After competing in New Ventures BC, AirZone received good coverage from the likes of Popular Science, Wired, and Western Living magazines, to name a few. They have also expanded the technology to other uses, included a Golfnet practice tent, and other construction and entertainment tents. They have also established a UK office.

Selling anti-spam software to large enterprise customers can be tricky, since the open source Apache SpamAssassin software is free, effective, and widely used. Rather than compete directly, MailChannels’ Traffic Control software works with SpamAssassin to provide an extra layer of filtering. When receiving email from a questionable source, the software deliberately stalls the connection; legitimate mail servers will be patient and wait to finish sending, but spam bots will usually give up and move on. This technique alone blocks 90% of spammers.

Company CEO Ken Simpson says MailChannels is in its second profitable year with annual growth of 500 percent. This level of success has allowed them to give back to the community. They recently donated infrastructure to support the SpamAssassin project, and the Traffic Control software is free for non-commercial users that receive less than 10,000 connections per day.

While the once frequently prophesied dream of the paperless office still isn’t a complete reality, the majority of new business information exists in the digital realm. While digital documents can be infinitely copied, the lifespan of digital storage media is often shorter than that of analog media. Despite technological advances, the need for proper archiving remains, and is often required by law.

Datawitness, a fourth round finalist in 2004 based out of Richmond, provides a robust data retention solution for small to large business, education, and governments. In addition to archiving documents in their secure data center, Datawitness also transfers those documents to microfilm, creating an analog copy suitable for long-term storage. Documents are digitally fingerprinted to guard against tampering. On top of this platform, they provide a “Mailwitness” service that tracks delivery and receipt of sensitive email, along with archiving.

The service has been approved for use by the governments of British Columbia and Ontario. In 2006, they won an “Investor’s Choice” award at the 20th Angel Forum in Vancouver. In 2007, Datawitness received “Eligible Business Corporation” status, allowing investors to receive a tax credit under the New Media Venture Capital program. Also in 2007, Datawitness launched an API, allowing third party developers to plug in to their service.

Datawitness’ innovative technology, competitive pricing, and attention to legal requirements has rewarded them with pleased customers and stable growth. As more of the world’s data is converted to digital form, and data retention standards become more strict, demand for Datawitness’ services will increase into the foreseeable future.

Visit fundfindr.tv for more video on entrepreneurship topics. If you’re interested in professional video production for your event, demo, pitch, product or service contact shannon@fundfindr.tv.

The event is free, but please register online.

There’s still opportunity to enter into the Pitchies main event, already going on.

The jury has read, discussed, and deliberated over the record 149 entries submitted to Round 2 of the New Ventures BC Competition this year.

Big thanks to our 2008 Round 2 jury this year. Many jurors stepped in at the last minute to help read all the submissions.

Congratulations to the 30 companies advancing to Round 3 of the competition!

Everyone is welcome to the networking event on June 18th, taking place at SFU Harbour Centre, 515 W. Hastings St, room HC 1400. Register online.

A Venture Capital Corporation fund, sponsored by the BC Ministry of Finance, entitles investors to a 30% tax credit. It is very popular and has sold out for the year.

A management team is like a three-legged stool: research and development, sales and marketing, and financing.

There are only six venture capital funds in BC, and only three are able to invest at the moment. The market is tough. Steps in the process: Package the business plan, identify appropriate targets, meet targets and follow up, complete due diligence, negotiate final terms. The process can easily break down at any step, time means nothing. Be emotionally prepared.

Question: How regional is the investment community?

Answer: Very. Investors tend to stick to their area. Investors also want to be close for face time when required. Regions have their specialities, in Vancouver: biotech, gaming, web, mobile.

Sources of financing: equity, debt, grants, and revenue. Banks will generally ignore you. Lots of good government money available.

Angel investors: the best angels are the ones that know you. It’s about building a relationship with that investor. They usually invest in areas of business they’re familiar with, and have had previous successful exists. They are faster moving and tend to invest early. (these are all generalizations and don’t always hold true.

Venture Capital funds: they may be active or passive, focused or diversified. They’ll participate through multiple rounds, move slower and more carefully.

Question: At what point does an active investor start to seek more control?

Answer: “When they cut the cheque?” *chuckles*. Soon and early.

It’s important to understand what motivates your investors. They think long term. VCs focus on the 10% of investments that go 100x. They have a diversified portfolio, you have one shot. VCs have a 20% performance fee, meaning they get 20% before the shareholders of their fund.

With Angels, there is one decision point. In a VC organization, there is a lead contact but also multiple decision makers within the organization. When you bring in equity investors, there is a dilution of your control, and increased governance and oversight. But you also gain access to their network of contacts and business insight.

Before seeking investment, it would be good to get even a small board together, 3 people. The yearly cost of director compensation might be around $15,000. Another option is to give them equity and similar values.

Question: What do investors think of having two founders on a board?

Answer: General practice is that only one is on, usually the CEO.

Targeting investors that understand your company and have done similar deals. Look at their CVs and portfolios. Find the right person at a firm; having the right one can make or break the deal. Ask who the best person in the firm is. Lever contacts to understand where you are in their queue.

Your first contact shouldn’t be a presentation, meet for coffee first. Talk about the business, not the technology. Follow up on this first meeting the same day. Answer questions, and ask some. Suggest another meeting and specific topic for it.

Executive Summaries: keep it concise. Start with a simple description of who your clients are and why they will buy from you. Have a clear value proposition. Keep it down to about two pages, and proof it with others. Don’t use technical jargon and acronyms. Make it clear how much money you will need. Each paragraph should explain why the company has value. You should be able to explain the value of your business in one line. Consider Science Proposition vs. Value Proposition; you want to be talking about the value. Avoid saying: “our projections are conservative”, “we have no competition”, “we have first mover advantage”, “we only need to capture x% of the market”.

Pitch presentations. Pitch time should be about an hour. 20 minutes of slides plus interaction. Ideal presentations: 12 slides, cover product, market, management, and interactive discussion. Don’t bring your entire team or focus too much on the technology.

Expect that angels or VCs will get on your case for due diligence items, such as: business plan and executive summary, all material contracts, details of financial and revenue models, Management CVs and references.

What are investors looking for? Opportunity to earn 20-35% compounded annually. Experienced Management. A sustainable competitive advantage. Market validation. A clear lucrative and sustainable value proposition. Large market opportunity and the ability to scale it.

Deal terms. Some terms of preferred shares: paid first upon liquidity, option to convert, dividends, varying levels of control over the business. Investors will often have more experience of the management, have had experience with many different companies. “Consensus is when both parties are equally unhappy”. Remember that investors are future business partners.