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IBDN Under the Radar

Hmmm…. I just realized I never published this report. This is just an info dump out of my head. There are no doubt statements somewhere in here which can both help and threaten the companies involved, but it’s nothing they shouldn’t have thought of before.

IBDN Under the Radar was a day-long event brought together companies seeking funding, VCs, and people like myself to get a sense of the state of innovation in the Valley. The event was expensive - $390 (a package deal that included a $95 No Frills membership – for members it was $295, for nonmembers it was about $400). That kept out the riffraff. There were no bloggers here, and very few job-seeker types. The format was highly regulated – a series of timed stages on the order of 6 minutes for presentation, then ~7 minutes for questions from the VC panel. The below is the full agenda of company presentations. There was also an intro session and a closing session with a panel of VCs moderated by CNet journalist Rafe Needleman.

The strongest message from this event was the lack of real innovation in many of these players. It’s a clear signal that the last 2 years of little seed-stage funding has yielded few truly interesting companies. The weak companies here should not have been allowed to present. The fact that they were means that this was the best they could find. VCs I’ve spoken with on this topic have agreed. When early stage funding dried up, we could see it in the VentureOne statistics, but now we’re seeing it in the market in a lack of viable startups ready for the next stage.

Here are my biased, potentially misguided, and personal notes from the event, broken out by session:

Communications – 9-10:15am

• BEDD was first. What a strange operation. This was by far among the shakier ideas. I met the marketing guy before the session – an old college buddy of the founder, he took a day off from his real job of surgeon to attend, saying the event cost him his $20K of fees. That’s the first hint here this is a “dentist” style operation – they can fund it mostly themselves and they have. The company is based in and running out of Singapore. They have customers there now and sell the application for $.60 a month, $7 a year. It is a “viral” Bluetooth application that serves as dating service and connector. I load my ideal man into my phone, and if I should pass him, it will let me know. Same idea for things like flat rental. Totally crackpot, especially here in the US. What I did learn of interest from the surgeon, which went unmentioned in the presentation, was they were primarily running off a patent portfolio, and that they have some overly broad and spurious sounding patent for peer to peer matching over Bluetooth. These guys don’t seem capable of growing a real business, but their patents could cause trouble for someone else down the road.
• Idetic is fielding MobiTV in the marketplace – tv content streamed to mobile phones. They gave a good presentation, and seemed to have done some of the work in content acquisition and partnering. Their technology is bandwidth intensive, which is an attractor to higher-priced data services, but originally the app drew down ~45kb/sec to support the video. Idetic has done tuning to bring that down to ~18kb/sec with decent-ish quality, which has pleased carriers.
• Traverse Networks brings presence-driven call routing and handling, aiming to manage multiple phone lines and voicemail boxes. Apparently it’s software for mobile phones that lets you select where you are, and opt to receive landline calls on your cell phone. The software also lets you manage preferences for your landline, so that you could route all calls to your land or office line. The tricky part here is that mobile handsets are currently the best place to deploy this software (or VOIP providers, but that wasn’t mentioned) – so that’s the deployment platform. Traverse’s presentation said they had assembled a decent array of partners and were already well integrated with the RBOCs and traditional carriers. They had exploited regulation that required carriers to forward calls out of their systems. Traverse seems like it has a decent offering for right now and has laid much of the groundwork to establish it. However, if you look at people abandoning their landlines (both home and office) for wireless phones – this is just one solution among others that the market – the people who see this as a pain point – will evaluate. In 5-10 years time, this switching problem will be largely eliminated by the move to IPV6. Traverse won this session’s VC pick.
• Zeosoft gave a presentation that was heavy on statistics and research but that left too little time to explain their business and business model. It’s a Java framework for mobile application delivery and billing, and sounds very much like a startup version of Nokia’s Preminet. The area where this startup did sound like it had an interesting idea was in its use of Cloudscape-style local databases to maintain state and a repository of commonly used data. In this sense, Zeosoft might be able to sell directly to enterprises looking to make existing applications mobile, but yet prefer to keep the data and the applications on their own system (I believe this is a service, but I’m sure they’d sell a big customer a blackbox appliance).

