| |
|
FORTUNE SMALL BUSINESS PICKS 65 FAST-TRACK STARTUPS.
Whatever the indicators suggest about the economy, FSB has detected no slowdown in aspiration and imagination. The creative pipeline is bulging with so many new products and services that this year we have expanded our list to 65 from 25. And never has it been more diverse. True, the largest number of inventors and entrepreneurs profiled here are white males, and Silicon Valley is home to a disproportionately large number (20). Still, 13 of this year's creators are women, and 19 are members of minority groups. Many are in their anything-is-possible 30s; two have not reached adolescence. Meanwhile, venture capital is being distributed more cautiously, but there is still plenty of it.
On average, our all-stars were able to raise about $22 million. Many have also formed strategic alliances with established companies. To select the 65, we contacted more than 1,200 sources for nominations, including the National Venture Capital Association, the National Business Incubation Association, colleges with entrepreneurial programs, and PriceWaterhouseCoopers, which surveys VC-backed companies. We're not going to engage in forecasting, but we asked five judges to pick their favorites (see story "The Greatest Hits"). We'll check in next year to see if they're right.
For the purpose of giving you perspective on what is getting funded, these are just a few of the 65….
Tracking Group E-mail
ABRIDGE: Using e-mail to update colleagues throughout the workday can save a lot of time, but it also poses a problem: how to keep track of crisscrossing conversations and attachments that may involve dozens of people. Shana Fischer, a vice president at the investment bank Allen & Co., and Susan Hunt Stevens, former group director for New York Times Digital, hope their Abridge for Enterprises software will help.
How does it work? A client pays a minimum monthly fee of $5,000 for Abridge services to what could be numerous groups within the organization. Each is assigned a unique Abridge-hosted e-mail address. When group members exchange e-mail, they have to remember to send a copy to the Abridge address as well. If they do, e-mail and attachments pass across Abridge servers, where they are analyzed and organized according to user-defined criteria into folders, schedules, and contact lists. Two-year-old Abridge Inc., which is based in New York City, anticipates revenues of $1.5 million this year. Its backers-including Venrock Associates and John Landry, the former CTO of Lotus Corp.-expect Abridge to capture a sizable chunk of the electronic-messaging-services market (which will reach $57 billion by 2002, according to the Radicatti Group, a research firm).
Mobile Multimedia
ACTIVESKY: ActiveSky Inc. is one startup that should benefit from the handheld-PC surge. In December, in the midst of the dot-com meltdown, the two-year-old San Mateo, Calif., company snagged $22 million in venture funds from such firms as JK&B in Chicago. What has excited investors is ActiveSky's promise to deliver video and multimedia images to cell phones, personal digital assistants, and other mobile devices. The key is compression technology that squeezes data down to a size that can be sent over the air on a wireless connection and played by the various devices. So far the company (which won't disclose revenues) has introduced video players for popular handheld computers including the Pocket-PC, Palm, and Visor. It has also signed a deal with Handspring's Japan division to bundle its media player with that company's products.
ActiveSky's founders include Ruben Gonzales, a Ph.D. who was the first to transmit full-motion video via a wireless transmission. The company has been criticized for introducing a proprietary compression format not compatible with the more popular MP3 and Windows Media Format. ActiveSky says there are already several formats for video and that the success of its own will depend on its value to the market.
Build a Smart Plan
ADVISE4STOCK: Got a surefire business idea that just can't get off the ground? These days, creators need a persuasive business plan and probably much more, including accounting, legal, and marketing advice. But how can an entrepreneur, operating on a shoestring, pay for that expensive talent?
Brian Shniderman, an experienced management consultant, has a strategy and built a company on it: Phoenix-based Advise4Stock. Through venture capitalists, Advise4Stock gets in touch with entrepreneurs who have recently been denied funding and need help. Advise4Stock then matches them with professionals who are willing to forgo all or part of their fee in exchange for shares. A $300-an-hour attorney, for example, might take $600 worth of stock for every hour worked. Advise4Stock charges entrepreneurs fees that start at $1,500, plus dues of $25 a month for continuing membership. Launched in December, Advise4Stock says it has "thousands" of clients and advisers worldwide.
Tell Me, Machine
ANSWERFRIEND: English isn't their first language, which makes the achievement of Gary Mekikian and Deniz Yuret even more impressive: software that allows computers to understand the folksy, natural language that Americans use when they tap out messages on their keyboards.
As a teenage mathematics whiz in Turkey, Yuret was inspired to ponder natural-language software by HAL, the sinister, smooth-talking computer in 2001: A Space Odyssey. In 1998, just three months after earning a Ph.D. in computational linguistics from MIT, Yuret had developed a prototype for the software now called QuestionEngine. A year later he met Mekikian, who had arrived in the U.S. as a teenage refugee from the Soviet Union, had worked his way through the University of Southern California to earn a degree in computer science-and had become a wealthy entrepreneur in the process.
