Digital Evolution Returns As Web-Services Startup

Emerging technologies, especially those accompanied with lots of vendor hype, are bound to attract investors. That's certainly the case with Web services, which proponents claim is posed to revolutionize application development for the Web. Among the latest startups to woo venture capitalists is Digital Evolution Inc., a Santa Monica, Calif., company selling a management server for finding, monitoring, and securing Web services in an enterprise.

Digital Evolution has secured $15 million of Series A funding from Paladin Capital Partners Fund LP. Digital CEO Eric Pulier says the company is already profitable, but the money is needed to help him expand the business, particularly in new markets like the public sector. The company, which provides software and consulting services, lists as customers Charles Schwab, Farmers Insurance, Sempra Energy, and US Steel.

But getting VC money isn't always an indication the company or its technology will take the industry by storm. After all, a lot of money has been invested in dot-coms that failed. Darcy Fowkes, analyst at the Aberdeen Group, says VCs invest in new companies across a number of emerging technologies to hedge their bets. Fowkes is skeptical that Web-services startups will become tomorrow's powerhouses because they're competing against today's giants, including Hewlett-Packard, IBM, and Microsoft. "I don't see how the small players are going to do it," she said.

Digital Evolution is the second company of the same name founded by Pulier. In 1994, Pulier started a company to help others incorporate emerging Internet standards into IT systems. The first Digital Evolution was bought in 1998 by Philadelphia-based US Interactive Inc., which filed for bankruptcy in January 2001.