AO Capital closes $1.5-M pre-IPO round for Morph Labs

AO Capital Partners Ltd. (AO Capital) recently announced the close of a $1.5 million pre-IPO investment in Morph Labs, the leading enabler of Software as a Service (SaaS) that leverages virtual infrastructure and open source technologies based in Cebu City, Philippines. As lead investor, AO Capital has brought in CSK Venture Capital Co. Ltd., the venture capital arm of Japan-based CSK Group.

“Venture investing is about investing in people and partners. Together with Winston Damarillo and his world-class management team’s outstanding track record, most of whom are returnees from the previous companies he had founded and sold, we believe we have found in Morph Labs a company that is poised for market leadership in a rapidly growing market segment. We are absolutely excited about Morph Labs’ prospects,” said Martin Lichauco, managing director of AO Capital and former country manager of global venture capital firm, Walden International. Lichauco continued, “This investment also represents AO Capital’s commitment to technology entrepreneurship value creation in the Philippines.”

Morph Labs was founded by serial entrepreneur Winston Damarillo. Damarillo is best-known for founding Gluecode Software, a company purchased in 2005 by IBM, and integrated into its Websphere application server. Another company, LogicBlaze, was acquired by Iona last year. Damarillo is also the founder of Exist Global, a software services company named to the Red Herring 100 Asia in 2006. The successful software products offered by these companies were developed in the Philippines.

“As lead investor, AO Capital is pleased to report that the pre-IPO round is oversubscribed. While we were prepared to fund the entire round, we found in CSK-VC, a strategic co-investor that can provide vast industry knowledge and deep operating experience to Morph Labs. This is consistent with AO Capital’s investment philosophy which has always been a value-added investment approach. CSK Venture Capital has an excellent track record in transforming early stage companies into industry leaders,” Lichauco added.

Morph Labs recently launched the Morph AppSpace, an innovative on-demand Platform as a Service (PaaS) that provides developers with a complete solution for the deployment, delivery, and ongoing management of web applications in an enterprise-quality setting. Available at www.morphexchange.com, the Morph AppSpace frees developers and independent software vendors from expensive and time-consuming system administration and maintenance tasks.

According to a report by RBC Capital markets, the SaaS industry is in the midst of a five-year period of 43 percent average annual compound growth. It is expected to capture a 23 percent share of the $120 billion US software market by 2010. “Although it is quite early in the evolution of SaaS, we believe this business model is more stable and sustainable than the traditional enterprise software model, which makes it significantly more attractive for Investors,” said RBC Capital Markets equity analyst Brad Whitt.

“Impressive growth, predictable revenue streams, scalable sales models and strong margins and cash flows are reasons why investors should consider investing in the SaaS market opportunity,” Whitt said.

Lichauco said, “Morph Labs has created a unique solution to a market need in the rapidly expanding SaaS industry,” noting that SaaS is forecast to generate almost $28 billion in revenue by 2010.

According to Lichauco, who recently joined the board of directors of Morph Labs, the company’s planned initial public offering (IPO) on the Philippine Stock Exchange in the second quarter of 2008 will push through.