The two men's collaboration has produced a commercial QuestionEngine designed for companies that sell online and want computers, not expensive personnel, to answer customers' questions. With $9 million in funding from Andersen Consulting (now Accenture) and star angels such as Sandy Robertson (founder of Robertson, Stephens & Co.), it's no wonder the entrepreneurs have clients such as Sun Microsystems. Estimated 2001 revenues: $35 million.
Rentals in Space
ASSURESAT: A few years ago 45 million pagers around the world went blank because a satellite failed. Such breakdowns are likely to become more common as satellites get bigger and more complicated, or so says Jerald F. Farrell, former president of Hughes Communications. He and other members of a high-powered team, including Mark Fowler, erstwhile chairman of the Federal Communications Commission (FCC), are raising $500 million to launch the space equivalent of rental cars. Already the founders have secured $310 million in bank financing and $17 million in venture capital. They intend to raise the rest in the corporate bond market.
AssureSat Inc. would like to put three birds in orbit, available to pick up the workload of a customer's satellite immediately should the customer's fail. The potential market is the 200 or so commercial satellites now in orbit, delivering TV signals, voice and data transmissions, and such. AssureSat will charge clients a $4 million retainer to have a backup satellite ready, and an additional fee if the client actually uses it. The El Segundo, Calif., company has already booked more than $150 million worth of business from clients such as LoralSkynet. AssureSat hopes to launch its first satellite in 2003.
Weather by the Minute
ASTROVISION INTERNATIONAL: What you may not know about those weather systems speeding across your TV screen during the evening news is that they are not news. The pictures, taken by government weather satellites, are as much as four hours old when they are passed along to your TV station. Malcolm LeCompte, who once dreamed of becoming an astronaut but earned a doctorate in astrophysics from the University of Colorado instead, would like to keep you up to date with real-time streaming video from space.
LeCompte is the founder of Bethesda, Md.-based AstroVision International Inc., which is trying to raise $139 million to loft two lightweight-satellites with cameras into orbit that cost $70 million each, one-third the cost of traditional satellites. To get the venture off the ground, the scientist has obtained a license from the FCC to operate in the X band (the Earth Exploration band) in order to transmit high-resolution images. He has also raised $5 million in venture capital, and at press time he was closing on an additional $120 million round.
AstroVision will serve more than weather fans. Shipping companies and others may find its video invaluable, since it can provide early warning of hurricanes and natural calamities. Its first deal: a $9.4 million contract with NASA to study Tornado Alley in the central U.S.
Connect Without Clutter
ATHEROS COMMUNICATIONS: Wouldn't it be great if all the computers, printers, and other electronic gadgetry in your home or office could be connected without the bulky cables and wires that dictate the layout and trip the unwary? That's the plan of San Francisco-based Atheros Communications Inc. chief technology officer Teresa H. Meng, 40. A distinguished member of the Stanford University faculty, Meng has designed a 'radio on a chip' that will allow machines to communicate with one another wirelessly and almost as fast as wired machines.
Since the early '90s, Meng had been working on the creation of an all-digital radio on a chip that would employ the standard low-cost technology known as CMOS (complementary metal oxide semiconductor) that was used to produce virtually all commercial computer chips. At that time, the only technology available was for specialized and expensive analog chips.
But over time she was able to take advantage of the increase in processing power and the decline of manufacturing costs. That combination made possible chips that produce digital equivalents of analog signals. Meng got another break when the FCC opened up some additional bandwidth for wireless local area networks.
Through the late '90s Meng raised more than $30 million in funding, with the help of John L. Hennessy, then provost and now president of Stanford. That's an impressive amount, but the cost of getting into semiconductor production is staggering. So rather than build its own fabrication plant at enormous cost, Atheros has formed a partnership with Taiwan Semiconductor Manufacturing Co., the world's largest semiconductor foundry.
Full production of the AR5000 chipset, as the radio on a chip had been known, will likely begin in the middle of this year. Large, established businesses probably won't adopt the new technology immediately, mainly because they already have a huge investment in their wired infrastructure. That leaves small businesses and homes as the likely first clients. Neither is to be sniffed at. According to Cahners In-Stat Group, the market for home networking alone will reach $5.6 billion worldwide by 2004.
One of Atheros' biggest worries is Australian competitor Radiata, which was recently bought by the mighty Cisco. But although Radiata is nearer to bringing a product to market, Atheros says its product is slightly superior.
Killing Bugs Without Fear
BIOGANIC SAFETY BRANDS: After his twins were born, Steven Bessette was reluctant to spray his West Palm Beach, Fla., home with pesticides for fear of making the babies sick. So Bessette, a lawyer and accountant, began working with researchers at a cluster of universities to develop a natural bug killer that would not be toxic to humans or other mammals.
