Ask any entrepreneur about finding success from inside a startup and they'll tell you that a number of things need to come together for it to happen.

You need a great idea, the right team to get it done, lots of hard work and dedication along the way, a little luck, and almost perfect timing. But few would ever say it was ever easy.

Now, try sitting on the sidelines and trying to figure out which ones will hit the market with that killer application, or that sought-after bell and whistle.

That's what the OBJ asks industry experts to do every year, and to their credit, they've had pretty good success choosing winners. The 2006 installment of Startups to Watch published almost a year ago highlighted 10 companies that looked like they had the necessary ingredients to succeed.

That doesn't mean there weren't others out there in stealth mode or that simply didn't register, for one reason or another they just fell under the radar.

Nevertheless, those chosen have done well, and although some are further ahead than others, they are all still operating and pushing to get their products to market. Here, in alphabetical order, are updates on the 10 companies selected by the OBJ in January as Startups to Watch.

ADSCAPE MEDIA, INC.

Founded: 2001

Number of employees: 17 (8 in Kanata, 9 in San Francisco)

Venture capital to date: US$3.2 Million

Type of product: Software

"No doubt, there is even more big news in store for this relatively young company of interactive entertainment veterans."

- Eva Woo, vice-president of marketing.

The message from Adscape Media is pretty clear and simple: Watch this space. And it might be a good idea to keep a close eye on the company, because it looks poised to score enough points to get to the next level.

Adscape develops software to help advertisers reach eyeballs through video games. The value proposition is simple but ingenious: Its embedded ads in video games allow players to link directly outside the game to purchase products, connect with other gamers, and access relevant information targeted to their specific interests.

"By creating the link between the virtual and real worlds, Adscape Media gives gamers more interesting choices in the game, provides advertisers with more compelling ways to reach the video game consumer, and creates more incremental revenue generating opportunities for game publishers," said Eva Woo, vice-president of marketing.

While the company wouldn't give any details, it hinted that a big announcement would happen right after the Checkup was published. That would have history repeating itself, as Adscape pulled in its first venture capital infusion of US$3.2-million only days after being named a "Startup to Watch" in January.

"We were able to build out our infrastructure in calendar year 2006," said Ms. Woo. "We are in the final steps of inking deals with key publishers and will be coming out with some big announcements in Q1-2007."

It also attracted Ms. Woo, who joined the company after five years as director of technology for educational toy manufacturer LeapFrog Enterprises. Before that, she was director of marketing for MySpace.com and part of the original startup team.

The company also added a couple other key people, which increased the combined gaming experience at the company to more than 100 years.

But attracting more experienced executives to the company also meant that it had to open a U.S. office, which soon became its headquarters.

So, it seems that Adscape has joined a long line of Ottawa startups that transformed into a U.S.-based company with a national capital R&D connection.

BLACK CORAL INC.

Founded: 2001

Number of employees: 10

Venture capital to date: $1 million

Type of product: Software

"2006 has been a banner year for Black Coral Inc. Our strengthened relationships with Microsoft and ESRI have been instrumental in our securing contracts within Canada and the U. S. within our target markets of our homeland security and the military."

- chief executive Doug Duncan

It would be difficult to question Doug Duncan's dedication to his latest venture.

While most chief executives pour blood, sweat and tears into their startups, Mr. Duncan is also Black Coral's lead investor. Although the company hasn't had an official round of financing, its venture capital to date came exclusively through its boss.

"Our CEO, Doug Duncan, converted his many 'loans' to the company into equity," said chief financial officer Larry Paget. "We regard him as an investor - the sole investor as of today, and he has funded the company in the amount of just over $1 million."

Black Coral offers two products that address the need for enhanced communication, collaboration and coordination in emergency response and defence operations. Its technology focuses on trying to bring the paper map into the 21st century by automating it. Its map-based applications - Black Coral LIVE and Black Coral MOBILE - enable tactical teams to communicate in real-time, collaborate and coordinate more effectively during emergency response and military operations, especially when it happens in unfamiliar terrain.

The company motto reflects the simple idea behind its technology: "See More, Understand Faster and Make Better Decisions." And it seems the technology is being tapped as a good buying decision by a number of military and emergency services providers. This year, Black Coral LIVE was integrated into Public Safety and Emergency Preparedness Canada's (PSEPC) operations centre to increase the level of situational awareness, and it also successfully created an Incident Management System from scratch for the classified network at the Department of National Defence Command Centre. That installation will see a new generation of web-based applications developed for and deployed by the Canadian Forces.

