Convio (CNVO) went public yesterday! The IPO did quite well considering the circumstances.

When assessing the two tech IPOs of the day, the second being a hardware manufacturer, an industry analyst said:

“You can keep selling the same (software) code over and over again. On the hardware side, that stuff is obsolete. By the time it is released, there is already something better in development,” said Morningnotes.com founder Ben Holmes.

Convio was hoping to raise $56.5 million with this IPO.  The good news for me is that I can now more easily follow Convio in the same way I follow Blackbaud. Unfortunately, the market is down today so it looks like Convio’s stock price will stay at the $10 range today. It did go up as 10.885 on it’s opening day. I hope Convio’s stock price rises as we certainly need more competition for the Blackbaud juggernaut.

Convio crows about the quick adoption of Common Ground today:

AUSTIN, TEXAS (January 15, 2009) — 

Convio, Inc. today announced the signing of more than 30 new clients for Common Ground™  since it became generally available in late September of 2008. Common Ground is the company’s innovative, web-based constituent relationship management (CRM) system for tracking all interactions with donors and other supporters. Built and delivered natively on salesforce.com’s Force.com Platform, the product leverages cloud computing to deliver database solutions designed for the needs of nonprofits. Common Ground easily integrates with other open systems including Convio’s online fundraising and marketing applications. The new clients include Youth Villages, Hill Country Ride for AIDS, Colorado Environmental Coalition, Homeless Prenatal Program, RESOLVE, Parent Project for Muscular Dystrophy and the Minnesota Red Ribbon Ride among others. 

Also, I asked Tad Druart, if I could say one thing in response to this release. Here it is:

“I TOLD YOU SO” 

Myself and others have been discussing the need in the nonprofit sector for precisely the kind of software Convio Common Ground is. We wanted state of the art open APIs yet we also wanted the business logic of a nonprofit CRM since most for-profit CRMs had the wrong language and inappropriate business models for a nonprofit. We’re getting there with Convio despite their early reluctance to believe in my and others’ understanding of the nonprofit sector. I can forgive the lack of an open source model right now but that’s the only major chink in their armor that I can see. (MPower Open — I hope you’re listening!)

While Convio was a little late to the SaaS/open API party, Convio has got a good shot at even more adoption this year as long as they can provide a clear path for people to adopt it given their current circumstances. In these tight economic times, it behooves people to really start looking at the Blackbaud fee structure and the requisite hardware and support necessary to keep Blackbaud software alive and running well. I would suggest that they might want a more flexible system like Common Ground which has very low internal IT maintenance costs.

Also, I would recommend all the other vendors to seriously consider the unique business relationship between Convio and an existing SaaS provider, Salesforce.com. It’s a seriously quick way to get into the game without incurring a high start-up cost. SaaS provisioning is no joke and requires pretty serious enterprise level IT work before you can even make a dime. Why bother creating  your own unique SaaS service? Why not just use someone else’s? This is what Convio did and it’s working out quite well for them. At the same time, the tie-in with Salesforce.com just makes them that much more believable. There are other SaaS companies out there and perhaps Donorperfect, GiftWorks and MPower Open could also create a tie-in with another Saas vendor.

Steve MacLaughlin wrote me today about giving trends for users of Blackbaud’s Internet solutions. It’s the kind of data I’d love to see released more often so that we could better understand how online fundraising was being affected by macroeconomic trends. Here’s an interesting finding:

Organizations had steady growth in their online giving through the first and second quarters of 2008. There was a slight decrease in online giving during the third quarter of the year, specifically the month of August. The final months of the year saw online giving rebound leading up to the typical end-of-year giving spikes. December and June were the two largest months for online giving.

My only wish is that more vendors were more transparent about the data they were collecting for their donors. It’s not impossible for Convio, Blackbaud, Salesforce Foundation, JustGiving, Network for Good and FirstGiving to produce charts that showed fluctuations in giving in real-time. This would serve as a great way for nonprofit development directors to measure their organization’s progress against a nominal index (short of Giving USA’s yearly figures). It would be trivial to create a Giving Index out of the information that Steve mentions in his post. Come on Steve and Blackbaud, give me a chart and I promise I’ll shut up about it. As usual, you can file this under nonprofit transparency

It looks like Convio’s CEO, Gene Austin, had a talk with Fortune Magazine’s Jon Fortt. The most telling quote is here:

It’s not like Convio it trying to be the next Google (GOOG). The company has 335 employees, most of them in Austin, with satellite offices in Berkeley and Washington, D.C. Revenues for 2007 were a respectable $43.1 million, though there are no profits yet. In its most recent quarterly earnings report, the company posted revenue of $14.7 million, $1.3 million in operating cash flow, and a GAAP net loss of a little under $1 million. So the company seems to be on basically stable footing, though it certainly doesn’t have a lot of room for error.