Over eight years he raised $30 million, mostly from private investors. Prominent among them was E. Douglas Grindstaff, a former president of Procter & Gamble, who was introduced through a mutual venture capital acquaintance. Now the company, Bioganic Safety Brands Inc. in Franklin, Tenn., is ready to launch its product.
Unlike synthetic compounds that target enzymes and can make humans, especially children, ill, Bioganic is a patented mix of food additives approved by the FDA that includes the essence of cloves, peanuts, and thyme. The compound attacks an insect's neurotransmitters and stops its body from functioning, but has no harmful effect on humans or animals.
Bioganic is aimed at a $9.5 billion market that includes everything from gardens to golf courses to farms. Competition from established bug killers, such as Raid, will undoubtedly be fierce. But the upstart already has deals with Wal-Mart and CVS Pharmacy that could soon put Bioganic on shelves in 29,000 stores. The company has even signed up actress and Uber-mother Jane Seymour as its spokesperson.
The Painless Warranty
BRANDSTAMP: After helping a Beverly Hills car dealer increase sales of SUVs by 50% in one year, consultant extraordinaire Sean Brown was ready for an encore. Rather than take another executive gig, though, Brown turned entrepreneur. The consumer ill he focused on: product registrations. Who hasn't tossed one in the trash rather than in the mail? They're annoying, but they are important when defects or recalls hit. Brown's solution was Cambridge, Mass.-based BrandStamp Inc., which he launched in December 1999 with roughly $1 million in seed money from the Cambridge Incubator, a venture development company. BrandStamp is an Internet-based registry with warranties and the like submitted online or at special in-store kiosks. The information remains on the BrandStamp server, which allows users to do product research. Manufacturers can check the site for aggregate customer information and rely on BrandStamp for services like issuing product recalls.
The key to the company's success, Brown says, is finding the right partners. So far Oracle is one.
More Storage in the Hand
DATAPLAY: Handheld electronic devices such as PDAs, MP3 players, e-books, and digital cameras can't store very much content, be it audio or visual images. Steve Volk, who has long toiled to solve electronic-storage problems, has come up with a tiny cartridge that can extend looking and listening by hours.
His company, DataPlay Inc., based in Boulder, Colo., makes a disk cartridge the size of a quarter that can hold more than 11 hours of music downloads and fits easily into a variety of handheld devices. It makes an attractive marketing tool for record companies. A consumer could listen for free to one song off an album that the record company placed on the DataPlay disk. If the consumer wants the whole album, he will have to go online and buy an electronic key. Investors have poured $64 million in DataPlay include Toshiba, Samsung, and Universal Music Group. To date the company has partnerships with such music labels as BMG and EMI.
No Rest for the PC
DATASYNAPSE: Did you know while the screensaver is on, you could lend your computer's power to a financial institution and receive gift certificates in exchange? All you need is a broadband Net connection, and DataSynapse Inc. will hook you into a network that will use your PC while you go for coffee.
New York City-based DataSynapse is the creation of onetime schoolmates James Bernardin, who holds degrees in physics, electrical engineering, and applied math, and Peter Lee, a former J.P. Morgan investment banker. Bernardin got the idea while crunching numbers for Bank of America. At 5 p.m., with hours of toil ahead, he looked out on a floor of idle computers and pondered how he could borrow their capacity to shorten his evening. He teamed up with Lee, who understood the savings to financial institutions if they farmed out work at peak times rather than buy additional computers.
As mind-bending as the idea is to a layman, it already has been applied to create similar networks. But DataSynapse is the first to design a network for financial institutions. Also, unlike other networks, it borrows your PC only while it is idle. So far DataSynapse has signed up more than half a dozen clients in the financial-services industry. For your PC's tireless efforts, you get gift certificates for purchases from the Internet marketer Flooz. If you're lucky, you might also win a Porsche Boxster.
The Smarter Wheelchair
DEKA RESEARCH: A priority for a humane society is helping its disabled citizens function fully. Dean Kamen, founder of Deka Research and Development Corporation Technology Center in Manchester, N.H., hears the call. Years ago he invented a wearable drug-infusion pump, a portable kidney dialysis machine, and flexible stents to keep collapsed arteries open. Kamen's latest contribution is even more impressive: the Independence 3000 iBot Transporter, which can go where no wheelchair has gone before. Kamen got the idea after slipping and nearly falling while getting out of the shower. If a human being could detect such an imbalance and right himself in time, why couldn't a machine?
