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You've got to have a great track record for anyone to give you $1 million for a technology startup these days.
Count Don Innis among the few on the Gulf Coast who does.
Innis, 62, started his career in data processing at General Motors, where he met Arthur Allen. He later helped Allen build ASG Software Solutions, a Naples-based technology company with $300 million in annual revenues today.
A specialist in data security, encryption and electronic communications, Innis has been involved in a number of startups, including as co-founder of Fischer Innis Systems and president of the U.S. operations of SafeBoot, which was sold to McAfee for $350 million in 2007.
Now comes Innis' latest project, Inware Technologies. Its newest product, Gem Suite, allows companies to monitor employees' use of the Web, e-mail or instant messaging using key words and site addresses. “This is the fourth startup I've done,” Innis says.
The Gem Suite software, which has cost $3.5 million to develop, monitors how employees use the Internet, prevents certain kinds of messages and Web surfing, archives employees' use and creates Internet-usage reports for management.
While they're launching Gem Suite, Inware already has an existing software program called E-mail Shuttle that will generate about $2 million in revenues this year. Shuttle helps companies move employees' emails from one system to another. Large customers include Bank of America, Publix, Unilever, Dell and Target.
But since the financial crisis started in earnest last year, many investors have been reluctant to put money in venture funds that fuel startups, no matter how great the ideas. The National Venture Capital Association recently reported that U.S. funds raised the smallest amount of money in the third quarter of 2009 in 15 years.
So with the help of a Dutch firm, Innis found investors in Australia who agreed to invest $1 million in Inware. The goal is to grow the company's revenues to $20 million within three years and then sell the company through an initial public offering.
Get a finder
When you're busy growing a young company, who has time to hunt down venture capital?
“You have to have a finder,” says Innis. This is someone who will hunt down capital for you so you can focus on building the startup.
There's a cost to that, of course. Such deal brokers get 2.5% to 5% of the money they raise. “It's well worth it,” Innis says.
In this case, Innis' funds finder was Marco Versteijne, a director with Dutch Diligence, a firm based in Holland. Innis and Versteijne had worked together at SafeBoot, the developer of encryption software that was later sold to McAfee.
“As you can imagine, despite the very promising product portfolio of the company, the timing couldn't have been worse,” Versteijne says.
Versteijne says he started hunting for venture funds for Inware in October 2008, a month after Lehman Brothers collapsed and the financial markets froze. “When I called or emailed banks, private equity funds or participation funds, I just got no answer,” Versteijne says. “Those entities seemed to have vanished.”
It wasn't until July that Versteijne and Innis started seeing some interest. “Banks and the larger private-equity funds remained cautious, but the smaller private-equity funds and angel investors started to become interested again,” Versteijne says.
Versteijne has a deep network of contacts around the world and found Australian investors more receptive than many others. Fact is, Australia never felt the bust as acutely as the rest of the globe, especially because its commodities, such as mining, held up relatively well.
Innis and his business partner, Chief Financial Officer John Baker, say persistence paid off despite overwhelming odds.
“The only way to make a deal is not to let it die,” Innis jokes. “It's only because we never quit.” They've both invested their life savings, Innis says, declining to be more specific.
The financial crisis has focused investors on realistic return expectations. “They're all going to talk exit strategies,” says Baker. “They're all tough.”
Assured Venture Group of Queensland, Australia, agreed to invest in Inware earlier this month, with the potential for more.
“For this capital injection, Assured Venture Group will participate in the business and provide access to further capital and fundraising should they become necessary to fully develop the business,” says Reg Viney, partner with the Australian venture firm, in an e-mail.
Finding the gem
While its e-mail migration program currently generates revenues, the real growth will come from Gem Suite, the software that monitors employees' use of the Internet.
Innis says that once employees know that they're being monitored on company computers, Internet usage drops 25% to 50%. “They're not using company computers to do personal business,” he says.
Innis tested the software on one of his employees and found that he had visited the Drudge Report about 5,000 times. If Innis had flagged Drudge as an off-limits Web site using Gem Suite, he would have received an e-mail instantly alerting him at the employee's first offense.
The software lets companies determine what Web sites are appropriate and when employees can use it for personal business. For example, you can program the software to let employees shop online during their lunch break but not other times.
Gem Suite can generate reports for managers alerting them to who does the most Web surfing, e-mail or chats and which sites employees visit most frequently.
For example, it can see whether a specific department uses the Internet more than others. A manager might wonder: “Why is the accounting department Web surfing?”
For liability protection, the software intercepts messages or chats that may be harmful to the company. It archives the offending messages, prevents them from being sent and alerts a manager immediately in a matter of seconds. “It makes everyone more careful,” Innis says.
Inware charges customers depending on the size of their organization. For example, a company with 100 employees using computers would pay $8,000 to buy the software and $2,000 a year for updates.
Part of the funding that Inware received from the Australian investors will be used to market the service, hire more employees and contract with software resellers.
An avid golfer, Innis has lived in Naples since 1975 and says he's never had any problems finding good technical people because of the balmy weather. “It's Software Beach,” Innis says with a smile.
Jean Gruss covers the Lee-Collier region. He can be reached at [email protected], or at 239-415-4422.
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