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Tech firms merge

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By Todd Cohen

Consolidation continues among tech firms targeting nonprofits with two new mergers.

Capitol Advantage, an Internet-directory and email-advocacy firm in Fairfax, Va., has merged with VirtualSprockets, an Internet firm in Poolesville, Md.

And Isoph, a firm in Chapel Hill, N.C., that develops distance-learning technology and content, has merged with SmarterOrg, a Washington, D.C., firm that helps nonprofits develop online training programs.

“There are really strong forces in software-based products and services that lead toward these kinds of mergers because people need to develop bigger market share,” says Andrew Blau, principal of Flanerie Works, a New York City consulting firm that helps nonprofits and foundations develop technology strategies.

“Because development is often very capital intensive, the resources of larger firms are often very helpful in developing new products,” he says. “And customers’ buying decisions are often shaped by whoever has the biggest market share.”

Capitol Advantage, with 900 customers and 43 employees, produces online directories and Web-based social-activism tools that nonprofits, member-based associations and other groups can use to wage email-lobbying drives.

VirtualSprockets, with 40 customers and five employees, produces tools for managing Web content and using email for marketing, fundraising and advocacy.

“Combining our technologies is really going to give a nonprofit a one-stop shop for a variety of tools,” says Barkley Kern, COO of Capitol Advantage and former business manager for C-SPAN, which was the first customer of the firm’s online-directory product. “We’ve already got the ability to integrate our products.”

The merger grew out of a request by the International Campaign for Tibet in Washington, D.C. – one of several clients the two firms share – that their products be integrated, says Tom Yeatts, who was president and CEO of VirtualSprockets and is chief technology officer for Capitol Advantage.

The two firms aim through the merger to integrate their products and create “one platform that is soup-to-nuts for the nonprofit industry and advocacy groups,” says Yeatts, a former financial analyst in the division of research and statistics for the Federal Deposit Insurance Corp.

Both firms were profitable and are independently funded, say Kern and Yeatts.

“We’re tied to our customers, not our capitalists,” Yeatts says.

Officials of Isoph and SmarterOrg say their merger combines the only two online-learning firms focused solely on nonprofits.

The merged firm expects to build its revenue to $2 million next year from $500,000 this year and expand its staff to 20 from 12, says Jeff Cobb, its founder and CEO.

Cobb formed the firm in 2001 after serving as senior vice president for Quisic – now EDT Learning in Phoenix and previously known as University Access – a Los Angeles firm that created online curriculum for graduate business schools.

Isoph’s clients range from the Seattle-based Bill and Melinda Gates Foundation, it biggest account, to the Peter F. Drucker Foundation for Nonprofit Management in New York City, while SmarterOrg’s clients include the Planned Parenthood Federation of America in New York City and CompassPoint Nonprofit Services in San Francisco and San Jose.

SmarterOrg, for example, has helped CompassPoint develop an online budgeting course for its clients, and is helping Planned Parenthood develop an online initiative to train public-affairs officers at its 126 local affiliates.

Isoph is working with the Drucker Foundation to create online versions of classroom workshops it offers on collaboration.

And as part of a major initiative by the Gates Foundation to distribute hardware and software to U.S. libraries, Isoph is designing a user interface for a public-access computing portal for libraries, as well as the technology and content for the portal’s learning center that will register users and launch and track their courses.

Nonprofits increasingly will look online to strengthen their operations, Cobb says.

“It’s really a natural need and evolution,” he says, “to be able to access technology to gain skills and knowledge – grantmaking, budgeting, building organizational capacity.”

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