The iBot can climb stairs, hop up curbs, and cross sand and other surfaces ordinarily off-limits to wheelchair users. That would be remarkable enough. Using gyroscopes and microprocessors, the iBot can rear up on two of its four main wheels and lift the occupant to standing level. A Johnson & Johnson subsidiary plans to start selling the iBot later this year at an expected list price of $20,000 or more. Let the revenues begin flowing.
Essence de Computer
DIGISCENTS: While on vacation in Miami's South Beach, biologist Joel Lloyd Bellenson, 36, and industrial engineer Dexster Smith, 32 (both former Stanford students), were swept up with the aromas of suntan lotion, ocean, and tropical drinks. They began researching the science of scent and learned that it's all about biochemistry. Realizing it could be represented mathematically and computationally, the two decided to find a way to introduce scent into media.
The result: the launch of DigiScents Inc., their Oakland company, which has created iSmell, a device about the size of an electric pencil sharpener that attaches to a PC. Within iSmell is a cartridge containing 64 scents in the form of natural and synthetic oils, and when you visit a Website that has signed up with DigiScents, an atomizer sprays vapor into the air.
DigiScents has raised about $20 million so far and has an agreement with Procter & Gamble for joint market research. It expects iSmell to be available by the end of this year at a retail price of under $200. Food and perfume companies are eyeing the technology to be used for online product sampling.
Trade Talks
E-XCHANGE ADVANTAGE: Even in a system as carefully monitored as a stock exchange, human flubs cost companies billions. On the Nasdaq alone, companies write off about $30 billion a year to loose-lipped brokers who leak information, causing unnatural price swings. Fred Federspiel, a former nuclear physicist at Los Alamos Laboratory, thinks his 11-person company, e-Xchange Advantage Corp., which he founded in 1999, can change that. The New York City-based venture licenses an automated trading system to stock exchanges and brokers that lets institutional investors and Wall Street traders share their orders with certain buyers, but not the whole floor. Who gets notified is dictated by past trading histories.
So far the company doesn't have any revenues, but Federspiel is predicting sales of $1 million this year. There has been one good confidence booster: an investment of $1.3 million from Nasdaq and a former employer of Federspiel's, Bios Group, a Sante Fe, N.M.-based consultancy.
Stopping Hackers Cold
ENTERCEPT SECURITY TECHNOLOGIES: When Yona Hollander and Ophir Rochman were teaching computer science in Israel, they noticed a big flaw in computer security systems. Most merely sounded an alarm when an intruder was afoot without stopping them from getting in. So with the help of a group of engineers-and investors who helped them team up with a U.S. company, Entercept Security Technologies-the men developed a guard dog of sorts for e-business: software that prevents hacks into Web servers and applications.
When hackers try to break into the operating system of a Web server, for example, they call in with codes that try to trick the server into thinking they are legitimate users. Entercept screens calls before the users get into the operating system and determines whether the callers are benign or malicious. Though the company is reluctant to talk about revenues, with the Web server appliance market alone it's tapping a $600 million market. Entercept calls Cisco Systems a partner, and it also has the blessing of investors like Dell and Intel.
Antibodies from Corn
EPICYTE PHARMACEUTICAL: Sometimes scientific inquiry leads to a commercial product. Plant biologist Mich Hein and biochemist Andy Hiatt are proof. The two scientists, formerly from the Scripps Research Institute in La Jolla, Calif., have invented a way of growing human monoclonal antibodies-the human's first defense against invaders- within plants such as corn, rice, and tobacco. Currently, antibodies can be reproduced and injected into the needy, but the process is expensive, requiring $300 million factories with huge fermentation tanks. In contrast, Hein's and Hiatt's approach costs one-tenth that of the current method.
Here's how it works: From a human cell, the gene known to be responsible for fighting particular invaders is extracted and inserted into a kernel of corn, say. The gene instructs the corn's protein to make human antibodies.
After a decade of research Hein and Hiatt launched the San Diego company Epicyte Pharmaceutical Inc. to get their breakthrough to market. The five-year-old concern has signed on Dow Chemical (an equity partner that has invested $6 million in the venture) to make the transgenic plants and turn them into drugs for clinical trials. If Epicyte is correct, its efforts will lead to an effective way of neutralizing the viruses that cause genital herpes, strains of pneumonia, and even AIDS. That's why the company has received $7 million in grants from the National Institutes of Health and the U.S. Defense Department's Advanced Research Projects Agency.
Total Temp Service
EWORK EXCHANGE: As Hans Bukow helped manufacturers like Intel develop automated just-in-time systems for the delivery of materials, he encountered companies that needed similarly precise methods for the delivery of temporary workers. He coupled his idea with the Internet, and the result is eWork Exchange Inc., based in San Francisco.
