Venture Update: Vol III, #3, March, 1999

Done Deals

Chapel Hill—TriState Investment Group III, a member-managed group that invests in entrepreneurial companies based primarily in North Carolina, closed on more than $5 million dollars for its fund in January 1999. Contact: Jim Newton (919.968.3760).

Apex—LIPSinc, a developer of software that incorporates lip synchronization in the animation industry, closed on more than $1 million in first round funding in February 1999. Investors were TriState Investment Group III and private investors. Contact: Michael Zapata (919.303.8499).

Durham—Red Hat Software, developer of software for Linux operating systems, entered an alliance with IBM in which Red Hat will deliver, via IBM Business Partners, high-performance IBM systems running Official Red Hat Linux. Contact: Matt Szulik (919-941-5804).

Cary—SpectraSite Communications, a builder of wireless communication towers, agreed to buy 2,000 wireless communications towers for Nextel Communications for $560 million. The deal will give Nextel 17 percent owner ship in SpectraSite. SpectraSite financed the deal with $390 million from private investors and $550 million in bank financing. Contact: John Ricci (919-468-0112 ).

Morrisville—Engineous Software, developer and producer of computer-aided optimization (COA) framework technology software that improves engineering design productivity, closed on $5 million in February 1999 from GE Investments. Contact: Sui Tong (919.319.7666 ).

Research Triangle Park—ICAgen, a drug discovery company focused exclusively on ion channel modulation, entered a research and development agreement with Incyte Pharmaceuticals, Inc., a publicly-held provider of an integrated platform of genomic technologies designed to aid in the understanding of the molecular basis of disease. Under the agreement, the companies will collaborate to create the world's first ion channel gene expression microarray. Contact: Dr. Kay Wagoner (919.941.5206).

New Developments
Wilmington—PPD, Inc., a pharmaceutical services company, signed a letter of intent in February 1999 to acquire Chapel Hill-based ATP Inc., a company that employs pharmacists and other healthcare professionals to answer medical questions from its clients customers. PPD plans to acquire the company for stock worth more than $30 million.

Chapel Hill—IntraSoft, developer of software products that simplify the management of distributed computing, began shipping KeyVisiontm Knowledge Module for PATROL in January 1999. The product enables users to administer the core KeyVision components from a single console. Contact: Deb Lovig (919.419.9427).

Research Triangle Park—OpenSite Technologies, developer of online auction software, has released OpenSite Auction 4.0 software, which makes Web auctions easier and faster to implement and includes security enhancements. Contact Kip Frey (919.544-1993).

Research Triangle Park—The Council for Entrepreneurial Development reports that 73 venture capital investments were reported totaling $249,557,000--a 59% increase in number of deals and a 49% increase in total venture capital funding raised in the Research Triangle region compared to 1997.

Fifty-eight different companies received investments compared to 46 in 1997 and 16 of these companies raised multiple rounds of financing. For more information visit the CED Web site or call 919.549.7500.

Research Triangle Park—The Council for Entrepreneurial Development's Venture '99 Selection Committee has selected seven more presenters for the April 28-29 CED Venture '99 conference. Thirteen other companies were selected in January and early February for a total of 20 presenters who will present in the main session on April 28th. Ten seed stage companies will be selected to present in the early stage session on April 27th. Presenting companies were carefully selected by a panel of venture capitalists and are chosen to reflect the diversity of North Carolina's entrepreneurial sector and include exciting newcomers and established ventures from diverse industries such as information technology, biotechnology, software, manufacturing, healthcare and pharmaceuticals. To view descriptions of all 20 selected companies, visit the Venture '99 presenters page.

For more information on Venture '99, visit the CED Venture '99 Web site or call 919.549.7500.

On The Up
LIPSinc.
When you watch a movie like Toy Story, you probably think much about how long it takes to actually make characters like Buzz Lightyear and Woody "perform." But consider this: A character animator could easily spend up to 40 hours perfecting just the lip synchronization for one 30-second sequence!