Security – 10:30-11:45am

• AirZip has integrated a software security solution with office products to maintain security of documents at the print (output) and scanning (input) level, in addition to the file system level (who can read, change, etc).They’ve got partnerships with Sharp printed in the flyer, but mentioned Ricoh, Canon and Xerox. The system works on a file folder level – expecting that users will save documents to be protected into a particular place, which I thought was quite burdensome to the user. In order to access a document, the user must be authenticated, which involves bouncing against a central server – one of the VCs asked ‘what about when flying in a plane?’, to which there was no clear answer. I was generally underwhelmed by this, but can see vertical market potential, especially in banking and financial services and healthcare. This would be a low-cost, theoretically countervail-able solution of the sort that would fit for mortgage and loan operations, health insurance claims and the like.
• Akonix is going after securing the enterprise instant messaging space, as an entrée to build out a more fully functioned security platform for other kinds of messaging. They are funded in part by their founder, have 70 people and are supporting one installation with 50K licensed seats. The tool can work with IBM’s Sametime and Microsoft’s Live Communication Server. They basically just serve as a message gateway through which to channel IM and screen it for content and malware. Akonix won the pick of the session.
• Vidius is military quality encryption somehow based on sonar waves. They claim that they fingerprint individual pieces of a document so that it continues to be protected if there is a change. It wasn’t clear how granular the fingerprinting extended – to the paragraph or sentence level – but it certainly covers the full document, chapter and memo level. The technology here might be interesting for someone else to explore, but they’ve got some 25 patents and were dead serious about the integrity of the encryption models.

Enterprise - 2:15-3:30

• Digipede aims at the Microsoft-only distributed computing market, which they say is growing rapidly. They look to harness the latency in application processing and in general underutilized capacity of Wintel boxes for processing, a la SETI@home. The idea is to use these cycles to provide peak utilization on demand capacity. The VCs commented that this likely to be a smaller market because most distributed computing is down in *nix HPC environments.
• nLayers’ software listens to the traffic on the network, looks inside the packets and creates a model of the data center. They aim to attack the problem of not knowing what is running where on the network, so that IT managers “do not have to unplug the box and wait to see who complains their application is down”. I’m not aware exactly how unique this technology is, but it seems like a very useful component in the toolkits of IBM’s and HP’s consulting orgs, both of whom are customers. This seems like a prime acquisition play. This company won the pick of the session for the VCs.
• Singlestep is a technology platform provider selling to service providers who need to help their clients integrate disparate services. It reminded me of capabilities of Opsware. They sell their platform to providers, who then use it to provision their clients. The core of their IP is a toolset to describe interfaces and workflows in a visual manner so that operations personnel can understand what is going on and quickly make changes. The prime value it brings comes from its autonomics capabilities – as it’s possible to describe powerful rules in the system to keep operations up and running. It’s very high performance, with live installations processing 3 million events a day. They’ve partnered with IBM around IBM’s first autonomic computing engagement, and their technology is apparently playing an important part in delivering that QOS. I found their case most compelling of this session, and it struck me as the startup of the day most relevant to the enterprise markets I’m looking at. Chris Noble is the CEO, I spoke with him afterwards and can get more information if you are interested.
• Trigence has a very complicated product, that sounds like it’s roughly like wrapping applications in virtual machine-lets so that they can be moved about the data center as needed. The founder didn’t get across much information during his presentation because he was talking in theory.