Prospective employees fill out profiles and post them on eWork's Website for free, and employers fill out project profiles for $100 each. The database finds matches. According to investors such as the Swiss VC firm ETF Group, what makes eWork distinctive is its Web-based ProSource contingent-workforce management system. It handles everything, from paying the temps' invoices to providing fringe benefits. It enables employers to tailor hiring standards and even keeps track of the total amount a company spends on contingent workers. EWork had revenues of $40 million in 2000, its first year of operation, thanks to alliances with Ariba, Account4 Software, and Novient.
Ticket Protection
FAIRAIR: All of us will find ourselves in this spot sooner or later. We buy an advance, nonrefundable airline ticket to Paris or wherever, and at the last moment we have to cancel our plans because the object of our travels has moved to Stockholm. The Paris ticket is worthless. Enter FairAir Inc., a service through which you can buy a plane ticket that you can resell to someone else at whatever price the market dictates, either on the Web or through a customer-service line.
Jim Lawrence, once CFO of Northwest Airlines, and Frank Levy, a former executive of an online address-book service, founded FairAir two years ago after overcoming the reluctance of airlines. FairAir eliminated their objections with a system that works like this: You, the consumer, pay an extra $9.95 fee when you buy your low-cost advance ticket through FairAir. The price is set by the airline partners. If and when you sell the ticket, the airline and FairAir will take 6% of the selling price and share it. (FairAir won't disclose how the 6% will be split.)
So far, Northwest, America West, Midway, and National have signed on. FairAir expects revenues of about $1.5 million this year.
Targeting Tumors
FERX: A shortcoming of chemotherapy is that the cancer-fighting cocktail may poison healthy tissue as well as cancer cells. But what if the tumor was magnetized to draw the drug directly to it? Thomas Widder, M.D., had been mulling over such a strategy ever since he was a medical student at Northwestern University in the mid-'70s. By the 1980s he was given a patent on a technology that had been tested on animals. But it still wasn't considered safe enough for human trials.
Then in 1993, he met Thomas Kent, a physicist, who had been traveling in Russia and come upon researchers there who had solved the puzzle of how to make a magnetic particle that could be used in humans.
Widder and Kent teamed up and brought in a third partner, Widder's wife, Jacqueline Johnson, a geneticist. She had years of experience working for several biotech/pharmaceutical firms, which was crucial in persuading investors such as Brentwood Venture Capital to come along. In 1994 the three incorporated their enterprise in San Diego as FeRx Inc., but it took them three years of filing patents, transferring the Russian technology to the U.S., and securing $22 million in funding before they opened for business.
FeRx has designed a proprietary technology called Magnetic Targeted Carriers. MTC is based on microparticles of elemental iron and carbon that are combined with the drugs to be delivered. The carbon absorbs the drugs. A small magnet positioned outside the patient's body creates a localized magnetic field at the site of the tumor. When the drugs are swallowed or injected, the iron, which is bound to the carbon, is drawn to the tumor like a sort of medical smart bomb. The first target of the new technology will be liver cancer. (Globally, one million people die of the disease every year, making it the world's deadliest cancer.) The treatment is now undergoing clinical trials at several major medical centers around the U.S., and FeRx hopes to receive FDA approval by 2003.
Catching Rays Cheaply
FIRST SOLAR: It took the genius of Harold McMaster, 84, the inventor of modern-day tempered glass and co-founder of Glasstech Inc., to revolutionize the solar-power industry. In his newest venture, First Solar LLC in Scottsdale, Ariz., McMaster has managed to develop a cheap way to produce solar panels based on cadmium-telluride cells as a substitute for silicon cells, using a thin-film deposition process. As a result, First Solar can produce photovoltaic panels for as little as $1.50 per watt delivered at peak (noon on a sunny day) compared to $3.50 a watt for silicon-based panels. Eventually, First Solar expects to get the cost down to 50 cents. With $43 million in funding from the venture capital firm True North Partners, First Solar thinks that power generation systems using these cells could eventually produce electricity that sells for prices similar to that generated by coal or natural-gas-fired plants. At press time it was close to snaring public utilities and government agencies as customers.
Psych Screening Online
FITABILITY SYSTEMS: What personality type makes the best administrative assistant? It would be good to know that before you fill that position in your small business. Fitability Systems LLC, an Atlanta company started by James Campbell (who has launched two other technology companies), says it can not only describe the personality but also help locate the right candidates.
The employer in need visits Fitability's Website, selects a job profile, and tweaks the profile to fit her specific requirements. The Fitability system then displays a personality norm for, say, a highly successful administrative employee, based on behavioral research. As applicants come forward, Fitability e-mails them a questionnaire that typically takes 15 minutes to fill out.
The answers are matched against the profile of the ideal administrative aide, and the employer uses the information to help her decide whether the applicant will be a good fit. Fitability, which has raised $2.5 million from investors, charges employers about $100 a month. Already it has snared 21 customers, including Oracle and Yahoo. By year's end it should be profitable, although company officials decline to provide revenue projections.