The company was also awarded a contract under the U.S. Department of Defence Foreign Comparative Test program.

EMERGING MEMORY TECHNOLOGIES INC.

Founded: 2004

Number of employees: 35

Venture capital to date: None.

Type of product: Semiconductor memories sold as memory blocks and memory compilers

"We are pleased with our continued growth in 2006. We have added several Tier 1 customers this year, that allowed us to grow all EMT centres: Canada, U.S. and India. We also signed an important license agreement with a world leader in SOI memories like Renesas."

- chief executive Sreedhar Natarajan

After growing to 24 employees by the end of the 2005, Emerging Memory Technologies continued its growth in 2006 by adding another 11 bodies and opening a third Design Centre in Dallas in addition to those in Ottawa and India.

The Texas location is headed by the company's new vice-president of product development, Bryan Sheffield, who was previously with Texas Instruments.

Speed is what the company is all about, and it's wasting no time getting its advanced memory modules used in the design of new integrated circuits to market. As EMT celebrates its second birthday this month, it has also had products on the market for almost 21 months and surpassed $1 million in revenues long ago. The company hasn't attracted any venture capital so far, but mostly because its revenues have made it unnecessary.

An agreement to license high-density capacitorless twin-transistor, random access memory from Japanese microcontroller company Renesas Technology promises to bring even more success for the company.

Designed to allow fast, high-density storage to be embedded in power-efficient system-on-a-chip, EMT will use the technology in the emerging silicon-on-insulator (SOI) complementary metal-oxide-semiconductor (CMOS) market.

If it all seems complicated, it is. But all users need to know is that it will make almost everything run faster and faster as the technology gets integrated into mainstream equipment. Considering EMT's track record so far, it won't take long for the new product to hit the markets and start bringing in additional revenues.

EPIPHAN SYSTEMS INC.

Founded: 2003

Number of employees: 10

Venture capital to date: None

Type of product: Hardware, with proprietary software designed in

"2007 will see the continued development of new products with our next generation VGA2USB PRO expected to release in early 2007."

- Steve Ryan, COO

Epiphan began 2006 looking forward to more growth, both in revenues and product lines, and expecting it to be "a very busy, and very exciting, year."

There was good reason for the optimism: Epiphan started 2006 by creating a beachhead in the niche market of VGA signal processing and attracting more than 500 customers the previous year. The success in 2005 brought demand for new product lines, and the company delivered.

"Epiphan has successfully brought new products to market in 2006 with the release of our DVI2USB and KVM2USB products," said chief operating officer Steve Ryan.

"Also, we have successfully secured several OEM agreements to integrate our core video graphics array (VGA) signal processing technology into a variety of industrial and commercial applications."

The company's technology can capture images from laboratory, medical, and scientific equipment and create specialized outputs for a number of different uses. Since inception, Epiphan has shipped over 2,200 units to 56 countries around the world.

A partnership with researchers at Detroit's Henry Ford Health Services to develop remote medical diagnosis for astronauts on the U.S. Space Station and the U.S. Olympic hockey team turned out to be a fortuitous venture. The success of the partnership led to the creation of a "sister company" in June called Mediphan that uses technology based on Epiphan's products in the medical field.

The new company made its debut at the 2006 World Congress on Ultrasound in Emergency and Critical Care conference in New York City. Its DistanceDoc application allows doctors to treat patients anywhere on the globe while the MedRecorder product can save, organize, archive and retrieve the images created at full resolution.

Both companies are led by chief executive Mike Sandler, with chief operating officer Ryan and chief technology officer Misha Zhilin also pulling double duty. Neither outfit has received any venture capital funding, and both continue to self-fund growth through customer sales.

NEWSTEP NETWORKS

Founded: 2003

Number of employees: Approximately 70

Venture capital to date: Approximately $27 million

Type of product: Software

"2006 was an exciting year for NewStep Networks. In addition to partnering with Embarq for their enterprise converged services rollout, we raised an additional $7 million in funding."

- Neil Baimel, chief executive

NewStep Networks' success hinges on helping service providers drive growth through new applications available from the convergence of wireless, wired, and broadband networks.

However, the company still needs to have a bit of patience before things will really start to take-off. But while the rollout of both the services and the handsets needed to use them is still in its fledgling phases, it doesn't mean the company has been standing still since January.

NewStep expanded its leadership team in June by adding a number of key hires, including industry veterans Donna Cowan as vice-president of sales and business development and chief marketing officer Craig Gosselin.

Chief executive Neil Baimel told the OBJ in January that the company would be entering into trials with Tier 1 service providers and planned to have several more arranged by the end of the first quarter of 2006. And to do it, the company would need more cash, which had it already looking for new investors.

