It's time for another edition of the Ottawa Business Journal's annual Startups to Watch and this year's list offers another diverse group of young — and sort of young — companies looking to find success.
While there's no doubt that the 10 companies profiled this year have potential, it certainly doesn't mean there are not others out there with the right stuff.
Indeed, two startups identified by our ad hoc panel of experts, investors, mentors, industry veterans, and local technology executives were contacted by the OBJ but respectfully declined to be profiled. Stay tuned as their stories may emerge sometime in 2007.
Those who agreed to be included share a zeal for their technology and a drive for success, but their stories are as diverse as their technologies. Among them are pharmaceutical plays, software developers, digital imaging creators, a router/switch builder, and chip makers.
Only one is building a large system-type product in the networking arena, which continues a trend in the city where the post-bust landscape dictates smaller plays in more niche markets.
While being picked for the OBJ's Startups to Watch doesn't guarantee success, it's an indication that the high-tech community at large has expressed an interest in their progress.
AVOCA SEMICONDUCTOR
Year founded: 2001
Employees: 7
Venture capital: None
Product: hardware and software
"We are focused on delivering the most effective and satisfying end-user experience with voice control. Our AMG and IBM alliances help ensure that Avoca technology and products will provide customers with end-to-end user interface solutions that make digital media systems easier to use."
— Iain Scott, president
OK, it's not exactly the sophisticated Star Trek talking computer that can easily do just about everything and answer almost any question.
Nevertheless, Avoca Semiconductor's voice control offering tops the cool list when it comes to technology.
"It's not quite as ambitious — the Star Trek thing implies a computer with tremendous capabilities to interpret absolutely anything a person might say and go after any kind of data," said Peter Fillmore, vice-president of marketing and sales. He is also a company co-founder.
"The focus that we have as a company is the technology that allows you to put targeted voice control and search applications in place."
In October, the Ottawa chapter of the Institute of Electrical and Electronics Engineers singled out Avoca's voice interface platform (VIP) for its 2006 award for innovation.
Earlier this month, the company signed an agreement with All Media Guide (AMG) to be its technology partner to create a voice-addressable set of data. While they've started with about 8,000 tracks of music as a test program, AMG has a collection of roughly 10 million items.
AMG provides meta data for music and video material which gives Avoca's technology the markers it needs to return accurate results. The computer can search this meta data to find a specific track when the user asks.
"All the data is available, and what we are doing is making it easier to access that information and search it," Mr. Fillmore said.
In addition to the AMG deal, Avoca also signed a second agreement with IBM for embedded speech technology to be used by Avoca in the design of its voice control and search product family.
While the company is focused on music for now, the technology can be adapted to do a myriad of things, from adding voice control to heating and lighting in a house to helping improve quality of life for people with a disability.
"The immediate application is the control of music and video collections, and the next step would be home automation — lighting, security, and redirecting media output to different speakers, for example," said Mr. Fillmore.
While the company does have a customer on the line, Avoca will still be seeking to raise about $300,000 of seed money in the first quarter and it expects to be looking for another $700,000 by the third quarter.
DISTIL
Year founded: 2005
Employees: 20
Venture capital: $950,000
Product: Software
"We have four Tier 1 customer wins, we're executing on our business plans way beyond expectations. Look to Distil to be the biggest software company in Ottawa in the next four years."
— Jonathan Adair, CEO
Distil's technology is all fun and games until someone doesn't get their certification.
The two-year-old startup's technology allows certification bodies to create role-playing, interactive testing which tests professionals' skills by gauging their responses in specific situations.
"We are able to have experts in the subject matter and establish patterns of correctness and then we can use machine learning and data mining technology to compare what the student is doing to the experts and therefore interpret skill," said CEO Jonathan Adair.
"And from what our customers tell us, we are the only people in the world that can do this."
Distil already has an impressive list of clients for its automated teaching and testing solutions after signing 10-year exclusive agreements with some of the world's largest certification bodies.
With 35,000 professionals to train, test and certify every year, the certification market tops US$730 million annually. Distil's product also certifies the certifiers who do the testing.
While the company has focused on the standards, training, and certification sector, the technology has applications in a number of different areas.
"You could use this in any skill-learning scenario," Mr. Adair said. "Anything where you have to demonstrate a skill or guarantee that you are skilled enough to do your job."
The company provides a standard platform to certifiers who create the interactive tests using a simple drag and drop interface. Distil charges a "modest fee" for the original sale of the technology, plus it earns royalties on the products developed by the certifier.
The company has attracted $950,000 in investment and it expects to close another round of financing worth $3 million by the end of March. The cash will take the company to profitability based on customer wins that have already been announced.
"We don't even need to go out and win more customer traction to accomplish this," Mr. Adair said. "But we will expand up to about 30 people and most of that will be engineers."
GRIDPOINT SYSTEMS
Year founded: 2005
Employees: 21
Venture capital: US$4.7 million
Product: Carrier ethernet service management and switch/routers
"The company wasn't formed from a technology that then sought to apply itself — it wasn't, 'We can make this widget, let's see if we can go out and sell it.'"
— Jim Arseneault, CEO
Gridpoint stands alone among this year's Startups to Watch as the only one of the 10 that's building a system rather than developing a component.
While Ottawa has seen a large number of companies developing chips and software modules over the past few years, few have ventured into the large system-type development area occupied by Gridpoint.
