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News from the Incubators
New information technology (IT) and telecommunications companies are integral to growth in innovation and job creation. But they often face challenges in developing new products and services for the commercial market.
The Department’s Building on IT Strengths (BITS) incubator program provides funding and support to incubators across Australia. These incubators provide services such as seed capital, business advice and assistance with raising follow-on capital, to start-up ICT companies with the intent of accelerating their growth.
ICT incubators have provided assistance to a number of firms which have gone on to win major national and international contracts and industry awards, and attracted considerable co-investment.
Here are three companies which have succeeded with help from the BITS incubator program.
Windspring
In 2003 Zentronix was an Australian company with a library of innovative intellectual property in data miniaturisation technology (DMT). DMT is an innovative and unique data miniaturisation technique and encoding algorithm that has been proven to dramatically improve the speed of access to text files, databases and vector-based images, and significantly minimise the electronic storage requirements of data on storage devices. Zentronix’s technology was fading—capital provided by family, friends and founders was depleted, and it did not have a topnotch management team.
In mid 2003, Zentronix invited BlueFire, a Sydney based investment and incubation business from the BITS incubator program, to conduct a due diligence on its DMT and review an application for early stage investment funding.
BlueFire looked at whether the technology was innovative and non-imitable, and whether its proposed first generation of applications, in the areas of storage area network, wireless networking and remote computing fields, could be commercialised.
BlueFire’s managing director, David Nelson, was convinced that Zentronix had a genuine breakthrough in the field of compression, and that DMT was a unique (and patented) technique for the reduction of lost data in data streams.
‘What stood out for us was the striking need for lower storage costs and higher speed transmission for the massive data repositories being built by organisations around the world,’ Mr Nelson said.
‘Windspring was able to provide working demonstrations of order-of-magnitude jumps in these key technology criteria.’
Having appointed a high-calibre CEO and a chairman with significant experience in technology commercialisation, BlueFire decided to lead a Series A investment round of $900 000 to recapitalise the company and fund its migration to the United States.
Further success, and validation of the BITS engagement model, were to follow.
On the re-launch of the business in San Jose, California, a Series B fundraising was quickly undertaken that netted a further US $2.8 million (AUD $4.2 million) at a valuation uplift of approximately 80 per cent. This was quite significant considering it had been less than 90 days since Zentronix had reached the United States!
In 2005 Zentronix, renamed Windspring, has gone from strength to strength and accomplished significant milestones. It has filled out its management team, released its first fully commercial product, and engaged the likes of Motorola, Microsoft, and Qualcomm in partnership and distribution relationships.
‘Windspring has been a classic case study. It shows how the BITS incubators can act as a ‘money magnet’ and be a catalyst for highly successful IT innovation and commercialisation activities in the Australian and global markets,’ Mr Nelson said.
Visit www.windspring.com to find more information on Windspring.
vRoam
vRoam Global is an Australian mobile communications provider. With the help of Australian Distributed Incubator (ADI), vRoam has expanded its global reach and is providing cheaper mobile roaming services in more than 25 countries.
Using vRoam, international travellers can cut the cost of using mobiles overseas with no loss to services.
ADI has helped fund vRoam’s marketing activities, held strategic planning sessions, and helped manage the bookkeeping and accounting.
With the help of the Incubator program, vRoam’s revenue increased by 200 per cent in the first five months of ADI’s involvement. Traffic to the website increased by more than 1000 per cent after a marketing campaign. The dramatic increase in website hits resulted in substantial sales growth.
Responding to consumer requests for cheaper and more fiexible mobile and data roaming services, vRoam developed two new product lines. vRoam’s CEO, Danny Nathanson, said the new products will give customers secure, convenient and cost-effective access to the Internet and email when travelling overseas.
iPass gives travellers high-speed remote access to the Internet from over 20 000 points globally, using simple dial-up connections as well as wired and wireless broadband.
The second new product is a global post-paid calling card which offers an alternative to exorbitant mobile roaming charges in every country. Users receive an itemised account of their call charges, making it easier to manage expenses. Calls are unlimited, and billed to the user’s vRoam account.
‘vRoam managed to expand its services to Greece for the Athens 2004 Olympic and Paralympic Games. Athletes and officials could keep in touch with family and friends at a reduced price using their regular phone numbers and service providers,’ Mr Nathanson said.
‘The success of vRoam has been incredible, and it would not have been possible without the help of ADI and the Incubator program. It’s a fantastic program which is vital to the continued growth of information technology innovation.’
Corporate travellers from Australia make up more than 70 per cent of vRoam’s customers. To cater for this market, vRoam is now available in most of the major international destinations for Australian business travellers in the Asia-Pacific region.
Visit www.vroam.com for further information on vRoam.
Net Return
Recently opening two new interstate offices, more than doubling staff numbers in the last three months and a rapid rise in client numbers are definitely signs of explosive growth. Welcome to the world of Net Return.
Net Return began in late 2002, when two established web communications companies, Gadfly Online Communications and Ion Global Australia, merged to form the total online solutions provider Net Return.
Net Return is the exclusive Australasian distributor of NetSuite, an application service provider (ASP) which provides an integrated suite of business applications online. US magazine Inc. recently ranked it the second fastest growing software company in the United States. Aimed at businesses with five to 500 employees, NetSuite integrates accounting, inventory management and customer relationship management tasks. Users can extract key performance indicators on a ‘dashboard’, a single screen accessed through the web browser.
NetSuite challenges the traditional ways of acquiring and using business applications. Rather than having to buy a licence and install a stack of software discs, users of NetSuite just pay a per-user rental or subscription fee and log on to the application.
The NetSuite model works through more than just delivery; it also benefits the consumer through economies of scale.
Companies using standard software need at least one server per company—more if they have desktop applications that need to be managed and maintained. And major applications require costly hardware infrastructure and people to maintain them.
NetSuite can manage and update software for many customers at once, using a single database on a bank of servers. A change may be as simple as an update to the application, or as complex as new accounting requirements and suchlike.
Net Return recognised the value of NetSuite and, with the help of incubator funding from ADI, modified NetSuite to suit Australian conditions.
Stuart McLean, Net Return founder and executive director of NetSuite, recognises the benefits of the funding.
‘The ADI funding was significant for NetReturn more for the timing than the actual amount. The funding let us make the changes to NetSuite that we needed so that it would be as successful in Australia as it was beginning to be in the United States,’ Stuart McLean said.
Released early in 2004, NetSuite had more than 35 clients by the end of the year, including large-scale companies such as RetireInvest (ING subsidiary) and Trend Micro. Net Return’s clients now include Tourism Victoria, AMP Banking, the Australian National Training Authority and the Department of Education Science and Training.
The online services arm of Net Return develops and manages online expertise for large public and private sector clients. An example is the recently launched Australian Development Gateway website it developed for AusAID. The gateway makes practical Australian development expertise available to people in the Asia-Pacific region and around the world.
The gateway can be found at
It is the first such website to be developed by an OECD country and will operate in a network of more than 50 other country gateways. It is a key project of the Virtual Colombo Plan, a joint initiative between the Australian Government and the World Bank.
Net Return’s website can be found at www.netreturn.com.au
Further information on the BITS Incubator Program can be found at
www.dcita.gov.au > Information and communications technology > ICT Incubators. Alternatively, contact the manager of ICT Programs on 02 6271 1719 or email incubators@dcita.gov.au