Things were relatively quiet until October, which turned out to be a huge month. In the span of two weeks, NewStep unveiled a new platform for enterprises and small carriers, secured $7 million in series B round of financing to help develop new technologies, and announced a partnership with Embarq, a Kansas-based communications services company with about 20,000 employees operating in 18 U.S. states.

"The support from Embarq and our investors will enable us to take the company to the next level as 2007 looks to be the year for the service convergence market to take off," said Neil Baimel, NewStep Networks chief executive.

The Embarq deal will bring the first major fixed-mobile convergence services rollout in the U.S. by a Tier 1 service provider. It will begin in six markets and once in operation, it will allow users to handoff calls between wireless, Wi-Fi and wired networks.

While it's still early, NewStep looks to be at the front as convergence momentum increases.

ONECHIP PHOTONICS

Founded: 2005

Number of employees: 12

Venture capital to date: None

Type of product: Application-specific photonic integrated circuit (ASPIC)

"We've accomplished a lot this year thanks to the outstanding support of the Ontario Centres for Excellence and with the right partners on the VC front, we should be able to create a significant company in the Ottawa area serving large and really exciting global markets."

- chief executive Jim Hjartarson

When new chief executive Jim Hjartarson was asked to describe OneChip's technology, he simply said: "Optics...really cool optics."

That was the thing that attracted the former Catena Networks chief executive to the fold.

"Only once in a very long while does a true breakthrough come along," he said. "When I saw what Valery and his team had cooked up, I jumped at it."

With a team assembled from the ashes of MetroPhotonics, the company began to develop chip technology that promises to achieve Internet speeds about 1,000 times faster than current asymmetric digital subscriber line (ADSL) solutions. And it's also attracting others.

While it only had seven workers in January, the company almost doubled its employee count to 12 in the last 10 months. Included in the new hires were Mr. Hjartarson and several key staff members needed to ensure the company had the people in place to drive growth.

Mr. Hjartarson tapped into his connections from Catena Networks to fill some key positions, with Catena co-founder Andy Weirich rejoining his old boss to become vice-president of product line management, while its former managing director for Asia, Yit Lee, took a similar role with OneChip.

Although investor interest has been very good, according to Mr. Hjartarson, and the company "should have interesting news in the coming months," it is yet to announce any venture capital infusions and will need significant investment to get its product to market.

So far, the only cash available has been through government grants, despite a venture capital offer for pre-seed funding made at the end of December. OneChip expected to use those funds to begin customer trials by January 2007 after having its first photonic chip on the market sometime in late 2006. Perhaps those announcements are the ones Mr. Hjartarson expects to make in the next few months.

PROCESS PHOTONICS INC. (PPI)

Founded: 2002

Number of employees: 13

Venture capital to date: $1.5 million

Product: Laser-based material processing systems

"We have doubled sales every year since founding, and we expect to do the same this fiscal year." - chairman and chief executive Don Gibbs

Process Photonics' story is one that has replayed many times in Ottawa and drives much of the technology growth in the city.

It started when GSI Lumonics closed in 2002 and put more than 200 talented people on the street. It was only a matter of time before a group of its former employees figured out they could band together and start something new.

Process Photonics was one of the outfits to take shape in the aftermath. It provides precision laser machining with a customer base mostly among equipment manufacturers that supply the medical, semiconductor, electronics, and aerospace industries.

The company has eight new products under development. Its bread and butter includes systems for circuit board via drilling, flex circuit processing, semiconductor wafer processing, general high precision material removal, as well as machines for medical component manufacture.

With most of its customers in the volume manufacturing business, PPI continues to receive repeat orders that contribute to a steady revenue growth curve. At the beginning of 2006, about 90 per cent of its sales were exports and the company expects this to continue for the foreseeable future.

PPI has attracted partner interest from several companies in the Far East, but no deals have been announced so far. The company also runs a technical consulting and integration business that helps other companies' development teams find solutions to problems.

While things are progressing on the customer, sales, and revenue fronts, the company has not increased its employment since January, but it continues to predict that it will double by mid-2007.

THIRD BRIGADE

Founded: 2004

Number of employees: 50

Venture capital to date: $19 million

Type of product: Security software

"2006 has validated that our product and strategy are the right ones to address this market opportunity. This year, dozens of enterprises, in a range of sectors including government, telecommunications and financial services, have licensed our host intrusion defence product to protect thousands of servers."

- Wael Mohamed, chief executive

Being named a Startup to Watch by the OBJ was only the first of many wins for Third Brigade in 2006.