Hold the Water
FLOLOGIC: When the ceilings of a colleague's house collapsed because of water damage from a leaky upstairs toilet, Charles deSmit raised an excellent question: Why is so much water, far more than the occupants can use immediately, allowed in a house to begin with? DeSmit, who until then had been working in health care, set about to create a method to keep water outside until it is needed.
The result is the FloLogic System, which does for water what circuit breakers do for electricity. A valve is placed inside the main water pipe where it enters the house. Within the valve is a flow sensor that keeps track of how long water has been running into the house and automatically turns it off after a set time; for example, 30 minutes when the residents are home, 30 seconds when they are not. The resident simply presses a button on a control panel to turn the valve on again. Earlier this year FloLogic Inc., located in Raleigh, signed a deal with Thompson Plastics to manufacture and distribute the system to plumbing contractors and construction companies. By year's end the company expects $4.4 million in revenues.
Gas at Great Prices
FUEL LINKS: Former attorney Jason Stancil, son of a Dallas oil-and-gas consultant, believes, like his father, that consumers would not think twice about changing retailers if they could save on gasoline. With prices skyrocketing, it is getting tougher to find bargains for the hot commodity.
Stancil's company, Fuel Links Inc., connects retailers-always trying to increase traffic through their stores-to a local gas station, and it already has some impressive clients: Wal-Mart and BJ's Wholesale Club. Here's one way the link works: The retailer runs a sale on Coke, for example, in which the customer earns a gasoline discount on every case he buys. The cash register is linked to a gas station the retailer owns or partners with. When a buyer shows up at the pump, he gets a discount of perhaps 30 cents on each gallon. At a Harps supermarket in Silom Springs, Ark., the grocer's sales have risen 25% since he installed the system. Fuel Links, which charges a retailer $40,000 for the system, expects $17 million in revenue this year.
Finding the Fakes
GENUONE: Counterfeiters of CDs, watches, golf clubs, software, and an endless list of other products with valuable brand names are now clever enough to duplicate even sophisticated markings, such as holographs, used to authenticate the real thing. "If you can see the identifying mark, it can be reverse-engineered," says Jeffrey Unger, 30, who with partners Stephen Polinsky and Ori Ron, founded GenuOne Inc., a Boston company that has designed what may be the mark that can't be copied.
Its distinctive technology, GenuGuard, includes optical, ultraviolet, infrared, photonic microfibers, and digital watermarks that can reside on a product or its packaging and keep track of it from production through sales.
The GenuGuard fingerprints cannot be imitated by thieves because the prints cannot be seen, except by a special scanner. That's why the company has attracted venture investors such as DFS Advisors and Delta Management. By year's end it expects $10 million in revenues. Among GenuOne's clients are New Balance athletic shoes and Xerox.
Risk-Free
B2B GEOTRUST: E-commerce is well on its way to being as commonplace as a trip to the supermarket, but it still has more perils than a shopping-cart smashup. A lot of online business is done anonymously, and the small business can never be completely sure whom it is actually dealing with. GeoTrust Inc., based in Portland, Ore., acts as a middleman to verify the credentials of buyers and sellers in business-to-business portals. CEO David Chen, who has a strong background in consulting, and software entrepreneur Charles Jennings founded GeoTrust in 1998. For a $15 fee, GeoTrust will query a vendor on its payment terms, return policy, and shipping charges. It will run a credit check and issue a digital certificate that guarantees the buyer or seller is a worthy business partner. Top industry players, including credit bureau Equifax and Ernst & Young, are supporting GeoTrust's efforts. The company, which went live in November, has received more than $15 million in two rounds of financing from VCs and private investors.
Streamlined Shipping
GOCARGO.COM: Eyal Goldwerger, once a captain in the Israeli Air Force, quit his job at Boston Consulting Group three years ago and locked himself in his New York City apartment, where he pondered overlooked opportunities in e-commerce. He concluded the world needed an auction site at which shippers could find transportation firms that would deliver their goods fastest at the best price.
The result is New York City-based GoCargo.com, which has taken off with the help of $16 million in funding from Cargill and Goldman Sachs. Say your company has to ship a ton of potato chips from Cincinnati to Tokyo. You proceed to GoCargo.com's Website, and once your account has been verified, GoCargo.com delivers several thousand e-mails to shipping companies to bid for your business. The winner pays GoCargo.com a commission of 1% to 3% of the total transaction, and you get your goods delivered for 15% to 25% less than what you are used to paying offline, says Goldwerger. Large shipping companies just pay GoCargo.com a subscription fee. GoCargo.com has run 8,000 auctions for clients like Cargill and Warner-Lambert. Off to a strong start already, GoCargo.com began 2000 with a couple of hundred registered companies and ended it with 13,000.
