Venture Update Vol III, #2, February, 1999

Done Deals

Cary—Research Triangle Consultants, Inc., a software and services firm for the electronic commerce marketplace, closed on the initial phase of a $3 million first round financing. The investor was Blue Water Capital. Contact: Jeff LeRose (919.469.5111).

Research Triangle Park—Red Hat Software, a developer of Linux-based software, entered an agreement with Hewlett-Packard in which Hewlett-Packard would start building servers and providing customer support for Red Hat Linux. Contact: Matt Szulik (919.547.0012).

Research Triangle Park—TAVVE Software, a developer of network integration solutions, closed on $1.5 million in second round financing from New World Ventures. Contact: Nick Francis (919.950.2131).

Cary—XS Inc., a developer of an online auction site for agricultural chemicals, closed on $500,000 in first-round financing from private investors in January 1999. Contact: Fulton Breen.

Charlotte—Kitty Hawk Capital, a venture capital firm, closed on a $42 million for its fourth fund in November 1998. Contact: Chris Helgele (704.362-3909).

Raleigh—Sanguinex, a developer of cell-analysis technology for the diagnosis and treatment of chronic diseases and biomedical research, closed on more the $500,000 in first round in November 1998. Investors included the Bioscience Investment Fund, North Carolina Technological Development Authority and private investors. Contact: Bruce Oberhardt (919. 848.6520).

In the Pipeline
Winston-Salem—Pilot Biotechnologies, a joint venture between North Carolina State University and Wake Forest University, was launched in October 1998. The company, which develops nutriceuticals, is based in the Piedmont Triad Research Park with labs in N.C. State's Centennial Campus.

New Developments
Chapel Hill—Draper Atlantic Venture Fund, a venture capital firms whose partners include Draper Fisher Juretson managing partner Tim Draper, is raising its first fund. The fund, which will work closely with Draper Fisher, plans to raise $30 million to invest in technology-based start-ups. Contact: Tim Draper (650 599-9000).

Raleigh—Relativity Technologies, Inc., a developer of software for legacy transformation for older mainframes to more modern platforms, will provide key Year 2000 remediation and legacy transformation technology for Russia's first official Year 2000 Competency Center. Contact: Rich Cronheim (919.678.1500).

Research Triangle Park—Industrial Microwave Systems, a designer and builder of industrial heating and drying systems using a patent pending microwave technology, delivered and installed its first commercial system. The system was purchased by Dow Chemical Company. Contact: Jay Borkowski (919.990.9595).

Research Triangle Park—Persimmon IT, developer of a developer of software for vertical markets leveraging the use of the Internet and corporate intranets, sold its UnifyIT product to ILEX Oncology Services for an undisclosed amount. Contact: Jinny Crum-Jones (919.941.9339).

Research Triangle Park—The Council for Entrepreneurial Development has selected six more companies to present at Venture '99, CED's 16th annual venture capital conference to be held at the Friday Center April 28-29, 1999. Newly selected companies are:

  • Lips, Inc.

    , of Research Triangle Park, is a NCSU spinout that develops software incorporating unique and innovative technology in creating a new line of products for lip synchronization in the animation industry.

  • Engineous Software

    , of Research Triangle Park, develops advanced engineering management software products and services for industries utilizing computer simulation models that facilitate the design of large-scale, industrial products.

  • Derivatives Net, Inc.

    , of Charlotte, is a software company that develops and operates an Internet-based electronic trading system for OTC derivative dealers around the world.

  • Delta Pharmaceuticals, of Research Triangle Park, is a biopharmaceutical company focused on the development of new and safer strong analgesics, urinary incontinence agents, and other therapeutic applications based on novel delta receptor compounds.

  • Biolex, Inc., of Research Triangle Park, is a protein technology company that has developed a highly-efficient and cost-effective production system for pharmaceutical proteins and other functional protein products.

  • Foveon Corporation

    , of Research Triangle Park, is an Internet company providing on-line vendors, merchants and service providers with neutral, third-party reference data about their e-commerce transactions.



On The Up
Volumetrics Medical Imaging
They say a picture is worth a thousand words. At Durham's Volumetrics Medical Imaging Inc., formerly 3-D Ultrasound, president John Oxaal is hoping a three-dimensional picture is worth many dollars.

The Duke University spinout, which was founded in 1991 by Oxaal and Duke professors Olaf Van Ramm and Steve Smith, has developed a real-time, three-dimensional ultrasound imaging machine that creates a view of the entire organ. The machine, which costs about the same as the two-dimensional machines it will replace, uses parallel processing of ultrasound signals to obtain multiple images simultaneously. As a result, doctors can view an organ from four or more perspectives at once. Current ultrasound machines create a two-dimensional "slice" view, which is less accurate and offers less information than the three-dimensional view. Volumetrics opted for the cardiac diagnostics as its first market, but plans to move into radiology later this year.

Volumetrics clients include Duke Medical Center, NIH, Columbia University, Cleveland Clinic, UC San Diego, University of Alabama at Birmingham, the European Space Agency and others. Current investors include Allen & Co., The Aurora Funds, Kitty Hawk Capital and TriState Investment Group II, and the company plans an IPO in the future.

Volumetrics is not the first start-up for Oxaal--he has been in three other start-ups, including Weitek, a Silicon Valley company that went public in 1987. Oxaal sites insufficient capital as a major issue facing start ups in the area. However, the quality of life in the Triangle is a positive factor. "It's easy to recruit quality workers to come here," he says. Also, the overall attitude in the Triangle area towards entrepreneurs is extremely positive. "When you start a company here, you feel like everyone is pulling for you. That's a nice change."

Featured Fund
South Atlantic Venture Group
"In 1981, there was essentially no venture capital in the southeastern United States," explains Don Burton. So he left his job in the v.c. department of Boston's Fidelity Group and moved south, founding South Atlantic Venture Funds in Tampa, Fla.

"I knew things were happening in the Research Triangle, metro Atlanta and Huntsville, Ala., as well as in certain parts of Florida," he recalls. "There were a few SBIC groups but not much else, so it was a great opportunity to grow up with the territory."

And grow up it has. Today, South Atlantic has just shy of $175 million cumulatively invested in four funds and 65 companies, most of them in the areas of communications, health care and specialty retail. "We've made money in 58 of them," Burton says, "largely because we have made a conscious effort to back later stage companies with experienced management teams, where there is less risk of loss of capital."

The firm has established a team to cover the Research Triangle region: Gene Gabbard, a successful entrepreneur based in Cary, and Drew Graham, a venture capital partner in Tampa. The duo Burton says, allows South Atlantic to focus on investment opportunities in the area.

So far, the firm has invested in two Triangle-area companies, Ganymede Software of Morrisville, and Alphatronix of Raleigh. "We're always looking for more opportunity," Burton says.

South Atlantic likes the Research Triangle region for several reasons, he says. "The Triangle was established a long time ago and has been going long enough to begin to see what I call the chain reaction. Big companies come in, they spawn start-ups and then the start-ups spawn experienced management teams for new deals. And all that means there are service providers who specialize in serving entrepreneurs.

"I don't know if it's fusion or fission, but the Triangle's got it going now—it's reaching a critical mass."

Mark Your Calendar!
Conference on Entrepreneurship
February 6th, 1999
8:00 am to 5:00 pm
Duke University's Fuqua School of Business

Venture Capital for Entrepreneurs—The Art of the Deal
February 16, 1999
1:00 to 5: 00 pm

Biotech '99
March 18, 1999
NCBC

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 BTI Business Telecommunications, Branch Banking & Trust, Cadmus Financial Communications and PricewaterhouseCoopers.

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