Slimmed-down online-translation startup Babylon raising $3m

Internet company focusing on revenue instead of aggressive penetration, says Formula chairman
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Israeli online-translation company

Babylon

hopes to complete a $3 million private placement in the coming weeks, TheMarker.com has learned.

Formula Systems

(Nasdaq:FORTY) is the biggest shareholder in Babylon. Formula chairman Dan Goldstein says the funding round should be completed within three to four weeks, and that investors would include both existing shareholder and newcomers. Goldstein added that Formula will be kicking in $1 million.

Goldstein said Babylon doesn't need to raise more than $3 million, because its business model should lead to considerable accrued revenue. He also noted that Babylon has tightened its belt, after changing strategy from aggressive penetration a favorite strategy in early 2000 among Internet companies - to building revenue and profit.

Babylon has developed software to translate highlighted words and idioms appearing on the computer screen with a single mouse click. The company apparently only began to bring in revenue in the last months of 2000. Its only source of revenue so far is from advertisers incorporated in its translation software and usage licensing fees paid by organizations wanting to make commercial use of its product.

Babylon is also developing a banner-free version for individual users. Use of the ad-free program will cost a few dollars.

Revenue came to about $100,000 a month toward the end of 2000. The company hopes to achieve a pace of $400,000 a month during 2001. Assuming it does, the company believes it can achieve operating balance by September 2001.

Even though Babylon has not joined the group of Internet companies smoking on the ground, it is typical in the sense that its dreams have fizzled. In April 2000, before the crash really hit, Babylon was negotiating a $20 million mezzanine round according to a company value of $200 million. The round was never completed.

In June 1999 Babylon, established in 1997, raised $3 million according to a market value of $24 million.