NetObjects founders increase stake

NetObjects will announce Monday that its CEO and other founders invested $1.5 million in the Web site building software company.

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Foreshadowing an initial public offering, NetObjects will announce Monday that its CEO and other founders invested $1.5 million in the maker of Web site building software.

Samir Arora, chief executive, has invested $1 million to help fuel the company's growth into a major, independent software company. Contributions from the three other founders, David Kleinberg, Clement Mok, and Sal Arora, brings their total investment to $1.5 million.

This investment follows other NetObjects financing rounds including: An investment of an undisclosed amount by IBM in March 1997; $4.5 million from AT&T Ventures, Perseus LLC, and private investors in January 1997; $5.4 million from Norwest Ventures, VenRock Partners and private investors in February 1996; and a founding investment by Rae Technology LLC in November 1995.

Sources told CNET's NEWS.COM that IBM's investment was upwards of $100 million, bringing the company's total financing to over $111 million.

Although company officials said it does not need additional money at this stage, an IPO is one of the future financing options it will consider in the near future.

Cristina Morgan, managing director of investment banking at Hambrecht & Quist, said it makes sense that NetObject's founders and CEO are ramping up their stake in the company.

"They are doing it because they believe that they can buy in now at a more attractive price that they can get later [in an IPO]. It underscores their confidence to see a substantial return," she said.

At a technology conference, NetObjects was voted one of the top five companies most likely to go public in the next year.

Although company founders usually pay pennies per share for their stake in a company, Arora and the other founders are believed to have paid a higher rate, similar to the one paid by IBM, Morgan said.

She explained the company has moved beyond the start-up stage. It is past launching its first product, Fusion, and is now entering a multiple-product or product family phase, Morgan noted. NetObjects has about 115 employees.