In the News...

Business in Vancouver
 - Feb 4, 2003

by Ian Noble

Dynaptive Systems and OctigaBay Systems land millions in cash

A double shot of good news has a local venture capitalist looking at the information technology space as half full.

Last week, two Lower Mainland companies told BIV that they had raised cash. Vancouver's Dyaptive Systems Inc. has pulled in between $1 million and $5 million in its first round while OctigaBay Systems Corp. closed a hefty $24-million round with four heavyweight venture capital firms.

Those deals, plus the $3-million Radiant Communications deal announced in December and jaalaM Technologies Inc.'s recent US$7-million haul, had Greenstone Venture Partners' Brent Holliday seeing better days ahead for a beleaguered IT sector.

"I am really excited by this trend, although I would be very surprised if we could keep this pace up. I do think we are going to see a trend up though."

Holliday said IT has been a dead sector since April of 2000.

"It's been very, very tough to raise money for information technology companies," he emphasized. "It's nice to see there's a bit of a turnaround here and companies are getting funded."

Steven Szabo, a co-founder at Dyaptive, said his company has been looking for funding for the past year.

"It has been hell," he summed up.

The company makes wireless infrastructure and network-testing equipment used to optimize wireless CDMA. Code division multiple access networks are the most predominant technologies for cellphones in North America.

The upside for potential customers includes research and development cost savings for telecom equipment makers, opportunities for wireless network operators to gain capacity from networks and improvements to wireless services that prevent customer turnover.

Szabo said providers heavily subsidize wireless users initially, so short-term customers cause much fiscal grief.

"We worked hard to understand the pain wireless equipment manufacturers and wireless network operators have, and came up with a clear value proposition on reducing their pain, saving them money and giving them the ability to increase the revenue they can generate from existing investments," said Szabo.

Szabo said Dyaptive's many strides over the past year have made the company more attractive to investors.

He pointed to Dyaptive's signing of a "top-tier" telecom equipment maker as a customer to help develop the technology, assembling a high-profile advisory board and hiring a CEO as crucial to finalizing the financing deal. Szabo said Vancouver-based GrowthWorks Ltd. invested in the round, but would not reveal any other funding sources.

OctigaBay president and CEO John Seminerio said his company has been seeking cash since the summer of 2002.

Last week, the company announced Vancouver's Ventures West Capital and Working Opportunity Fund had invested alongside Business Development Bank of Canada and Celtic House Venture Partners.

Although Seminerio said raising the money took three months longer than anticipated, OctigaBay's brain trust does not lack confidence.

"Our specific product plans will be announced at a later date, but based on our track record with our last company, Abatis, and the level of endorsement from our investors, you can expect something big," said Seminerio.

In February 1998, Seminerio, Adam Lorant and Paul Terry co-founded Burnaby's Abatis Systems Corp., which made hardware and software for telecommunications firms. In summer 2000, before the tech market's froth evaporated, California's Redback Networks Inc. bought Abatis for US$676 million in shares. All three are now at OctigaBay.

In an earlier interview, Seminerio said that OctigaBay is capitalizing on silicon chip innovations, and that it's targeting data centres. They are facilities that house racks of equipment such as servers, computers and networking devices. In an interview last week, he said he expects OctigaBay to remain in "stealth mode" for at least another three quarters.

"We are building a hardware and software product, a very new product in a very new market. Because it's so new we want to keep it stealth as long as possible, just not to give any potential competitors a heads up."

Meanwhile, Holliday added that his company is now seeing what he called more interesting, more exciting IT deals.

"From our perspective and other investors' perspectives, we're starting to loosen the purse strings a little bit," he said when contacted about the recent flurry of deals.

Holliday, who invests in information technology companies, said the companies funded presented high-quality opportunities.

"These are good investments. We're looking to do a couple like them real soon," he said, adding that he expects to make a few deals this year.