14 Hot Startups (FORTUNE Small Business) You've almost got to pity the 14 entrepreneurs profiled in the following pages.
Not long ago investors would have climbed over each other for the opportunity to fund these companies. choo shoes But great ideas don't wait around for a sympathetic economy, and neither do the visionaries you're about to discover. World changing concepts may be out of fashion, but who cares about fashion? That said, as we compiled this year's hot startups list, we did not relax our standards. We pored over hundreds of candidates from dozens of sources venture capital firms, angel networks, universities, competitions to find the most exciting, innovative companies in the nation. Our criteria for inclusion: a truly Big Idea and some form of institutional backing, either reliable funding or strategic partnerships. The companies we came up with hail from across the country and tackle diverse problems, but they all suggest that while the economy may be stumbling, the state of entrepreneurship is healthy indeed. Turn the page to learn more. She hoped to create corn with increased resistance to drought and disease by importing some genes from a tall, strong variety of grass called gama grass. Did she succeed? That's an understatement. During last summer's drought she tested her technology in North Carolina; crop yields doubled. Eubanks's corn includes more air channels in its roots, which allow oxygen to filter through even in swampy areas. The hybrid is also resistant to rootworm, a beetle that causes 50% of corn death in Third World countries. "The insect she's targeting is a serious pest all over the entire Cornbelt," says Dr. Walter Riedell, a plant physiologist at the Agricultural Research Service at the USDA. "So if this research came to fruition, it would have a direct economic impact." Realistically Eubanks could be looking at a $130 million market. What's more, Eubanks is hoping to avoid the pitfalls that can waylay other companies that experiment with genetically modified foods. Sun Dance's technology is such that it need not navigate the often cumbersome regulatory approval process. "Because the [hybrid] she is putting forth is from relatives of corn," says Dr. Walton Galinat, professor emeritus of plant and soil sciences at the University of Massachusetts, "it's natural and can't be objected to the way synthetic genes might be objected to." Translation: Don't look for the European Union to explode in protests over Sun Dance corn. Rather than close up shop, president Bud Cass looked at his company's technology and tried to think of new markets. Armed with Small Business Innovative Research funding from the Small Business Administration and a team of employees willing to be trained, Cass transformed Advanced Cerametrics into a new business, or, as he calls it, "a brand new company wrapped around the old one." Cass and his team created a microscopic, flexible ceramic fiber that conducts heat like any ceramic pot. Those qualities give the fiber so many uses that analyst Mark Sirangelo, senior vice president of investment research firm ASB, compares it to Intel's chips. "Computer chips run everything from cars to airplanes," he says, "and Cass is building the same kind of core technology that could be used in many different industries." Like the sporting goods industry, for one. Andre Agassi plays with a Head tennis racket with ceramic fibers that stiffen the frame and lessen its vibration after a hit, resulting in a more powerful stroke. The fibers are also making their way into skis, baseball bats, and hockey sticks. But why stop with sports? Cass says his fibers could reduce the vibration in the fan of an air conditioner, for instance, making it run more quietly. Research is also underway for military and law enforcement applications. Right now Advanced Cerametrics pulls in $1.8 million in revenue annually, and no single market that it plans to enter is worth more than $15 million. But then, Intel started small too. Cinema Latino, his year old Colorado startup, has nothing to do with the Internet. Instead, Polis is tapping into one of the nation's quickest growing markets the Latin American demographic, which represents more than 12.5% of the nation's population and offering it something that hits closer to home: movies in Spanish. "It's meant to feel like going to a mainstream theater complex in Mexico," says Polis, who says that movies are a natural connection to an already huge market, marked by the success of Spanish language radio (local stations) and jimmy choo anouk pump sale television (Telemundo, Univision). So far Polis has opened three theaters in Denver, Colorado Springs, and Las Vegas with two more to come by the second quarter of 2003. Eventually he sees his company running 30 to 40 theaters nationwide. Besides offering Mexican food, decor, and the occasional Spanish to English language class, the theaters, all old but renovated complexes, feature many types of movies: independent films from Latin American countries as well as Hollywood blockbusters when the studios cooperate and actually make the effort to dub or provide Spanish subtitles. For Cinema Latino, which Polis largely funds himself, he seems to have taken a cue from Magic Johnson, who has opened up deluxe movie theaters in inner cities. "People have been running theaters for hundreds of years," says Polis. Another 