"We are trying to harness the intellectual capital that exists in this town that focuses on creating networks," said chief executive Jim Arseneault.
"It is more involved and closer to the likes of companies you see that can become a wholesome company. I hate to do the comparison to the Newbridge kind of approach, but it's a company that is designing products that it can sell and actually generate revenue on its own."
Part of the reason for the lack of these types of companies is basic: They take truckloads of cash to get to market and it's not easy to get investors to take risks in today's post-bust world.
But Gridpoint avoids requiring "gobs and gobs of cash" by focusing on the access control space and creating a "smart edge play" that allows the carriers to put more paying customers on their network in a fashion that generates more revenues through higher value services, Mr. Arseneault explained.
The company arose from a simple observation that networks tend to repeat their evolutions as they switch over to new technology. This happened through the different types of networks: time-division multiplexing (TDM), frame relay, asynchronous transfer mode (ATM), and now with Internet protocol and ethernet.
"The company wasn't formed from a technology that then sought to apply itself — it wasn't, 'We can make this widget, let's see if we can go out and sell it,'" he said.
"Ethernet jumped across from the enterprise space to the carrier footprint because it was attractive at its low cost points and high performance and what we are doing is adding the things it needs to make it a carrier-grade technology."
The immediate target is to have a product in a customer test lab by the end of March. Gridpoint has enough cash to get there, but it will need more investment to grow the workforce by 50 to 100 per cent and it expects to have revenue by the end of 2007.
IMASIGHT
Year founded: 2001
Employees: 7
Venture capital: $3 million
Product: Digital X-ray equipment
"I am just back from the North American Veterinary Conference in Orlando, Fla., and the reaction I got was that if we could deliver a product, it would fly off the shelves."
— John Brooks, CEO
While digital imaging has revolutionized photography and made taking snapshots easier than ever, many smaller medical clinics and veterinarians are still using old-fashioned film and developing in X-ray machines because the new technology is simply too expensive.
Enter Imasight, which hopes to change that with its simple but ingenious technology that brings the same advantages that digital has over film into X-rays, but at a low cost.
"It just makes sense: You don't have film costs, you can manipulate the images, get the contrast right, and you save time and money," said CEO John Brooks. "It's just a better diagnostic tool."
The company launched its flagship product, the ImaSight4600 digital radiography sensor, last week. While there are digital X-ray units that many major hospitals use, the existing equipment also costs about $500,000, putting it out of the reach of smaller medical and veterinary practices.
Developed in conjunction with the National Optics Institute in Quebec City, Imasight's technology has found a way to reduce the price of the digital sensor and make it affordable for smaller outfits.
The company's primary target for the digital product is the 30,000 veterinarian practices and animal hospitals in Canada and the U.S., which can add a digital sensor to their existing X-ray system for about $50,000.
"There are some cheaper systems out there right now, but they just don't have the image quality that is really required," Mr. Brooks said.
"I am just back from the North American Veterinary Conference in Orlando, Fla., and the reaction I got was that if we could deliver a product, it would fly off the shelves."
Another large market for the product are the 33,000 chiropractic clinics with X-ray equipment, but selling to any medical operation would require regulatory approval by the U.S. Federal Drug Administration (FDA) and Health Canada.
With the product expected to hit the streets in April, the company expects to have FDA approval by July. Once beta testing begins next month, the company will also be looking for venture capital in April to help get things going when the product is ready to ship.
JADED PIXEL
Year founded: 2005
Employees: 5
Venture capital: $350,000
Product: Hosted e-commerce
"We help businesses by providing the smartest, most easy to use e-commerce tool for becoming and staying successful at selling online."
— Scott Lake, founding partner
Scott Lake and Tobias Luetke just may be a parent's biggest nightmare: They proved that spending all your time snowboarding really can lead to a successful career.
The snowboarding-crazy pair founded Jaded Pixel after discovering that many of the e-commerce applications available were simply not suited to small- and medium-sized operations.
"We had an e-commerce snowboard site and went out looking for something that would help us sell them quickly and easily," Mr. Lake said. "But we found that the majority of hosted applications on the market were really over featured, so Toby and I sat down one day and decided to develop one of our own."
After Mr. Luetke built a basic selling tool that only had the features that they needed, a successful year of trouble-free sales convinced the pair that there must be other small- and medium-sized businesses out there looking for a simplified e-commerce.
Shopify was born with a straightforward goal: Get rid of all excessive features and make a simplified version of an application to make e-commerce easy for small businesses.
"The idea behind it was using design as a competitive advantage. We wanted to remove as many steps from the process and just make it completely easy," Mr. Lake said.
"If you go and look at it, Shopify is just about the easiest e-commerce application you're going to come across on the Internet."
And it's a good thing, since Jaded Pixel targets a market that often doesn't have lots of experience with e-commerce or Internet retailing and may be easily intimidated by technology.
Essentially, a new customer can hit the Shopify.com and have an e-commerce site up and running in minutes, while more Web savvy clients have the latitude to implement a more complex design.
The company will be looking for venture capital in the spring and hopes to increase its employee count radically by the end of the year.
Jaded Pixel charges a flat commission of three per cent of the first $10,000 in monthly sales and two per cent of all sales above that.
"We wanted to make it so there was no financial barrier for small businesses to try it," Mr. Lake said.
"And we are successful if they are successful, so it's in our best interest to try and make our shops as popular as possible and to help our clients sell online."
By Jeff Pappone
Special to the Ottawa Business Journal