Look to see that paragraph referenced a lot if Convio is pitching its products to you… As for the prospects of Convio returning to raise more capital via an IPO…

Austin says Convio will give an IPO another go when financial markets are more stable (”not up 200, down 200?), the U.S. economy has settled down, and software-as-a-service companies are getting healthy valuations. Of course, that might not take too long – but it will almost certainly be more than a year.

Personally, I would love for more nonprofit CRM vendors to go public. It makes it easier for me to cover them because of the added transparency.

According to the Austin American-Statesman, Convio bowed to the inevitable and withdrew its S-1 filing today:

Convio Inc. said it will withdraw its planned initial public offering Tuesday, nearly a year after it filed to raise about $86 million in an IPO.

“It’s still part of our future down the road, but right now, the markets really are in pretty bad shape,” said Gene Austin, chief executive of Austin-based Convio, which sells software and customer-management tools to nonprofit organizations.

Not really Convio’s fault, really, all hell has broken loose in the markets and a Convio IPO is merely collateral damage.

On the other hand:

Today, Convio reported revenue of $14.7 million in the second quarter, a 35 percent increase from the year-earlier quarter. The company lost $893,000, compared with a loss of $2.1 million in the second quarter of 2007.

If Convio can get on the positive side of the balance sheet, especially if Common Ground takes off, who knows? As for IPOs, ii’s been the worst time for tech IPOs since the early 1970s with ZERO tech IPOs being offered last quarter. That’s about as bad as it gets. Apparently, it’s a combination of cheaper startup costs allowing startups to not have to raise VC and the horrific economy that is leading to very few IPOs.

I would again suggest that Convio’s move to Salesforce.com is a great move in terms of driving down provisioning and set-up costs per seat. I just hope that they have the audacity to really embrace SaaS for the rest of Convio’s software line.

This also means that Convio is finally coming out of its quiet period. I’m still curious as to what they have to say about that lawsuit that emerged in April for that charged that they had allegedly violated a credit card reporting act.

Ricketts [VP of information technology for Susan G. Komen for the Cure] added that one of Komen’s main goals is to increase revenue associated with Race for the Cure — its most significant fundraising event — by 15%-20%. The organization also aims to decrease technology costs by 30%-40% by moving to the shared platform.

That’s basically the promise of SaaS for the non-profit sector, the cost decrease comes about by the use of shared code and less server infrastructure. It’s a lesson that I hope other vendors, like Blackbaud, will adopt with their own infrastructure. Note to vendors of proprietary software: even IF you don’t want to open up your code, for God’s sakes, don’t waste your money and your customer’s money maintaining proprietary data centers. Seriously. Go over to EC2, fin d a decent provider and start converting your code to run on those boxes. And yes, Blackbaud, you can move to a .NET infrastructure there too.

Convio seems to already have taken this advice with Aikido. By moving hosting costs over to the SaaS provider and just writing code, it allows them to be a lot more nimble in dealing with the Blackbaud beast. All things considered, I would like to see more resources going into business analysis and software development then in maintaining uptime for boxes. Time will tell if this newfound agility will allow them to gain market share in the same enterprise space that Blackbaud has dominated in the last few years but starting out with Susan G. Komen for the Cure isn’t bad.

Again, Aikido hasn’t been reviewed thoroughly by me or anyone else so we’ll just have to wait and see until later in the year how good (or bad) the software is. The question for me though is whether or not Susan G. Komen was an earlier customer of Convio. It looks as if affiliates of SGK were earlier customers of Convio, I’m not sure Convio had all 120+ affiliates as their customers previously.

Let’s go through some recent developments that have occurred over at Kintera, Convio and MPower. It’s been a cascade of announcements all about the new platform strategies of what is rapidly developing into the Blackbaud and Convio camps.