The Real Calorie Counter
HEALTHETECH: On James R. Mault's first day as a freshman at the University of Michigan, his father died, suddenly and unexpectedly, of a heart attack. The shock was terrible, and so was the fact that Mault no longer had the means to pay his tuition.
While some people might have been sidetracked by the tragedy, Mault responded by taking a full-time job as a medical technician. It was then, while operating a large and cumbersome metabolic counter, that he had the Idea. Why not create a smaller, cheaper version of the machine and sell it to medical centers as well as fitness clubs?
Today Dr. Mault-he's a cardio-thoracic surgeon-is CEO of Golden, Colo.-based HealtheTech Inc., which produces BodyGem, the very device of which he dreamed. The BodyGem fits over one's mouth like an inhaler and is attached to a handheld monitor. Users breathe into it for a few moments and get a reading of the actual rate of their metabolism. The purpose: knowing exactly how hard one has to work to shed those extra pounds.
It took Mault 15 years and $35.5 million in funding-including $5 million from Procter & Gamble and $2 million from 3COM-to bring BodyGem to market. The rewards: The company had $1 million in sales in 2000; this year he expects that number to hit $30 million.
Less Scrap at the Fab
IBEX PROCESS TECHNOLOGY: Not many people spend their free time contemplating semiconductor production, but then Jill Card is hardly any old body. While working as an applied mathematician for Digital Equipment in the late '90s, she began developing software to help the semiconductor industry increase productivity.
How does it work? During the fabrication process, Card's software can monitor all of the 60 or so variables determining how much silicon will be turned into chips and how much will be scrap. Considering that making semiconductor chips is such an expensive process that increasing the yield of wafers from 80% to 81% can save a fabrication plant $8.8 million a year, it's not surprising that Card's got a bona fide company on her hands: IBEX Process Technology Inc., based in Lowell, Mass.
Backed by $2.4 million from Battery Ventures and angel investors, IBEX's program has already been installed at plants owned by IBM and Lucent. While Card won't disclose sales, industry stats help illuminate IBEX's potential: There are 700 fabrication plants throughout the world; and the semiconductor industry is expected to double investment in process control from $1 billion to $2 billion by 2002.
Transcripts Without a Fuss
INTERFOLIO.COM: For the graduate who wants his alma mater to send transcripts to a prospective employer or to another school, the wait can be irritating. For the school the request can be a nuisance. So a pair of recent Georgetown University graduates, Karen J. Fuerherm, 24, and Steve Goldenberg, 23, are compiling transcripts and other college records into an electronic database, Interfolio.com Inc., that can be accessed by e-mail.
The graduate can enroll by paying a setup fee and then $39 for five years of service, plus a charge every time Interfolio sends out data on his behalf. Two-year-old Interfolio.com scans the college's paper records into its system and makes sure they aren't tampered with and don't fall into the wrong hands. Customers of the Arlington, Va., dot-com to date include Georgetown, the University of Virginia, Notre Dame, Rutgers, and New York University.
Reading Your Phone
INVISO: It takes little wizardry to have that written report you need transmitted from your Internet-enabled cell phone or PDA, but how are you going to read the text on that minuscule display? InViso Inc., a Sunnyvale, Calif., company founded by Al Hildebrand, one of the inventors of the bar code scanner, has a solution that will give you the illusion of reading a 19-inch computer monitor when you look at one of those small handheld devices.
InViso's technology, OptiScape, is available in two forms: eShades, which you put on like a pair of glasses and plug into the cell phone or other device; or eCase, which resembles a PDA and which you hold close to your eye like the ViewMaster you may remember from childhood. OptiScape is not the first microdisplay technology. What makes it unique among rivals such as Colorado Microdisplay is that it is the first to integrate an imager on a microchip with the magnifying optics so text can be read easily from several angles. So far InViso has attracted $33 million from VC firms and corporations such as Qualcomm. Devices incorporating OptiScape should reach consumers later this year.
Kids Create a Company
ITZ TOYS: Children don't generally build real companies with their toys, which makes Matthew Balick, 12, and Justin Lewis, 11, both of Highland Park, Ill., extraordinary. When they were really little (eight and seven) they were at a basketball camp banquet, and during a lull in the festivities they got a little bored. So they extracted from some pizza boxes the small plastic stands that are put inside to keep the top from sticking to the cheese and tomato.
Matthew and Justin observed an interesting phenomenon of physics, along the lines of actions and equal and opposite reactions. When the boys pushed on the stands, the stands flipped-and switched on the boys' creative thinking. With the help of their fathers, they got in touch with toy developer Peter Gantner, who was the founder of Toy Craze (creator of Pogs), based in Cleveland.