40% are burned for fuel. But two entrepreneurs hope to make the Michelin Man fully recyclable. from Russia in the late 1980s but didn't meet until June 2002, when Lifton, then a Columbia University Business School student, was looking for someone to help develop his used tire recycling technology. Lifton knew that ground rubber can be combined with asphalt to make running tracks and stadium turf, but most tires contain metal, which is inseparable from the rubber. Enter Reznik, a mechanical engineer Lifton met through a mentor at jimmy choo black pumps Columbia. Reznik helped design a process to strip the metal from the rubber and turn the rubber into a fine powder that could be reused in other industries. That may not sound like exciting work, but it taps into a market worth $80 million, according to the Rubber Manufacturers Association. Reznik and Lifton have received just $100,000 in funding which they won from a Columbia investment fund. But the two aren't looking for any more, hoping that the company's twin revenue streams charging businesses to take away old tires, then selling the rubber products they create will be enough to carry it to profitability. So far they've talked with a tire service company and a large Japanese automotive company about a financing partnership down the road. For now Lifton wants to see the Syracuse plant grow and take it from there. Kolb knew she had to pack her bags or come up with an idea that could keep her in Boston. The 30 year old entrepreneur, with degrees from Babson, MIT, and Stanford, had plenty of expertise. And when talking to the urologist husband of a friend, she came up with a business idea that would let her stay put. The idea: a device that would gently widen small openings in the body to make it easier jimmy choo by jimmy choo for women to remove kidney stones. By 2001, Kolb had designed her device and founded a company around it: Fossa Medical. This August, Fossa got FDA approval for its initial product called the Ureteral Stone Sweeper and today surgeons throughout Massachusetts and New York have begun using Kolb's device in marketing tests. After they're complete probably in the spring Fossa will release its sweeper commercially. And from there? Kolb sees Fossa moving into gallstone removal one day soon. In addition, Fossa makes a polyurethane stent that opens up veins that surgeons would normally have to flush out themselves before beginning surgery. If the company sticks to those three applications, it will tap into markets worth more than $500 million. So far Kolb has just angel funding backing her company, but with endorsements from potential investors, doctors, and the FDA, that could change very soon. In fact, if CEO Richard Licursi has his way, you'll soon be able to use your phone in highway tunnels or to access a broadband connection from your car. His company is developing technology for a new breed of wireless devices laptops, Bluetooth phones, Internet capable PDAs, and so forth that can act as routers for all of a network's subscribers. So instead of depending on a static transmitter (such as a radio tower or the hub of a Wi Fi network), signals can hop from device to device, ensuring a more flexible and stable connection. The prospect may sound futuristic, but to some degree it's already well underway. The military has begun using MeshNetworks' technology. In fact it was Milcom Technologies, an incubator for military based businesses, that first launched the company. And the potential uses are vast. For instance, Allen Nogee, senior wireless analyst at In Stat/MDR, says the technology could also work well in an educational setting like a college campus, where a set number of people are plugged into the same network. And one of the company's partners, a wireless broadband services firm called Air Media Now, plans to roll it out to consumers in Orlando and other cities within the next three years. MeshNetworks' management team has a proven track record building multimillion dollar companies from the ground up. Licursi and CTO Peter Stanforth recruited a team who developed wireless networks at companies like Phoenix Wireless Group, SkyTel, and Nortel. And talk about stable connections: MeshNetworks has landed partnerships with information technology companies and wireless Internet service providers such as Viasys, ITT, Fujitsu, and 3Com. Even if those partners don't carry the company, there are plenty of others who believe in it. MeshNetworks is armed with $26 million in venture funding from the likes of BancBoston, Patricof, 3Com Ventures, and Redwood Ventures. The company has already passed the $1 million revenue mark, just a few months after shipping its product to customers. In college he was drafted and put in charge of a remote dispensary for a hospital in Germany, where his manual dexterity proved him a gifted suturer, even though he didn't have a medical degree. "My dad was in the military, and I had gone to 13 grammar schools," Sweeney says. "As a consequence, my math and science skills were lacking." Luckily his entrepreneurial skills were not. Since 1979, Sweeney, now 60, has founded health care companies Home Healthcare of America, CarePartners, CareGivers, CAPS, and Bridge all of which are still in operation or have been acquired. Sweeney's latest project is CardioNet, a remote heart monitoring service he founded in San