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.
KAKILOC
Year founded: 2006
Employees: 2
Venture capital: None
Product: Location-based social networking service
"Fast improvements in communication and transportation technologies are shifting the social networking scene which was once restricted to local areas. People are now able to network on a global scale. Kakiloc enables this new global networking by correlating geographical physical locations and individuals to facilitate the discovery, the interaction and the management of social network contacts and places."
— Martin Dufort, CEO
Think of Kakiloc as our address book on global positioning-laced steroids.
Its customers don't only know how to reach their contacts, the technology adds geographical positioning to the mix, which means their mobile handheld can pinpoint their colleagues' locations anywhere on the planet and even sound alerts when they are close by.
"Say a buddy is coming to Ottawa, I can get an instant notification on my cell phone when he shows up at the airport," said chief executive Martin Dufort.
"You could go to a conference and know which of your contacts are there, and it also allows you to see if there are people there who you want to meet."
Since users maintain their networks of contacts, they can decide when, where, and to whom to broadcast their location, so it's not like "big brother watching," Mr. Dufort said.
The system can even identify that two people who are using the technology are in the same vicinity and try to link them together.
"When I am moving around the city, I have set reminders for myself that tell me when any of my contacts are within 500 metres of my location, so I can call them up and have coffee or something," he said. "And you can rank the contacts as well as group them."
But it's not just for connecting with other people. For example, setting an electronic reminder to pick up milk on the way home will have the Kakiloc-enabled handheld automatically repeating the need as it passes a grocery store.
The business model has both a free basic subscription and a paid membership plan, which has specialized software that adds enhanced features to handhelds. A third revenue stream would come from partner businesses that would use the information collected from subscribers to target new customers.
Kakiloc hopes to secure angel financing in the first half of 2007 and has met with a number of local investors and a venture capitalist in Montreal.
"We've got about 150 people doing alpha testing for us from various geographical regions – U.S., Canada and Europe," said Mr. Dufort. "Our goal is to have the Beta 1 launch in the beginning of February, which would also be a closed test, and then we would open it up in mid-March."
LIPONEX
Year founded: 2000
Employees: 18
Venture capital: None, but raised $11.5 million in August 2005 IPO
Product: Medical drugs related to High Density Lipoprotein (HDL)
"Liponex is working to address unmet needs in the world's largest pharmaceutical markets. Big pharmaceutical companies are focused on finding successful HDL-raising technologies to bring to market, putting Liponex in a good position to potentially impact human health worldwide."
— Bill Dickie, CEO
There's no doubt that calling a six-year-old public company a Startup to Watch seems a bit odd. But, in the grand scheme of the pharmaceutical development world, Liponex still has a long way to go — even if its shares are trading on the Toronto Stock Exchange.
"We're even a bit unique even by bio-tech standards," said Liponex CEO Bill Dickie. "But we're a development stage company with no revenues and no prospect for revenues."
With the typical discovery-to-market timeline for a drug being 10-12 years, Liponex is about halfway to market – if everything goes without a hitch.
The company has produced some promising Phase I clinical trial results for its products related to maintaining an increased level of a protein related to High Density Lipoprotein (HDL), often called "good cholesterol." The idea arose from research at the University of Ottawa Heart Institute by Dan Sparks.
Mr. Dickie's immediate job when he joined the company two years ago was to come up with the fundraising strategy to get the drug to the next stage.
"The classic thing to do would have been to go out and find some venture capital," he said. "We looked at an early IPO as an alternative because we had the classic big market, simple story and that's what we decided."
Until the August 2005 move to the markets, Liponex was funded by a group of Ottawa angels. Its primary drug candidate, CRD5, is currently in Phase I/II clinical trials with its first 50 low HDL patients getting the drug. The results for the current trial will be available in March.
Once the drug gets past Phase II trials, the company will start looking for partnerships. With the cost of getting a drug to market easily topping several hundred million dollars, the business plan calls for a license agreement with a bigger player.
"Right now we are focusing on the science end of the business – the discovery and early-stage development," Mr. Dickie said. "Once you get into late stage development and beyond, it's not so much about the science at that point but a regulatory machine to get the drug approved and a major marketing machine to take it from there."
MERCURY GROVE
Year founded: 2006
Employees: 9
Venture capital: None
Product: on-demand software
"We are starting to see a massive shift in the software industry as applications are delivered by third parties over the Web, rather than through traditionally slow, internal IT departments. This shift benefits business managers as the cost of software comes down, speed of delivery goes up, and power shifts from IT to the business. Mercury Grove helps business managers take advantage of this shift."
— Scott Annan, CEO
When Mercury Grove develops a software package for a customer, it takes care of the front end the back end and just about everything in between.
The company not only creates the applications but also hosts the software on its servers where customers access the offerings. While not a new concept in software delivery, Mercury Grove has extended its stable of products far beyond the usual Customer Relationship Management and Sales Force Automation tools often associated with this model.
"We'll go into a company and they'll ask for some kind of software, for example a department database where they are trying to keep track of expenses, and we'll develop it and host it afterward," said CEO Scott Annan.
