- The Washington Times - Monday, December 11, 2000

The search for survivors amid the debris of recently crumbled and market-battered high-technology companies has led market analysts to five D.C.-area enterprises they say are worth watching.

The quintet includes a couple of software producers, a consulting firm, a computer security company and a phone company or in the parlance of technologists, a "local exchange carrier." All are in Virginia.

Assertions that the five will make it past toddler stage rest mainly on the assumption that the companies are trying to produce needed products and have reasonable financial support and experienced front-office talent.

Whether this adds up to eventual success for these businesses is, of course, the essential question the companies' venture capitalists are asking.

But for others, the companies' activities help illustrate where the smart money says high-technology entrepreneurs are leading us.

Here then are brief sketches of the companies:

Worldweb.net

The Alexandria software company produces programs aimed at reducing the time needed to manage and maintain complex Web sites. It faces stiff competition in the endeavor, yet industry watchers say it gained an edge last month when it partnered with IBM. IBM is said to be interested in Worldweb.net because of the company's demonstrated knowledge of XML, or extensible markup language.

That relatively new computer language provides a method of describing data that can make business transactions more efficient. XML is similar to HTML, or hypertext markup language, which is used in designing Web sites.

Worldweb.net was founded in 1994 on the premise it would develop a product that helps users access the Internet. Four years later, when XML was just being introduced, the company shifted focus.

Larry Henry, the company's chief technology officer and an alumnus of the software maker Attachmate, explains:

"We said, 'OK, we want to take our software to the next level.' XML was just about to get out of the recommended stage by the [World Wide Web Consortium] at this time. We bet on XML before it was in the recommended state." Worldweb.net's prominence among companies working with XML was apparent last week when it co-sponsored the Graphic Communications Association's XML2000 Conference. The event showcased the work of such industry leaders as Microsoft and Sun Microsystems.

Industry analyst Andrew Warzecha, vice president of Stamford, Conn.-based META group, comments that Worldweb.net's software contains "must-have components" for businesses.

Last month, the company released the second version of Expressroom I/O, a software system designed to simplify the maintenance of business Web sites. The original Expressroom I/O will be used as part of an IBM electronic business solutions package.

"We're going to be part of a product [IBM is] selling," Mr. Henry said. "We've been working on it for some time. It's very exciting to go down that path, because there are a lot of technology synergies between what we've done and where IBM continues to go."

Neil MacDonald, vice president and research director of the Gartner Group, another Stamford-based analysis firm, indicated that the tie between Worldweb.net and IBM can only help a company. He called it an "excellent example" of the kind of thing that makes a company viable.

"[The partnership] is an excellent indicator that this company has something. [It's] absolutely a positive," Mr. MacDonald said

QB Inc.

Many electronic businesses that once offered on-line data exclusively in a text format now are incorporating film and video into their presentations. The innovation has brought with it programming problems and assorted other technical challenges that QB Inc. develops software to overcome. The software organizes the film and video content placed on Web sites and in databases and facilitates access to it.

The year-old, 100-employee McLean company is operating on $3.5 million put up by Draper Atlantic Venture Funds. Draper is a Reston firm that invests exclusively in early-stage ventures. Since 1999, Draper has helped 20 start-ups go public. The lender's investment in QB Inc. is its largest so far.

Indeed, part of QB Inc.'s luster comes from Draper Atlantic's favor. As the Gartner Group's Mr. MacDonald puts it, "If you see a very high-profile, well-known venture capital firm behind a company, that's an endorsement."

Beyond that, Gistics Research, a San Francisco-based technology analysis firm, reports that the market for managing rich media content reached $1.7 billion in 1999, up from $654 million in 1998. There are predictions it will reach $3.2 billion by the end of 2001.

"What we'll see over the next year to five years is a turn more and more to a visual society and the incorporation of more media into day-in-day-out business communications," said Tom Magazzine, QB Inc.'s chief operating officer.

Mr. Magazzine is the former chief operating officer of Xerox. He previously nurtured Intercim Inc., GTE Vantage Solutions and WorkSmart Inc. from start-up stage to maturity.

John Backus, managing partner of Draper, the firm backing QB Inc., agrees with Mr. Magazzine's vision of the future. He says:

"We believe that broadband proliferation will bring new types of applications to the masses, many of which will go well into the realm of streaming audio, video and rich graphics."