Diego in 1999. A patient wears a four inch round sensor that tracks heart rhythm data and transmits any arrhythmias or other irregularities to CardioNet's 24/7 monitoring center in Philadelphia. Within minutes technicians respond to events per the doctor's orders. Industry experts say CardioNet's business is unique; it is the only service that offers real time outpatient monitoring. Since CardioNet went live last August, about 30 doctors have registered, monitoring more than 100 patients (four of whose lives may have been saved by the service, according to Cardio Net). But it's not just doctor's offices that have signed on. Hambrecht Quist Capital Management, Sanderling, and BioFrontier Partners, among others, have put up $26 million, hoping for payback in an estimated $500 million market. To help, George Dzyacky, founder of 2ndPoint, has developed a patented technology that lets refineries conserve fuel themselves. Drawing on his 25 years of experience in the petroleum refining industry as a production supervisor for Amoco and BP, he developed software that monitors oil levels in refineries. The technology predicts when oil levels will surge and cause flooding. For a moderately sized refinery, that could mean recovering more than 90,000 gallons of oil every year. And that could result in cheaper gas at the pump. 2ndPoint's technology is still in the testing stage Dzyacky has a pilot plant at the University of Texas at Austin that serves as a prototype to show potential customers. Combine that with other investments, as well as university and government grants, and 2ndPoint is working with $860,000 in funding. That may not sound like a lot of money, but it has taken the company far enough to attract attention from several potential customers. Dzyacky has already started adapting his technology to other industries. Next up: using 2ndPoint to monitor blood glucose levels and combat diabetes. Dzyacky, the father of a diabetic son, has presented the technology to doctors in Chicago. If he succeeds, 2ndPoint could prove to be a gusher. Jekyll and Mr. Hyde. Or if he has, its main message don't conduct scientific experiments on yourself must have eluded him. In 1995, as a researcher at the government run Walter Reed Army Institute of Research, Glenn developed a vaccine that could be applied through a patch on the skin rather than with a needle. Lacking funds, he gathered up scrap rodents leftover lab mice that were "old or vaccinated with another vaccine" and ran a renegade test. It worked. "A good inventor recognizes something important," recalls Glenn. "I knew right away it was hot." So hot, Glenn says, that he tested a patch on himself. When he found antibodies in his own bloodstream, he declared his experiment a success. Glenn's method may be unorthodox, but his (patented) idea is the basis of IOMAI, a company he founded in 1997. So far he's raised $80 million from funders, including angel investments, money from New Enterprise Associates, National Institutes of Health grants, and corporate financing from companies like Mitsubishi. IOMAI also has R alliances with Swiss vaccine manufacturer Berna Biotech and pharmaceutical company Elan. IOMAI's road to success has been a bit long, but its future looks quite promising. If IOMAI succeeds, it could end needle vaccinations as we know them; patch vaccines don't need to be refrigerated, could potentially be applied at home, and would reduce needle injuries and contaminations. IOMAI's influenza patch vaccine is in Phase II of human clinical trials, the next to last step before FDA approval. CEO Stanley Erck, a biotech and pharmaceutical industry veteran whom Glenn pulled onto his team in 2000, hopes physicians will start using IOMAI's influenza patch by 2005. IOMAI is also researching and developing patches to prevent traveler's diarrhea, H. pylori (the bacteria associated with peptic ulcers), anthrax, and cancer recurrence. Those investors are probably regretting that now. Gale, a self taught designer, has developed molded paper packaging that has caught the attention of several large retailers and even a government agency. Gale founded his company, Regale, in 1995, but the technology that now drives it was not developed until 1999 and 2000. The company makes a cardboard like paper fiber that is cheap to produce, shock absorbent, and customized to protect many shapes. For California winery Chalone, Regale created paper crates that hold both the neck and the bottom of the bottle in place, which prevents the scuffing of wine labels. And Regale's form fitting boxes aren't just more secure; they save their clients money. "It decreases the size of the container, so it saves on freight," says Willie Purvis, a plant manager at Libbey Glass who has been working on packaging design with Regale. Regale's containers, made from recycled paper and cardboard, are also environment friendly. Hewlett Packard is working with Regale to create a plastic free alternative to bubble wrap and foam filler. Even the USDA has come knocking.
The agency encouraged Regale to create paper packaging that incorporates leftover rice husks, chicken feathers, and even a "hay byproduct" better known as horse manure. "We think we can mold that into nursery pots," says Gale. Taking manure and turning it into flowerpots? Sounds like a born entrepreneur.
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