May 4, 2005

RFID-Free America

Continued from page 1

By Andrew Madden

Tried and True
Start-ups are often best served by targeting obvious markets -- and other alarm:clock news from the land of private venture funding.

While start-ups that are seeking to create unprecedented business models tend to capture the imagination, sometimes the best business focuses on building a better mousetrap. Last week, we encountered several recently funded companies that caught our attention because of the simplicity and straightforwardness of their business models.

One such company is Palo Alto, CA-based PayCycle, a start-up that sells a very inexpensive payroll platform which automatically calculates, files and handles payroll taxes. PayCycle targets small businesses with its easy-to-use service, a part of the market that has not been well served by incumbents such as Paychex and ADP.

The company currently claims upwards of 15,000 clients and has done a good job integrating its service with money management applications that are widely used in small businesses such as Microsoft Money and Intuit's QuickBooks,

PayCycle, which raised an $8.5 million series D round in April and has raised $29.3 million to date, also boasts a management team with serious chops. Jim Heeger, who assumed the role of CEO in February 2005, was previously a senior vice president at Adobe and, before that, a senior executive in Intuit's Small Business division. Co-founder Rene Lacerte is the son of Larry Lacerte who, incidentally, sold Lacerte Software to Intuit for $400 million.

Desktop search applications haven't been around as long as payroll services, but companies like Microsoft and Apple have been duking it out for years, trying to create the best application to help users manage all their locally stored information. X1 Technologies, a Pasadena, CA-based start-up founded in 2003 has quietly come on to the scene with a well-respected desktop search application of its own.

The company sells a premium desktop search offering for $75, but it also has a free version that is the underlying technology powering both Yahoo Desktop Search, Earthlink Desktop Search, and Newsgator RSS search. Both free and paid versions will index documents and Outlook e-mails. The paid version includes the ability to search network drives and external Outlook PST files not loaded in Outlook, as well as Eudora, Mozilla mail, and Lotus Notes. The company is also readying an enterprise edition for corporate networks.

In April 2005, X1 raised $10 million led by U.S. Venture Partners with participation from founding investor, Idealab. Yes, that's the same Idealab that launched the search engine GoTo.com, which then became Overture, and eventually purchased by Yahoo for a cool $1.6 billion. Mark Goodstein, the founder of X1, was an early employee a GoTo.com and presumably understands the nuances of the search game as well as anyone.

Celerica, a Tel Aviv-based wireless equipment start-up, provides another example of a company that's targeting an unoriginal, but potentially lucrative market. Celerica makes products that provide mobile network operators with something they all want and need: more capacity out of their networks. The company's technology extends wireless coverage and optimizes network capacity in urban and rural areas. The products are aimed at applications where current radio frequency solutions are coming up short because of interference or signal deterioration problems.

It's not a stretch to say that wireless networks face increasing demands on their spectrum and infrastructure resources.

According to the CDMA Development Group , an industry trade group: "Increased minutes of use, capacity-intensive data applications and the steady growth of worldwide wireless subscribers mean carriers will have to find effective ways to accommodate increased wireless traffic in their networks."

Well, it looks like Celerica has a pretty obvious market opportunity.