But thanks to technology developed at North Carolina State University and commercialized through its Technology Education and Commercialization (TEC) Program, animators can reduce that time, cutting production costs and improving productivity.

"Our technology has a broad base of application in its category," notes Michael Zapata, LIPSinc.'s head mouth. "We're working hard to establish a good network with other applications in the animation, biometric and telecommunications areas where we know we can add significant value."

Its innovative and unique software technology, voiceDSPtm, analyzes human speech and automatically generates precise lip positional data.

To date, LIPSinc. has raised money from several private investors and one small group. Though Zapata is tight lipped when it comes to divulging the exact amount raised, he does allow that "We exceeded our $1 million target."

The funding is being used to develop the entry market and develop product, specifically a line of animation software that greatly improve the process of animated character lip synchronization.

In addition to its use in the next generation of applications for the animation industry, LIPSInc.'s technology will be deployed in telecommunications, speaker recognition, hearing impaired and linguistics training, Zapata says.

"We're looking for more strategic partnerships and additional rounds of funding," he says. "Then we can develop these follow-on markets and strategies for expansion."

Featured Fund
Silicon Valley's Trinity Ventures prides itself on investing in "the most interesting and attractive companies nobody's ever heard of," says General Partner Noel Fenton. The firm, founded in 1986, has more than $330 million under management in five funds and over 75 companies. "When you start hearing about them, that's when we're leaving." Some of Trinity's investments in "unknown" ventures have spawned such well-known companies as Starbucks and Conner Peripherals.

While 85 to 90 percent of Trinity's investments are made on the West Coast in computer software, e-commerce and communication technology companies, the firm funded companies in Atlanta, Florida, Tennessee and Washington, D.C.

The firm's first foray into the Research Triangle came last year when it invested $3.5 million in SciQuest, theCary-based e-commerce company. "We liked the management team and the market opportunity we saw there." For now, SciQuest is its only N.C. investment, but Fenton says he likes the Research Triangle because it exhibits key success factors such as:

  • Rich Academic Research Structure: "Great universities spawn great businesses. We've seen this in Boston, Silicon Valley, Austin and now RTP."

  • Strong Corporate Community: "In larger companies, people can get experience they'll need to manage technological enterprises."

  • Good Infrastructure: "There needs to be a strong base of attorneys, accountants and recruiters with experience in start-ups."



He also looks for the presence of funding sources, which had been an issue in the Triangle. "But you're seeing more venture investing," Fenton notes. "The Research Triangle is now a contender on all of these fronts."

Mark Your Calendar!
Venture Market South
March 15, 16 & 17, 1999
Ritz-Carlton, Downtown Atlanta
For more information, call 888.286.2167, email events@redherring.com or visit www.redherring.com/events.

Biotech '99
March 18, 1999
North Carolina Biotechnology Center

Venture Capital Investment Competition
March 18-20, 1999
Kenan-Flagler Business School
University of North Carolina at Chapel Hill
For more information, call Jeff Reid at 919.962.2031, visit itr.bschool.unc.edu/vcic/ or email vcic@unc.edu.

STREAK Quarterly Luncheon
April 8, 1999
Noon-1:30pm
Sheraton Imperial, RTP, NC

Venture '99
April 28-29, 1999
Friday Center on the Campus of University of North Carolina at Chapel Hill

For information call CED (919.549.7500) or visit the CED Web site.

CED is a private non-profit supported, in part, by corporate contributions, including funding from Gray Venture, Inc., Highwoods Properties Company, Inc., and Hutchison & Mason, PLLC.

Research Triangle Venture Update is published by the Council for Entrepreneurial Development (CED), a non- profit organization located in Research Triangle Park, N.C.
Editor Carolyn Foy, CED
P.O. Box 13353
RTP, NC 27709
Phone: 919.549.7500
Fax: 919.549.7405
Email: mcfoy@cednc.org