Despite a recent management shakeout that has plunged publicly traded Engage Inc. into penny stock territory, the venture capital community seems confident that a spin-out founded by former employees of the company will not repeat the mistakes of its predecessor.
The new start-up, a mobile Internet technology company called Avesair Inc., recently rang up $16 million in first-round financing led by Nokia Venture Partners, the venture capital arm of global wireless heavyweight Nokia. New Things, a New York-based venture firm, also participated.
Jonathan Ebinger, a principal at Nokia Venture Partners, and an undisclosed New Things representative joined Avesair?s board of directors.
A History of Give-and-Take
Avesair is Nokia Venture Partners? sixth investment from its $500 million second fund, which targets wireless technology companies, including security and location-based services plays. As a provider of software and infrastructure that enables wireless carriers to match advertising and other messages to customer profiles, locations or other criteria, Avesair hopes to cultivate strategic alliances with other companies in Nokia Venture Partners? portfolio, and is already aggressively exploring such relationships, said Kimo Kong, Avesair?s chief executive.
The company is no stranger to such symbiotic pairings. Avesair?s software technology was originally developed as part of a strategic initiative with Engage, an interactive media company that is part of the crumbling empire of once high-flying Internet incubator CMGI Inc. Previously, its founders were affiliated with Accipiter, a software start-up that was sold to CMGI in April 1998 for $35 million.
Although Engage owns a minority stake in Avesair and will get kick-backs from the royalties the spin-off earns from software licensing agreements, the start-up is considered its own entity and is not a CMGI company. Moreover, Avesair will have the opportunity to get the word out about its technology faster by using Engage?s already-established network of marketing channels.
Expansion on the Horizon
To that end, Avesair intends to use this latest capital infusion to bolster its sales and marketing efforts, as well as continue building out its wireless technology infrastructure. The company also plans to expand its staff from 12 to 50 employees by the end of 2001.
While Avesair?s Kong noted that, for now, its Research Triangle Park, N.C. headquarters are more than sufficient, he also said that plans are in the works to open regional offices throughout the world. Currently, the company is looking at Europe, Asia and Latin America as viable locations to set up ancillary shops.
?We?re not limited to those areas, but they are our first thought, as the customer opportunities seem to be best there,? Kong said. ?Wireless technology is much more advanced overseas than it is in the U.S., and the wireless world, inclusive of Internet and telecommunications applications and services, is poised for explosive growth.?
Consumer Privacy is Critical
Ensuring that the wireless revolution catches on as expected is just one concern for Avesair. Privacy is another issue the company must deal with.
In Kong?s mind, privacy concerns are critical to the company?s success. ?It?s our responsibility to educate the consumer, and make sure we keep their privacy in the forefront of our thoughts, and so should the carriers we work with,? he said. ?It?s important that we all respect individuals? privacy.?
Moreover, as the company targets overseas markets, it?s crucial that it accounts for all of the different privacy standards that apply in foreign countries. Avesair?s decision-engine software, which enables carriers to match messages to customers who opted in for certain types of messages or who fit the target audience for a product, should help avert some of those snags.
Surmounting the privacy obstacle is equally important to Avesair?s ability to meet the burgeoning demand for its technology as wireless carriers continue to look for alternative ways to generate revenue by delivering targeted, personalized messages to consumers.
Its investors seem to believe that the two-month-old company is well-positioned to cater to that demand and, currently, that its competitors are few and far between.
?We looked for three months and didn?t see any other companies doing what Avesair is doing,? Nokia Venture Partners? Ebinger said. ?We found a lot on the Internet and wireless side, but no one had the decision-engineering capability nailed down.?
Avesair is the firm?s first start-up investment. ?The opportunity came to us through another venture capital fund, a rather unusual channel for us,? Ebinger noted. ?We typically don?t fund start-ups, but we felt this one was wholly-baked. It had the management and technology already in place. All it needed was funding.?
As for future financings, Kong said that, while he assumes the company will need additional capital infusions as it grows, for now, he?s taking a ?wait-and-see? approach.
When asked about the likelihood of an initial public offering, he said, ?No one wants to be public right now.?