Deal Radar 2009: Colosa

Deal Radar returns to a hot topic, enterprise open source, via an area that it has not covered recently: business process management. South America-based Colosa develops software solutions that help companies automate approval-based workflow processes by interconnecting people and systems across the organization. The company offers a free open source application, ProcessMaker®, which is an AJAX-enabled, SOA, web-based application that allows users across single and multiple sites to create and share workflows, create custom forms, route processes, and improve management control. 
Colosa was founded by CEO Brian Reale, a literature and philosophy graduate from Duke University. His first company, an ISP in Bolivia called Unete, became a leading phone and satellite services company. Reale was approached by a childhood friend, Bobby Vernon, to create software for the reinsurance industry. Without any prior experience in reinsurance or software, Reale and set up the business in Bolivia, where he understood the culture and where the price for talent was very attractive. The company now named Colosa (previously SpinSit) was instrumental in creating a National Digital Identity Number for Bolivia. 

To date, Colosa has been financed by friends and family; in addition, Mexbrit LLC made an investment in 2004. Between Reale, co-founder Vernon and Mexbrit, Colosa now has about $500,000 invested. The company is on the lookout for a $500,000 to $1 million angel investor who understands open source, consulting, or workflow/BPM and can bring some contacts to the table. 

Founded in 2000, the company really entered the workflow space in 2004. At that time, SaaS was gaining prominence and Web 2.0 was growing out of its infancy. Unlike other workflow/BPM vendors with client-server architectures which were difficult to change, Colosa made its BPM software web-based and offered it as a hosted solution. By late 2005, it had what it says was probably the world’s first BPM SaaS offering, which was the foundation upon which ProcessMaker was built. Colosa aims to differentiate itself by offering a simple, comprehensive, totally integrated, web-based product that the mid-market can install easily to solve workflow problems quickly. The largest vendors in this field are SAP and IBM, with Tibco, Lombardi, and Savvion sharing this space. 

The company estimates a $2 billion total available market which is extremely fragmented, with no single vendor having more than a few percentage points. ProcessMaker, a horizontal application, is focused on the small and mid-size market in an attempt to help these businesses automate their custom core processes. The company believes adding a workflow component to existing applications is important in penetrating the marketplace and thus creates mash-ups with the leading open source DMS (KnowledgeTree), leading CRM (SugarCRM), leading ERP (Openbravo), and a leading messaging and collaboration solution (Zimbra). It plans to continue to roll out mashups with open source applications that could benefit from this strategy.

In a year’s time, ProcessMaker grew from about 1,000 to over 20,000 web visitors a month, and on Sourceforge it is regularly ranked in the top 200 out of over 100,000 projects. The ProcessMaker software averages about 350 downloads per day. It has about 1,000 active community members participating in its open source community. ProcessMaker now has around 50 commercial clients around the world in industries like local and central governments, telecom, oil & gas and insurance, including Honeywell, the National Congress of Peru and Banco Economico in Bolivia. The application has been translated into Spanish, French, German, Portuguese, Finnish, Polish, Danish, and Persian and will soon be available in Hebrew and Italian. All of this work is done by its community of users and supporters. Colosa has a limited US presence; most of the development team in is South America. It is currently looking to bring on higher management in the US and expand from its current 30 employees. Colosa has offices in Brooklyn, New York, La Paz, Bolivia and Lima, Peru.

With no outside investment, Colosa has had to be profitable. Cash flow positive, it is expected to grow by over 200% in 2009 and is in the $1-$2 million revenue range. As workflow and open source are counter-cyclical, Colosa became overwhelmed with calls and leads when the economy took a nosedive. Although ProcessMaker is a free application, enterprise clients can purchase the Enterprise Support Plan, which includes SLAs (service level agreements), IP indemnification, upgrade support and more. The company says that because it is growing organically, it is only able to reach a small part of its potential market and is unable to scale fast enough to address the growing demand for products.

Colosa will continue integrating with other leading open source players, enabling it to attract contributors and users from existing communities. The company has identified total communities of over 20,000 users that it will begin trying to attract. It says that ProcessMaker is able to attract non-technical users to the community even if they cannot understand code, making the total universe of active member and contributors much larger than those of some traditional open source software companies. 

Colosa sees several possible exit scenarios, ranging from interest from other open source players or other BPM companies because of its technology or leads. It also feels that with additional capital and its solid foundation, it is an attractive target for investors and management companies.

Related Readings:

Forbes Column 2009: Consolidation Looms for SaaS
Deal Radar 2009: Extentech
Enterprise 3.0 = (SaaS + EE)

This segment is a part in the series : Deal Radar 2009