Gantner traveled to Chicago to meet the boys and liked everything about the idea, including the fact that the inventors were kids who knew what kids like. However, no one else at Toy Craze was enthusiastic enough to take it on as a project. So Gantner quit and created a new company in Phoenix, Itz Toys Inc., based on the boys' creation. The toys, which they named Flip-Itz, look like three-legged spiders. They come in 28 designs, each a character devised by Matthew and Justin. There's a fireman named Burnie and a cat named Purrl. For a start Itz Toys has an agreement with a chain of 10 Pizza Hut franchises to have Flip-Itz replace the usual plastic stands in their boxes. The company expects sales of $5 million this year. It is now trying to take the concept national-and international.
Matthew and Justin are not officers of the company. They share in the royalties, however, and remain involved in the design of new models. Gantner calls the boys every Monday night for a conference, provided they have finished their homework.
Everyone's a VC MEVC Who wouldn't want to experience the thrills and perhaps even the financial rewards of being a venture capitalist? So about 20,000 small investors have gone online and transferred $330 million of their savings into meVC Inc. in San Francisco, which runs a VC fund that will invest in tech startups before they go public. It started trading last June. The idea is that of Peter Freudenthal, formerly a biotechnology analyst at the investment bank Banc America Robertson Stephens. Freudenthal is not at all discouraged that investors involved in VC undertakings seem wary at the present time. His bigger challenge could be some imposing potential rivals like Fidelity and Schwab that are developing similar funds for the wealthy, not the masses. The strategy seems to be working: meVC.com is bringing in $7.5 million a year in revenue.
Palm of the Dashboard
MOBILEARIA: Do you take your cell phone into the shower and your PDA to the beach? If so, Tom O'Gara is a friend of yours: He has created a wireless service for using these gadgets in the car. The idea for MobileAria Inc., based in Mountain View, Calif., came to O'Gara while visiting auto-parts maker Delphi in 1998. He and co-founder Dan Kolkowitz were wowed by a futuristic van with TV screens and streaming audio and video. But they figured the James Bond getup was years away. Yet people needed help accessing information in their vehicles.
Considering that the market for voice and data automotive services is expected to reach $33 billion by 2010, it's not surprising that O'Gara counts Delphi, Palm, and the VC firm Mayfield as investors. He is lucky: Palm will help market the product. Delphi will ensure that vehicles are equipped with the hardware, the Communiport Mobile Productivity Center. The MPC will provide voice-recognition capability and sockets into which a driver can plug his PDA. MobileAria is the voice-enabled content provider that consolidates all the information the driver wants and delivers it wirelessly in the car at a cost of about $10 to $50 per month. O'Gara, who isn't making any revenue projections yet, says the service will launch by year-end.
How Much for an Atrium?
MOCA SYSTEMS: When working as a carpenter while earning a Ph.D. in civil engineering at MIT, Sarah Slaughter, now 40, began to wonder just what impact subtle changes in architecture and design-like the addition of another floor-have on a building under construction. As an assistant professor at MIT in 1995, she and her students labored for five years to build a database of actual scenarios from more than 200 construction sites. To fund the effort, Slaughter got a $200,000 grant from the National Science Foundation to launch a Newton, Mass., company, MOCA Systems Inc. (Models of Construction Activities) last year. She hopes revenues will hit $10 million by 2002.
The Paperboy Abroad
NEWSPAPERDIRECT: Leaving your hotel room in the morning in Buenos Aires, you find that the staff has left a digest of news on the doormat. Nice, but it's not the same as getting the daily newspaper you have long relied on. A new delivery system can make you feel more at home abroad: NewspaperDirect, the creation of Miljenko Horvat, a former Citibank executive, along with Esther Dyson, an expert who runs a global information service specializing in Internet technology development (she's one of our judges; see page 69), and Anatoly Karachinski, president of IBS Group Holdings, a Russian information technology company.
Each day, NewspaperDirect transmits electronically the full version of some major U.S. newspapers-including the Wall Street Journal, USA Today, and the Washington Post, as well as some international papers-to hotels around the world including Westin, Hilton, Hyatt, Radisson, Marriott, and Ritz-Carlton. NewspaperDirect provides the hotel with a PC and a couple of printers large enough to handle paper 11-by-17 inches. The hotel gets only the newspapers it requests, pays NewspaperDirect $2 to $3 a copy, and either passes the cost on to you or writes it off as an amenity. To date, the New York City and Vancouver, B.C.-based company has clinched more than 140 alliances including distribution deals with the bookstore chain Borders and Holland America cruise line. Projected 2001 revenues: $5 million.
|
Derby Management
399 Boylston Street, Boston, MA 02116
Tel: 617-292-7420 |
|
