interactive software and services across all sectors of the industry. The company eventually targeted 14 markets that covered the spectrum of nonprofi t, government, and corporate sectors: arts and culture; associations; foundations; corporate workplace giving; education, environmental an d animal causes; faith-based groups; federations; financial services; governments; health and hospitals; human and social services; intern ational affairs; and advocacy and politics. To meet the needs of clie nts in each of these sectors, Gruber needed to broaden Kintera's port folio of services, an objective he pursued by employing an aggressive acquisition strategy. "We're trying to build a substantial company i n a short period of time," Gruber explained during a December 6, 2004 interview with the San Diego Business Journal. "We're buildin g a brain trust and acquiring the best and brightest management teams in the industry."

Acquisitions Fueling Growth During Kintera's First Years

Kintera's growth during its formative years was fueled by acquisition s. The company followed a particular strategy, surveying the industry landscape, which was populated with scores of firms, and identifying its acquisition targets. "The number one reason is the quality of th e management team," Gruber said in his interview with the San Dieg o Business Journal, "and number two is [management's] knowledge o f a particular sector. The technology itself is less important becaus e we rebuild it anyway to fit our platform." Gruber agreed to acquire one of his first companies in November 2000, when he purchased Give Power, Inc., a two-person firm based in San Diego that offered online services for athletic fundraising activities. After a lull in acquis itive activity, Kintera began purchasing competing firms with regular ity, tailoring each acquisition to fit its platform. Two flagship pro ducts, which constituted the company's platform, emerged, "Kintera Sp here" and "Friends Asking Friends." Kintera Sphere, a web-based servi ce, gave clients the ability to manage their web sites, organize indi viduals, advocate causes, and implement marketing campaigns. Friends Asking Friends, which the October 13, 2003 issue of Forbes des cribed as "a kind of do-gooder pyramid scheme," served as a way for v olunteers to solicit donations from their friends.

Kintera's acquisition campaign began in earnest in 2002. During the e nsuing two years, the company acquired more than a dozen companies, s ignificantly broadening its capabilities. Most of the acquired proper ties were rival software designers with expertise in particular secto rs, but one acquisition stood out from the rest. In February 2002, Ki ntera acquired Masterplanner Media, Inc., a company founded and owned by Elisabeth Familian. In 1986, Familian published the Los Angeles M asterplanner, a publication that offered a comprehensive calendar of social and civic events in Los Angeles, thereby enabling fundraisers and party planners to avoid conflicts with events targeting the same crowd. Familian added a version for New York City in 1997. In Novembe r 2002, eight months after acquiring Masterplanner Media, Gruber publ ished a 28-page, glossy magazine for San Diego, charging a $225 p er year subscription rate. A version for Washington, D.C., was slated for release in 2003, part of Gruber's plan to add two to four market s a year until Masterplanner Media's coverage encompassed ten major m arkets.

Public Offering of Stock in 2003

Thanks largely to acquisitions, Kintera's revenue increased substanti ally during the first years of the decade, but profits eluded the com pany. After losing $12.4 million in 2001, the company lost $9 .4 million in 2002, a year in which revenues totaled $1.9 million . As the company's acquisition rate picked up pace, its revenue swell ed. By August 2003, Kintera was managing monthly donations totaling m ore than $5.6 million, significantly more than the $65,000 it was managing two years earlier. At this point, Gruber chose to take the company public, filing for an initial public offering (IPO) of st ock in October 2003 to reduce nearly $30 million of debt. The IPO was completed in December 2003, raising roughly $35 million, but the year ended with another substantial loss. Kintera generated &#36 ;7.5 million in revenue and posted a $9.8 million loss. In 2004, a flurry of acquisitions coupled with online donations spurred by the U.S. presidential election, helped revenues nearly triple to $23 .7 million, but the year ended with another substantial loss, putting Kintera $19.2 million further in debt.

As Kintera plotted its future course, its inability to post a profit worried some analysts. Gruber remained confident, however, offering a dvice to those who claimed Kintera was destined to be a perennial mon ey-loser. "I don't think it's a wise bet considering the last two com panies I owned were each sold for $3 billion," he said in a Septe mber 28, 2004 interview with the Daily Deal. "Those who bet on the jockey own my stock," he added. The company was expected to reco rd another major increase in revenue in 2005. Further acquisitions co mbined with the outpouring of donations for the damage caused by the December 26, 2004 tsunami in Southeast Asia and Hurricane Katrina in August 2005 promised to fuel dramatic revenue growth for the year. In creased revenue offered no guarantee of profitability, however. To he lp make Kintera a profitable company, Gruber turned his attention to streamlining operations and trimming the company's workforce by 10 pe rcent in August 2005. As it had since the company's formation, succes s for Kintera rested on the skill and reputation of Gruber. He offere d no guarantee that he would end his career at Kintera, only mildly d ismissing speculation that he was planning to leave. "I've never star ted a company to be acquired," he stated in his interview with the Daily Deal. "They're more like children--you don't want them to leave, but they grow up."

Principal Competitors: Blackbaud, Inc.; Convio, Inc.; gomember s inc.


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