SAN FRANCISCO -- Let's talk privately.
ZDII usually doesn't cover privately-held companies because most readers can't invest in them. But not-yet-public companies often have the most interesting stories. They're fresh and enthusiastic. And as long as they haven't filed for an IPO yet, they can say anything without fear of SEC regulations or shareholder lawsuits.
The upstarts tend to throw out even more hype than publicly-traded firms, but that's forgivable; when you don't have the market to provide at least a bit of a spotlight, you need to grab attention anyway you can. Besides, it's the audience's job to filter through it.
That's especially true at investment shows, where the audience includes jaded fund managers and investors. In the case of the now-ended Robertson Stephens Tech 2000 conference, listeners included at least one columnist who sat in on several private presentations in search of a break from yet another CFO droning on about some Nasdaq-traded company.
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With the weekend approaching, this is as good a time as any to go through a few private outfits that stood out. All the companies listed below probably will go public sometime this year, barring an acquisition, so think of this as a short preview of what might come down the IPO pike.
Keep in mind the "Problem" in each segment is defined by the company in question. No doubt someone out there would dispute the nature or even existence of the "Problem" and the quality of the "Solution". Make your own judgements.
Some entries have more information than others. Just remember this isn't comprehensive; it's merely an introduction:
nCipher. A UK-based company specializing in Web security, based on hardware. nCipher's technology processes and manages digital certificates used for secure transactions online.
Problem: Web servers spend an awful lot of time and processing power on certificates.
Solution: Dedicated plug-in cards. The company claims its scalable, plug-and-play nFast technology boosts server throughput by 20 to 30 times and can cut cost processing costs by up to 80 percent. Other products include nForce/nShield, which creates, manages and stores certificates.
Money raised to date: $18 million.
Notable rivals: Rainbow Technologies (Nasdaq: RNBO), at least for issues of speed and scalability.
Partners: Netscape, Microsoft, Apache, C2Net, Verisign, Entrust, Verifone, RSA Security.
First impressions: Sounds like a 3dfx-type of hardware acceleration, but for digital certificates rather than 3D graphics. nCipher also generates more gross profit: the company has gross margins of at least 75 percent, says CEO Alex Van Someren, co-founder of nCipher with his brother, who holds a Ph.D from Cambridge University. Can't say I much care for peripheral businesses in general, but at least nCipher has a relatively unique approach, as opposed to being another dot-com or Web services company.
Equinix. Builds data centers that house multiple networks. The 350,000-square-foot-and-up facilities include colocation, interconnection through high-speed switches, and traffic exchange services.
Problem: Companies often find themselves forced through a single lousy hub on the Internet.
Solution: By putting a bunch of networks in one spot, companies can choose the ones they want to work with. Equinix says its centers make online activity more efficient, more reliable, more scalable and cheaper. Equinix has immediate plans for 30 centers around the world, and currently has three in the United States.
Investors: Microsoft, Dell, E*Trade, Cisco, Benchmark Partners.
Money raised to date: $315 million.
First impressions: Like Webvan (Nasdaq: WBVN), this seems like more of a capital expenditure story rather than a pure technology play. On the surface, the colocation aspect reminds me of Exodus Communications (Nasdaq: EXDS), but companies like Exodus focus on running and monitoring their clients' networks, while Equinix highlights connections between corporate systems.
Billions of Operations Per Second. Makes high-performance digital signal processors.
Problem: Communications chips from the likes of MIPS (Nasdaq: MIPS) and ARM Holdings (Nasdaq: ARMHY) need more powerful DSPs than anything currently available on a widespread basis.
Solution: More powerful DSPs.
Notable rivals: Texas Instruments (NYSE: TXN), Lucent Technologies (NYSE: LU), Motorola (NYSE: MOT) and anyone else who makes digital signal processors for wireless communications, set-top boxes and other products.
First impressions: If the performance claims of BOPS are anywhere near accurate, this technology rocks. BOPS claims its 4x4 product performs at least 32x faster than existing DSPs. The company doesn't manufacture DSPs; BOPS is an intellectual property specialist like Rambus (Nasdaq: RMBS).
Amazingly, BOPS talked about revenue and earnings forecasts. The company expects $2.6 million in revenue in 1999, $6.8 million in 2000 and $38 million by 2002. BOPS sees pre-tax profits of $6 million in 2001 and $14 million in 2002. BOPS doesn't sign a lot of contracts, but each one is in the multiple millions.
On the downside, IP isn't as easy as some would have you believe -- look at all the delays affecting Rambus' memory chip technology, despite the backing of a giant like Intel (Nasdaq: INTC). But if BOPS can execute on its patents, it'll be something to watch.
Syndesis. A Toronto-based vendor of software usedto manage communications networks for next-generation technologies like DSL, voice-over-DSL and Internet telephony.
Problem: Every communications provider uses equipment from many vendors in a mix-and-match approach, resulting in a cumbersome process to add new customers for broadband and other high-speed services.
Solution: Syndesis' NetProvision Activator makes it easier.
Investors: VC firms including Greylock, Sequoia, Pequot Capital and VenGrowth.
Partners: Major equipment vendors such as Cisco (Nasdaq: CSCO) and Lucent; other software companies like MetaSolv, Portal, Amdocs and Micromuse; and system integrators such as Cap Gemini, Pricewaterhousecoopers, KPMG and Ernst & Young.
Money raised: $33 million.
First impressions: Intriguing because Syndesis has few if any direct rivals. NetProvision automates much of the customer activation process, and works with products from all major equipment vendors. One of the keys: the software uses the network itself as the information database, rather than accessing a separate system. The company claims the approach eliminates errors on service orders. 22GO>