Sunday, March 16, 2008

The Roanoke Times, http://www.roanoke.com/business/wb/154775

BLACKSBURG -- The "had to be there" moment may soon meet its match.

Vidrunner -- a small start-up in the Virginia Tech Corporate Research Center -- hopes this summer to begin offering a technology that allows cell phone users to stream live video to Web pages and other cellphones.

Want to send the grandparents real-time footage of Junior's piano recital? Just hold the cellphone camera up and begin transmitting.

And, say company executives, applications for the downloadable software exist far beyond the fun and familial -- from telemedicine to distance education.

"We're throwing it out there and we'll see what people do with it," said Vidrunner President Peter Lazar. "We might be surprised."

Even before the technology gets its public airing, people seem to be paying attention.

The company was awarded a $900,000 grant from the Israel-U.S. Bi-national Industrial Research and Development Foundation last year.

In the months since, Lazar estimates Vidrunner has raised another $500,000 from angel investors and $100,000 in Center for Innovative Research GAP Funds. It was also recently selected as one of 10 finalists in Nokia's worldwide Mobile Rules! business plan contest.

Lazar and Project Manager Will Stacy hope the contest, which will announce a winner this Wednesday, will bring increased exposure to the company at a key moment in its growth.

"Four months ago, we were doing some development and also a lot of R and D [research and development], but we've gotten past the technical obstacles, so now it's just a matter of finishing the implementation," Lazar said.

"We're working right now on getting this beta product out sometime this summer."

Once up and running, Vidrunner will be available off the web as a free, downloadable application.

And, while the software depends on sophisticated cellphone cameras and the availability of high bandwidth networks such as 3G, WiFi and WiMAX, some people who are familiar with the technology think it's only a matter of time before it takes off.

"The potential for real-world use is pretty clear to almost any casual observer," said Jim Flowers, director of VT KnowledgeWorks, the business incubator to which Vidrunner belongs.

"Once that thing is tuned up and there is enough 3G cellular coverage around the world, pretty soon you're going to have all kinds of streaming going on that's for entertainment purposes -- in addition to medical, or business, or whatever purposes."

Building up a significant user base is key to Vidrunner's plans for turning a profit: advertising.

Not just any advertising. According to its business plan, the company hopes to sell ads that are targeted based on sender and viewer demographics, real-time behavior and location.

It's a sales strategy company executives believe will bring revenues of approximately $275,000 in 2008, $7 million in 2009 and $36 million to $37 million in 2010. The company expects to break even in July 2009.

Lofty goals for Lazar, an entrepreneur who moved to Blacksburg in 2005 to be a stay-at-home dad.

"That lasted a very short time," he said with a smile.

Business was calling.

After Lazar was awarded a patent for Vidrunner's underlying technology in 2006, the Northern Virginia transplant partnered with Fulcrum IT Services in Manassas and Israeli software development company SoftExpress to develop Vidrunner.

The resulting company began ramping up shortly thereafter, funded in large part by a grant aimed at encouraging collaboration between U.S. and Israel-based companies.

"They walked in here with the BIRD grant essentially in hand and that means ... they had a management team, they had the money and they had a technology that appeared to be sound [and] that clearly addressed not just marketplace wants, but marketplace needs," Flowers said.

In addition to joining VT KnowledgeWorks, Vidrunner began courting angel investors, among them members of the Virginia Active Angel Network.

VAAN Managing Director Letitia Green said Vidrunner's appeal was obvious almost immediately -- from its patented technology to its social and "first responder" applications.

But "what really did it for us," Green noted, "was the fact that the entrepreneur's presentation and passion was really credible ... and when an entrepreneur is passionate and knowledgeable, you can't help but want to put them in front of people that make their own decision."

After hearing Lazar's presentations to VAAN members in Charlottesville and Blacksburg, Green said potential investors were impressed by the company's market opportunity, as well as its management team's experience. (Lazar was previously involved in a pair of technology startups, including Web Data Solutions.)

So impressed, in fact, that VAAN invested $250,000 in the seven-employee business -- one of the group's top three investments to date.

"I think the potential is huge," Green said. "It's a very transparent world and people want to see and feel and touch."

Capitalizing on that potential won't be a walk in the park.

"In this country, a challenge over which they basically don't have any control is the proliferation of the 3G cellular network," Flowers said. And "they do need the right kind of electronic bandwidth in order to stream their video."

Recognizing that access to 3G networks in the United States is limited to major cities and cellphone technology is less advanced than it is in other parts of the world, Lazar and Stacy said they plan to target customers in Western Europe first, then China, Japan and the U.S.

But, Lazar noted, "anybody can download it and probably the first users would be techie people anywhere."

Vidrunner's business plan calls for the software to reach 20,200 subscribers in 2008, 250,000 in 2009 and 945,000 in 2010.

To cultivate the rapidly expanding group of users, Vidrunner envisions a three-pronged marketing approach, including viral marketing, channel partnering with social networking sites such as Facebook and working with cellphone manufacturers to offer the software as an "on deck" option.

These tactics, however, are likely to require some big-dollar funding.

And, after raising $1.5 million in grant and angel money, Lazar said company executives are looking for investments from venture capital firms in Northern Virginia and California.

The aim? To raise "some millions of dollars," he said.

This task was helped last month by the announcement that Vidrunner was one of 10 finalists in the Mobile Rules! business plan contest.

"It stood out with a very well-thought plan and it is an innovative mobile solution for today's challenges," Vesa Luiro, director of Traffic Services and Software for Nokia, said in an e-mail.

Sponsored by Nokia and a handful of venture capital and technology firms, the contest has the potential to bring significant visibility to Vidrunner.

Flowers believes it already has.

"The fact that Nokia has already named them one of the top 10 mobile technologies and that in that top ten there isn't anything that competes directly with them at all, means that a whole bunch of people are already knocking on their door saying, 'Can we be part of this game?'"