Digital Home – 3:45-5

• Akimbo launched a niche digital content delivery service. They aggregate and make available for on-demand consumption niche programming – old tv shows, sports events, cooking shows, and other special interest categories. It’s a low cost model for them because this is not deemed premium content that the content owners can easily monetize, but if made available through this system content owners can gain a new revenue stream. They’ve been working with Hollywood for 2 years to secure exclusive rights to content and are adding between 50-100 program selections each week. Subscription pricing starts around $10/month and currently requires purchase of a dvr (which Akimbo has been developing itself for lack of availability for a OEM version that meets their requirements). Right now it’s a progressive downloading which takes time, that should be done ahead of time (overnight for example) – instead of on demand, but they are working on that. They’re early to own a market, one that matches exactly with the “Long Tail” (article in Wired, blog) philosophy that’s been seen with Rhapsody-type services – that each show will be consumed by someone out there.
• Watching iControl was funny in a deeply ironic way because my boyfriend, Mike worked for a startup with this exact business model (only they were selling to Europe) that died a slow death. Even the screens looked the same - too, too bad. They sell home networking systems, basically a control box and devices that link to a central server via your home network connection. This enables dreams of monitoring kids from work, opening the garage for the delivery man, etc. The problem is real burning customer need and lack of a concrete problem to solve, combined with the fact that these systems are still too hard to set up, maintain, and troubleshoot by most home users, and the service provider they’re starting a “paid trial” with (has to be Earthlink or Comcast since they’ve had an interest in this for a while to sell their broadband svcs) doesn’t have the technical support staff (or the margin) to really support it. All the VCs were very harsh on this startup.
• Mirra makes consumer backup and media distribution servers. They’re selling them in mainstream consumer electronics stores now. It’s a nice package to serve as a central media server for the house and also to backup media, solving the problem of both having too many digital pictures and sometimes deleting them all. VCs questioned whether this was a technology that would really be adopted by mainstream households, rather than just us tech types in the Valley. But for now it’s a good business – the boxes still have a reported 40-50% margin on them (that won’t last), after leaving 25% margin in the channels.
• Roku also makes boxes. They make audio equipment that play from media servers. They showed pictures of pretty machines that would, for example, make a great bedside radio, but didn’t give a hint of a strategy or a larger services tie in. Roku might just be a plain vanilla consumer electronics company. It’s worth noting that their founder is Anthony Wood, who, according to Roku’s description, invented the DVR. It may be a case that he’s very good at coming up with CE innovations, but leaves it to companies like TIvo and Akimbo to try to build a value-add services business around it — sounds like a good place for a case study.

Companies to watch

• InnerSell is a peer to peer lead swapping service aimed at local business communities. I talked to the founder for a while, and he’s a sharp guy, but the value proposition is murky.
• Buzznet has built a photocommunication platform for sharing photos from mobile devices. It has some aspects of social networking and community building, and other aspects of marketing and advertising potential.
• Commendo is big in Mexico, but sounded confused. The founder stressed the need to run data centers like manufacturing facilities, with process controls and attention to efficiency, but didn’t make it clear how his software? service? product? delivered it.
• Satori Labs built its Sure Scribe technology on the Anoto technology to streamline digitization of text. The application is targeted towards medical applications.
• Nisvara is a materials company that has come up with a special material to diffuse heat. This is important (I think) to make less noisy home devices. Their value proposition this year (I spoke with them last year) is trying to sell data center power and cooling savings. That strikes me as a very difficult, high end area to persuade to adopt a new material. Home users are much less risky, and probably more appreciative of the benefits. Data centers have a lot of problems, heat and power consumption often drive server consolidation not buying a lot of new servers with lower power consumption.
• GroundWork Open Source Solutions sounded a lot like Spike Source, whose CEO, Kim Polese, I heard speak earlier in the week at the SDForum Open Source Conference. GOSS has customers though (which I don’t think SpikeSource had), 25 in the last 8 months. I have the same doubts about GOSS’s long-term business model as I did about Spike Source.
• Protego Networks is headed by a spunky Asian woman who was much more enthusiastic than explanatory. She talked a lot about all the great things they do for their customers in the network security and compliance spaces but did not explain what they do or where they’re headed.

Winners overall:

• Security: V-secure whom I did not hear present, but Izhar Shay, their CEO whom I spoke with briefly was an interesting guy.
• Communications: Traverse
• Enterprise: Tableau whom I also missed
• Digital Home: Orb Networks whom I missed too
• Companies to watch: Groundwork (shows what I know)

My timing wasn’t as good as I wanted - I clearly missed hearing pitches for some of the most exciting companies out there. Still I wanted to break up my day so that I could attend one session from each segment.