When the company was selected as a Startup to Watch 11 months ago, chief executive Wael Mohamed asserted that the increased need for intrusion prevention would help it continue to grow and attract more customers. The plan also included entering into some key strategic partnerships this year to help extend its global distribution channel.

Two weeks after the issue was published, Third Brigade began that process by hiring Carlos Gonzalez from Oracle to take the role as vice-president of sales for the Americas. Part of his responsibilities were to drum up interest in the latest version of its intrusion prevention system called Deep Security, released a week later, and to get some partnerships established.

It worked. Deep Security quickly attracted new customers both in government and the private sector, with Third Brigade announcing a number of wins in the next few months and some new partners.

While the company was named as one of the top 25 on the 2006 Branham 300 Top Up and Comers list in March based on its 2005 performance, its security software continued to play the role of upstart in the market and solidify its reputation with customers.

"In some cases it has displaced much larger competitors' products, and is becoming part of the standard server configuration within organizations," said Mr. Mohamed.

"The feedback from customers and industry thought leaders alike is that our product is better: it provides broader, faster and simpler protection for mission critical systems."

In an interesting twist, one of its customer wins was fellow Startup to Watch, TrialStat, which entered into a deal with Third Brigade in May for its intrusion prevention products. Along the way, the company added several key people to its board of directors, including Paul Tsaparis, chief executive of HP Canada, as chairman, and Alberto Yepez, vice-president of identity management and security strategy at Oracle.

TRIALSTAT

Founded: 2001

Employees: 60

Venture capital to date: $5.5 million

Type of product: Software

"We've more than exceeded our growth plans for this fiscal year with 421 per cent growth year over year. Our current expansion in the U.S. is gaining momentum and producing positive results, while we continue to build on our European presence."

- Jonathan Barker, president and CEO

It has been a busy year for data management software company TrialStat with new hires, big customer wins and conference appearances.

In fact, TrialStat was so busy it was a challenge to even get anyone to respond to the OBJ's requests for basic information before the press deadline.

When contacted in January for the Startups to Watch issue, chief executive Jonathon Barker said the company expected its employee numbers to grow by about one-third by October, which would put its headcount at about 35. Instead, the company has more than doubled to 60.

"We've more than exceeded our growth plans for this fiscal year with 421 per cent growth year over year. Our current expansion in the U.S. is gaining momentum and producing positive results, while we continue to build on our European presence," Mr. Barker said last week.

In January, the company was fresh off its venture capital win and looking for some new executives. Among the new hires were three vice-presidents: software development, clinical affairs, and business development. The company also introduced a number of enhancements for its technology, including the industry's first browser-side encryption module for electronic data collection, before unveiling the latest version of its ClinicalAnalytics software in October.

VAASAH INC.

Founded: 2001

Employees: 7

Venture capital to date: None

Type of product: Home Healthcare software applications

"We are seeing a lot of activity in the home healthcare area, especially from investors in the U.S. and have focused quite heavily towards the U.S. as well as global markets."

- chief executive Rajiv Muradia

While things are not moving along as fast as VaaSah chief executive Rajiv Muradia would like, he knows it's a waiting game.

With growing patient waiting lists and increasing nursing and primary physician shortages, the pressure is on provincial governments to look for more innovative solutions for delivering medical care, such as tele-health.

"It's just matter of time before funding is allocated towards keeping and caring for the patient in their homes," Mr. Muradia said.

And when healthcare providers begin to explore new areas, VaaSah will be ready. Its technology collects medical data from patients using laptops or personal digital assistants and then sends it to the healthcare provider treating the patient. It can also be used to remind patients about taking medication and to establish video links between healthcare providers and patients.

The company spent 2006 continuing its successful launch of its initial products to help deliver rural tele-health services, as well as address home disease management markets. With that launch put to bed, it is now working on a consumer wellness product.

"We have just showcased our rural tele-health solution at the recent ITU Telecom World event in Hong Kong and received excellent feedback," Mr. Muradia said. "Also, we have just signed a strategic partnership with France Telecom to address the home healthcare monitoring market globally."

To help ensure the company had the expertise to get the job done, it hired seasoned executives with extensive high tech experience, as well as business development and marketing backgrounds. However, its overall employment numbers dropped from 10 to seven. It has yet to secure any venture capital funding after hoping to announce a seed financing round early this year.

As 2006 comes to an end, the company is finalizing a few additional pilot projects that it plans to begin early in the New Year.

By Jeff Pappone Special to the Ottawa Business Journal