"But we keep the intellectual property, so that we can actually provide it as a service for other people as well."
The appeal of Mercury Grove's model is twofold. First, companies pay a monthly fee for applications rather than a large purchase price at the outset, plus implementation and support costs.
In addition, it transfers most of the IT responsibility outside the company so that Mercury Grove's customers can concentrate on their core businesses rather than spending internal resources on administration. Companies spent about $650 million annually in this area in 2005, with some estimates putting the number at about $2.6 billion by 2010.
Mercury Grove also provides online training, campaign management, and collaboration tools as well as custom applications for large companies. The revenues from this professional services arm, plus the response from customers has been enough to allow the company to be self-funded and profitable from day one.
"It usually takes us between one and five days to get the software up and running, while most traditional software takes six to 18 months to get it working," Mr. Annan said.
"It would be just like any other software the company would use internally, only it would be served through the Web and sitting on our servers."
Mr. Annan got the idea for the company while working at Lexmark, where he put together a working group to help develop software solutions to solve problems the company was experiencing.
"I began talking to executives in other companies to see if the same kind of need existed in their companies and the answer was absolutely," he said.
"I was sitting there thinking: 'There's got to be a better way and having people less frustrated with IT.' Not only did we have an idea that we thought would be great, it's actually been testing inside a large company."
MODASOLUTIONS
Year founded: 2002
Employees: 20
Venture capital: $12.5 million
Product: Software
"We compete in the lucrative, fast-paced $632-billion e-commerce and call centre retail payments sector. Our products are being rapidly adopted and I encourage anyone looking to be on the leading edge of alternative payments and e-commerce to look to MODASolutions."
— Marwan Forzley, CEO
Ever wondered why customers can't pay with anything other than a credit card when shopping online?
Marwan Forzley not only pondered that very question, but he also decided he should do something about it. Soon after, MODASolutions became a reality.
"When you go to a store, there are multiple ways to pay — credit cards, debit cards, cheques, gift cards, cash, you name it — but if you go to the same store online, it's the same company but it only accepts credit cards," Mr. Forzley said.
"It's a reflection of a whole bunch of notions on the Internet and the predominant method is credit cards. But we are now seeing a move to alternative ways, to tailor things to different consumer segments and needs."
MODA's Secure e-bill offering allows customers to pay using their bank account, in the same way they'd pay a hydro bill. It's a solution that looks to have a bright future: Forrester Research estimates that about half of the online payment mix will be in the alternative model by 2010.
That fact was partly a factor in MODA's attracting $12.5 million in investment last July, which it used to build its customer base. The company will probably look for another round in 2008. Mr. Forzley expects MODA to be cash positive in roughly 36 months.
Ironically, MODA's solution arose as the company was developing a better credit card payment system. As it explored the market, it began to see a trend that saw a high number of completed transactions started online actually ended with the consumer using another form of payment, whether by cheque in the mail, visiting the store, or making a telephone call.
Once a company signs up for the service, consumers can add a special identification code to their online banking payments folder and simply transfer money to the merchant when they make a purchase. MODA collects a small percentage of the purchase price from the merchant.
"It allows companies to tap into customers who are not buying on their websites today," Mr. Forzley said. "And it also takes care of the security issue because both parties are being authenticated by their banks and the money moves bank-to-bank."
SIDENSE
Year founded: 2003
Employees: 25
Venture capital: US$3.5 million
Product: Embedded non-volatile memory cores
"The timing is right, and the product is right, and our people are great and it's a combination of these three things that make you successful ... we will hit $1 million in revenues in the next two months."
— Xerxes Wania, CEO
Name a region of the world and chances are that Sidense already sells its products there.
That's because the Ottawa memory core developer continues to rack up customer wins and looks poised to hit the $1-million mark in revenues in the next few months.
"We have a lot of traction and the challenge right now is to ensure that we grow with the market as opposed to going too fast or too slow," said chief executive Xerxes Wania.
"The time is right and venture capitalists are interested in our story. We could do without money but I don't think we will go that route — we are definitely in the market to raise another $3 million to $5 million."
The company provides embedded memory to customers who want to add it to their own chips and also licences its circuits to customers. The memory is an add-on to an existing product to help it perform a specific function or task.
Although Sidense secured a bridge financing round last fall, it needs more cash to help build the infrastructure within the operation to help achieve a planned quadrupling of its revenue. To do it, the company needs to expand its marketing and sales operations.
While the company has an office in Toronto where Mr. Wania is based, most of its employees are based in its Ottawa R&D facility. It plans to add another 10 to 15 people in Ottawa this year, which would bring its local workforce to about 40.
And although a viable product had brought success so far, Mr. Wania also discovered the power of the press along the way after an online article shoved Sidense out of stealth mode and may have helped the company close its first sale.
"We closed two customers in 60 days and we didn't even know about the story until we started getting inquiries. We got about 15 calls and we thought, 'There must be something going on'," he explained.
"So, in a way customers sort of stumbled upon us and now we have to go out and make sure we do the right things to keep them coming in."
By Jeff Pappone
Special to the Ottawa Business Journal