Despite the self-imposed quiet period due to the acquisition of Kintera by Blackbaud, Kintera issued a press release on June 6th touting the ability to add custom entities (database tables) to Kintera and have them automatically exposed through the Kintera API. Yes, you can now develop unique third party apps in Kintera that have nothing to do with fundraising (even though everything has to do with fundraising).

A week later, on June 13th, MPower sends out their press release touting the appearance of MPower on Sourceforge under both a GPL v3 license or a license that allows you to develop code without sharing with the rest of your community (I call this the Ebenezer Scrooge license). That’s right you can download MPower off of Sourceforge the same way you can download many popular open source products.

And then yesterday, on the 17th, Convio issued their own press release, heck their own mini-website about a new CRM they’ve developed for nonprofits using Salesforce.com as the underlying platform.

It’s an impressive series of wins for those of you who signed the Integration Proclamation so many moons ago. Each of these developments are unqualfied wins for openness but as always, not all these wins are equal. In fact, they can be described as an open API, an open platform and open source.

The Open API: Kintera’s custom entities is mighty impressive but it does keep you locked to the Kintera platform. On the other hand, the automatic exposure of new tables through the existing Kintera API means that once you build a custom table in Kintera, other applications can see it through web services. This is a Good Thing. And it has some unusual implications as well… If this new feature set in the Kintera API survives the Blackbaud acquisition, we potentially have a new way to interact with Blackbaud data once Kintera is fully merged into the Blackbaud product set. It’s unknown if this feature will survive but let’s hope that this tiny window into Blackbaud isn’t automatically shut by the powers that be.

The Open Platform: Convio’s new offering on Force.com is another evolutionary step for the nonprofit world. Remember that Force.com is an open platform with great APIs but is NOT open source. Frankly, this level of openness is more than enough for many non-profits. It remains to be seen what exactly the pricing model is for this new product codenamed Aikido. As you know, I’m a big proponent of salesforce.com and its use for nonprofits but I’ve been a little disillusioned by the lack of fundraising logic in salesforce.com itself. If what Convio is offering this Fall erases those problems, I can see salesforce.com really penetrate the nonprofit sector even faster than it already has. This announcement seems to be directed at generating FUD (fear, uncertainty and doubt) with existing Kintera customers trying to decide whether or not to stay with Kintera or to move over to Convio. No pricing information or even a release date has been offered which I interpret as a FUD move on Convio’s part. Nevertheless, this is a welcome development for those of us simply looking for a SaaS platform that has better fundraising logic.

The Open Source: MPower Open is on Sourceforge. Repeat after me — MPower Open is on Sourceforge. And they have it under a GPL v3 license. You can’t ask for more. OK, you’re right, you CAN ask for me. MPower Open is written in .Net which isn’t exactly my cup of tea but for those nonprofits that are heavily standardized on Microsoft products (and most are) this isn’t really a barrier to entry. Hiring good .Net programmers is the barrier. On the other hand, if you’re not looking to modify MPower right now but might in the future, it’s still a viable option. Keep in mind that I haven’t done a thorough review of MPower so I’m just waiting until the hosted version is available for me to look at it. What’s great about MPower being on Sourceforge is that there are statistics available for the project. They’ve already had 86 downloads since they released five days ago. Next up: getting more community members willing to add code to the project.

A reader wrote this to me the other day:

Cannot understand the big deal about MPower. Right now ASI’s iMIS software has fundraising, segmentation, RFM analytics, a data warehouse, and email marketing that is far greater in scope than Convio….They have been doing this a while now so yeah, M Power is a developer’s dream and maybe nice for the resume, but why re-invent the wheel when sophisticated software already is in use?

Indeed, why re-invent the wheel? I think the reader is missing a couple of issues that are a result of looking at fundraising software within the silo of a fundraising department.

Firstly, there should be no more silos. You see, dear readers, there’s a problem when one assumes that fundraising logic only exists between the screen and keyboard of a data entry person caging checks or when someone is looking at a LYBUNT list for their next mail merge. What about your web site? Wouldn’t it be nice to have some fundraising logic there? Or if you want to integrate fundraising logic with your accounting data?

