# OpTier (2002 – 2014)

- URL: https://girisimcikafasi.com/en/startup-graveyard/optier/
- Sector: Enterprise software (SaaS)
- Country: United States
- Total funding: $100 million
- Cause of closure: Lost to competitors

## What did it do?

OpTier was a software company that tracked business transactions as they flowed through large organisations' infrastructure, tier by tier, from web and application servers to legacy mainframes and databases. Its CoreFirst product, launched in December 2005, aimed to catch slow or stalled transactions in real time and keep business services from being disrupted.

## Why did it shut down?

By 2005 the company had won early customers such as a Fortune 50 financial institution, a major mobile operator and a government agency. In September 2008 it accelerated its growth with a $47.5 million Series D joined by Index Ventures and Morgan Stanley. In March 2011 Morgan Stanley was reported to be seeking a buyer for the company at a valuation of $250 million to $300 million, but no sale took place. Meanwhile the market shifted towards application performance monitoring tools offering visibility right down into the code, and according to 451 Research OpTier moved into this space late. In May 2014 Gartner analyst Jonah Kowall reported that the company had ceased operations and, despite raising more than $100 million, had failed to keep up with the change in its market.

## The story

OpTier was founded in New York in December 2002 by Israel Mazin, Yori Lavi and Amir Alon. The team started by asking what gave large companies' IT departments the most trouble, and built a product that tracked a transaction's journey from the web server to legacy mainframes and on to the database. CoreFirst, launched in December 2005, promised to catch slowing transactions in real time and protect business services from outages. In its early days the company worked with a Fortune 50 financial institution, a major mobile operator and a government agency.

Investors were interested too. Backing that began with Carmel Ventures, Lightspeed and Pitango grew in September 2008 with a $47.5 million Series D joined by Index Ventures and Morgan Stanley, plus a $15 million credit line. In March 2011 Morgan Stanley was reported to be looking for a buyer or a large strategic investor at a valuation of $250 million to $300 million, but no sale took place.

Meanwhile the market was changing. Application performance monitoring was moving towards tools that went right down into the code. While AppDynamics and New Relic, both founded after OpTier, reached valuations of around a billion dollars, 451 Research wrote that OpTier had moved into this more valuable space late. In May 2014 Gartner analyst Jonah Kowall announced that the company had ceased operations, noting that despite raising more than $100 million it had failed to keep up with changes in the market. According to 451 Research, some of the company's assets may later have passed cheaply to SAP.

OpTier's story shows that even a start-up that begins by asking the right question about a customer's real pain cannot survive on the size of its funding alone if it fails to renew its product when customers' questions change. The company served large organisations for twelve years but missed the next wave of technology.

## Lessons

- When the centre of gravity in your market shifts to code-level visibility, leading at transaction level is not enough; update your roadmap early to answer customers' new questions.
- Use big funding rounds to finance the move into a new product category, not to scale up an ageing model.
- If a sale process run through an investment bank fails to find a buyer, treat it as an early signal of what the market thinks your product is worth, and rebuild your strategy at that point.

## Sources

- [10 start-ups to watch: OpTier](https://www.networkworld.com/article/863751/infrastructure-management-10-start-ups-to-watch-optier.html)
- [OpTier raises $63 million in funding](https://networkworld.com/article/2276439/optier-raises--63-million-in-funding.html)
- [Morgan Stanley seeks $300m buyer for OpTier](https://www.globes.co.il/news/article.aspx?did=1000635069)
- [Gartner Reports: OpTier Shuts Down Operations](https://www.apmdigest.com/gartner-reports-optier-shuts-down-operations)
- [Did SAP exercise an opportunistic option for OpTier?](https://blogs.the451group.com/techdeals/application-software/did-sap-exercise-an-an-opportunistic-option-for-optier/)