QB Inc.'s top customers include Universal Studios, Microsoft, Bertelsmann Music Group and the U.S. government. The company projects revenues of roughly $6 million this year, and $50 million by 2002.

Collaborex

Fairfax-based Collaborex is a consulting company for big corporations. Or, as the company's executives prefer, it is a "solution provider." The latter phrase implies quick results, they say.

Ten-month-old Collaborex recently entered into a partnership with webMethods, a prominent provider of software used in on-line business-to-business operations, an area of activity that's said to be verging on explosive growth.

The company is led by its founder, Australian Andrew Nash. Mr. Nash came from Baan, another business-to-business consultant. Before that, he was managing partner at Deloitte Consulting. He is backed by Chief Technology Officer Don Scheuler, formerly a top hand at webMethods; Chief Financial Officer Rick Romar, who held a similar post at KPMG; and Senior Vice President Dave Jordan, formerly with Andersen Consulting.

"You need a strong, solid management team to ride through times of uncertainty," Mr. Nash said.

In February, Collaborex received $4.6 million as an initial investment from FBR Technology Ventures, and that sum is sustaining its operations.

Forrester Communications, a Boston-based analysis firm, predicts that business-to-business consulting will grow into a $60 billion-per-year activity by 2003 and into $100 billion by 2005.

"We call it 'c-commerce,' for collaborative commerce," said Mr. MacDonald of Gartner. "The idea is not new, but [Collaborex] is on the right track. It's a huge market opportunity."

In September, Collaborex was one of 60 young technology companies the Mid-Atlantic Venture Association invited to its Capital Connection 2000 fair. Three hundred had applied for invitations.

"We looked at the strength of the start-up," said Jack Biddle, co-chairman of MAVA's selection committee. "We were looking for companies that have the potential to be very valuable down the road."

Riptech Inc.

The more businesses use the Internet, the more white-collar criminals have to attack. Credit card information, passwords and even medical records are all vulnerable, but Riptech strives to protect them.

Riptech, of Alexandria, develops monitoring systems based on its ESentry software and, in effect, provides a 24-hour data guard.

The company was founded by Elad and Amit Yoran, West Point graduates who claim years of security experience, and Tim Belcher, a Desert Storm veteran who serves as the company's chief technology officer. Amit Yoran reportedly helped design the Pentagon's computer security architecture.

"The threat changes every day. There has always been and always will be a criminal element out there. [The crooks] are not going away," said Elad Yoran, the company's chief financial officer.

It's for that reason, said Charles Kolodgy, a senior computer security analyst at International Data Corp. in Framingham, Mass., that companies like Riptech have been doing well financially this year. Business was spurred by anxiety over the so-called "Y2K bug" and by recent reports of successful hackings. International Data predicted this year that the computer security industry will grow an astounding 1,400 percent over the next four years.

"Most businesses work on the Internet 24 hours a day," so businesses need 24-hour security, Elad Yoran said, adding that security systems are "a critical piece of enabling technology."

On the basis of these predictions and calculations, Riptech managed to obtain $23 million from Columbia Capital and Providence Equity Inc. last month. It is using part of that money to establish Riptech monitoring centers throughout the country.

Hard on the heels of its funding, Riptech signed four new customers, including NetCreations, an e-mail marketing service based in New York.

2nd Century Communications

Arlington-based 2nd Century Communications says it provides business solutions to small-to-medium-sized businesses in 22 cities across the country.

Officially, the company is considered a local exchange carrier, meaning a telephone company. It offers high-speed Internet connections, telephone hookups and even assistance with desktop computing.

In August, the company was named the "Top Company to Watch" in Washington, D.C., and Tampa Bay, Fla., by dbusi-ness.com, a leading on-line provider of local business news.

Network Magazine called 2nd Century the "Most Innovative CLEC" (Competitive Local Exchange Carrier) earlier this year, touting its ability to provide more services than most companies of the kind.

Big investors, too, have taken note. In the last 20 months, 2nd Century has gathered some $155 million in backing from Dell ($75 million), Microsoft Corp. and Intel. The company already has established product partnerships with Dell in Baltimore and Miami.

"These are probably the three most prevalent companies in the world that are involved in the desktop [computing]," said John Prisco, 2nd Century's chief executive officer.

Mr. Prisco said 2nd Century is expanding to 48 cities nationwide, and the Gartner Group's Mr. MacDonald commented that the company's "strategy makes a lot of sense."

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