Secondly, you want leverage on your vendor. Openness not only gives you choices. It is about setting up a competitive marketplace where an existing contract coupled with proprietary software does not determine whether or not you stay with a vendor like Blackbaud or Convio. In other words, legalistic and technological strategies have been designed to keep us paying our vendors. That’s THEIR side of the game. We should try to break those bonds whenever possible.

We don’t accept vendor lock-in in many aspects of our daily life and we shouldn’t accept it at the very heart of nonprofit line of business applications, fundraising tools. It’s a fundamental obligation on the part of IT directors to constantly push for openness of architecture in both hardware and software purchases. This doesn’t necessarily mean you stop buying Microsoft. Instead, you help foster a marketplace where Microsoft feels COMPELLED to compete with open source vendors to provide you with the best bang for your buck. Notice the quick number of revisions to Internet Explorer the minute Firefox hit 15% of browser market share. And in the same way, this doesn’t mean you move from iMIS or Blackbaud or Convio tomorrow. Hey, over 70% of computers still use IE to browse the Web. However, it’s clear that the changing marketplace and concerted action by nonprofits have engendered a new environment where there is now more choice than ever before. And our choices shouldn’t be dictated to us by vendors who say that their application can’t do what we want it to do.

Those of you looking for more information regarding the purchase of Kintera by Blackbaud may want to check out the recent EDGAR filing by Blackbaud. It contains FAQs that were sent out to Blackbaud and Kintera employees. Many of these questions are pertinent to nonprofits such as:

A customer is raising issues that are specific to them that are not covered by the generic messaging. Who do I contact for more information?

Should any of your customers raise Kintera-Blackbaud issues that are specific to them, contact a member of the Integration Leadership Team so they can be involved. You should contact the person from your company below based on the product the customer has questions about:

• Sphere – Shaw Drummond (Blackbaud); Rich LaBarbera (Kintera)
• P!N – Chris South (Blackbaud); Ian Gruber (Kintera)
• Fundware – Scott Butler (Blackbaud); Scott Bechler (Kintera)
• Other issues – Bob Hughes (Blackbaud); Rich LaBarbera (Kintera)

UPDATE (6/2/2008): Thanks to EDGAR, we now have access to e-mails sent from Blackbaud and Kintera management to their employees. Check it out!

There’s also a webcast available that was hosted by Marc Chardon and Timothy Williams. The questions were inevitably financially-related but I’ve distilled some of the more technically relevant pieces for those of you looking for more information.

The webcast starts out with a prepared statement from Marc and Timothy. They went on to state that they believed that Kintera Sphere is the most advanced and the best Internet fundraising software in the sector. They went on to say that 2300 nonproifts use Sphere.

They said that the acquisition is intended to accelerate Blackbaud’s move into online fundraising. They will continue to use Blackbaud NetCommunity for solutions requiring tight integration with Raiser’s Edge but KNTA will be for those customers who aren’t looking for Raiser’s Edge integration.

What was interesting to me is that it looks like they bought Kintera primarily for Sphere. Per seat licensing fees are what makes up Kintera Sphere revenue whereas Fundware is associated with renewable maintenance contracts. Fundware has 1700 customers whereas Financial Edge has 4300 customers. Apparently, KNTA made $45 million in 2007 with the majority of it from Sphere. The purchase for Kintera was at 1x annual revenue which makes the purchase pretty close to a fire sale. Apparently, Kintera was still operating at a net operating loss this year and that will drop the purchase price even lower to around $36 million.

Blackbaud wants to improve profitability of Kintera by sharing the costs of building online fundraising and CRM. Also, people were concerned about KNTA’s sustainability and it weighed on decisions to purchase KNTA. BLKB is guessing that with its backing KNTA will have a better reputation in regards to sales.

There was a question and answer period as well. Here are some snippets from the Q&A period with the timelines inserted so that you can follow along in the Web cast.

25:00
eTapestry is donor management more similar to RE than to Sphere or BBNC. They don’t expect to see any integration between eTapestry and Kintera Sphere.

Sphere had very strong online fundraising characteristics and was on .NET platform. Blackbaud believes that makes for much easier integration. I forgot that Kintera was .NET but now that I hear it again I think this acquisition makes a lot more sense for Blackbaud.

Blackbaud will have a roadmap out in next three months and they think that Blackbaud NetCommunity and Sphere will integrate in the years ahead.

28:30
Are KNTA transaction processing fees continuing?
Yes.

You’ve got to listen to this question being asked of Blackbaud management as the analyst asking the question mentions that Blackbaud once thought of Kintera’s transaction fees as “mercenary” which is something that Blackbaud immediately backed away from. I don’t think I’ve ever heard that criticism of Kintera by Blackbaud but it was funny to hear.

30:05
Blackbaud was asked about the previous integrations with Target Analytics and eTapestry. Blackbaud is claiming that the integration between Target and Blackbaud’s Analytics groups has gone well and that they think eTapestry and Kintera integrations will proceed similarly.

41:45
The question is asked as to why did BB stop with Scorpio and think of purchasing Kintera.
They say that 18 months ago stock prices were different. Blackbaud NetCommunity is still not really finished and not yet connected to infinity. As a result, Scorpio (the recent improvements to NetCommunity) wasn’t really wasted if Blackbaud bought Kintera. There would be very little duplication of engineering.

44:45
An analyst asks about Kintera’s restricted cash line item?
Blackbaud responds that restricted cash and donations payable are offsets to one another.

Here’s an interesting item I didn’t know about. I believe this restricted cash line item on Kintera’s quarterly statement is the float that Kintera carries in order to insure that donations are paid. It was $7 million in Kintera’s last quarterly statement. This means that Kintera is earning interest on that $7 million before it gets disbursed to nonprofits on their system. It’s a nice job when you can get it

UPDATE (6/2/2008): Don’t Tell the Donor has posted Gene Austin’s response to the acquisition. It’s a bit strange in that there’s a call from Convio to have Blackbaud open up its API despite the fact that Convio’s own API is problematic at best in its inability to provide multiple records in one call. In fact, if Kintera’s API gets adopted into the Blackbaud codebase there’s a good chance that Blackbaud itself will have the more open API vs. Convio’s. Sometimes, I have to wonder if Convio’s strategists ever bother to check themselves before they wreck themselves. I concur with Don’t Tell the Donor in that it’s highly unlikely that people will believe Convio’s new stance as an advocate for open APIs since they themselves were late to the game in this respect.

There had been a lot of speculation concerning the eTapestry API and now we’re finally getting some news. eTapestry’s API will be offered for free next week! That’s pretty exciting news for developers I’m sure. While Blackbaud isn’t offering Raiser’s Edge’s (say that three times fast) API for free yet, the eTapestry API will be free to developers. However, eTapestry’s own API documentation admits the API cannot:

• Allow mass entry of accounts or journal entries – must pass data one at a time.
• Update existing gifts or pledges.
• Delete accounts or journal data.
• Add or modify relationships.
• Query and return large data lists

It’s crippleware, meaning that it’s intentionally underpowered to prevent the wholesale export of your records to another provider. It’s similar in that respect to Convio’s API although Blackbaud is honest about the limitations. Convio doesn’t even bother to mention that.

At this point Kintera’s API is still the best in terms of capabilities but you couldn’t tell that by the most recent filings from Kintera.

A quick search on “Convio lawsuit” in Google turns up:

http://snipurl.com/25sx1 [dockets_justia_com]

The lawsuit was filed on April 22, 2008 and the plaintiff is Scott D.H. Redman. Digging further turned up this PDF document of the filing.

The plaintiff’s claim is that Convio keeps sending receipts with credit card expiration dates on them to donors in violation of the Fair Credit Reporting Act. I don’t have any idea what the merits of this suit are but it looks like a fairly small violation to me.

I’m wondering now how widespread this practice is and what kind of effect this will have on the way donations processors are going to send receipts for tax purposes to donors. Does your nonprofit show credit card expiration dates on donations receipts?

UPDATE (4/28/2008): To make it less ambiguous, I inserted “credit card” in front of expiration dates. Thanks to Peter Gulka for the suggestion! Also, I hear from my source in Blackbaud that they do not display credit card expiration dates or show five or more credit card numbers in any of their Internet products. Can anyone confirm that the other donation processing systems don’t show credit card expiration dates? Jon? Stacie?

UPDATE (5/5/2008): Kintera also confirms that it does not show credit card numbers or expiration dates in any of receipts they send.