Been there, done that

Mar 26, 2001 12:00 PM, Jason Meyers

The principals of inOvate Communications Group are quite sure they know what it takes to build a business in the approaching age of the wireless Internet. And their confidence is based on more than just professional narcissism: They're sure about the future because they've survived the past.

“We eat, drink, sleep and breathe wireless,” said Craig Farrill, managing director and chief technology officer of inOvate, a self-described “accelerator” for start-up wireless companies.

inOvate's founders believe they are equipped to do what they're out to do because they have all, at one time or another, experienced the pain of wireless to excruciating degrees. They know how it feels to fail as well as to succeed and they are intent on injecting all of that into their efforts to jump-start the network side of the mobile Internet business.

“I've been in the wireless operator community for 20 years, and what I was seeing was that this next transition of the industry to the wireless information age would be the largest and most difficult transition we would ever face,” Farrill said. “This next stage involves the confluence of a lot of different industries — wireless computing, mobile multimedia, entertainment — that present many different roadblocks. There are so many gaps.”

Farrill is representative of other principals of inOvate, the bulk of whom came out of the carrier side of wireless. Farrill was most recently chief technology officer of Vodafone AirTouch, where, among other milestones, he helped launch a wireless data initiative in conjunction with NTT DoCoMo.

On the heels of that service provider experience, Farrill felt ready and well-rounded enough to jump feet first into the “mobile multimedia” experience. “I wanted to be in a position where I could have a significant impact on this industry in the way of accelerating the availability of wireless multimedia around the world,” Farrill said. “Being in one company, I didn't see how I could do that.”

Merely defining inOvate and exactly what it does is difficult, particularly in an economic era when incubators are anathema and venture capital firms are thought of simply as holders of purse strings and not developers of companies. Hence the “accelerator” descriptor and a company mission that covers all bases but doesn't specifically lay out what the company does.

“We don't want to be classified as any of those,” said Keith Kaczmarek, another of inOvate's managing directors. “We're really helping create, accelerate and grow companies — taking innovative ideas and getting them to market faster.”

The incubator tag is especially abhorrent to inOvate principals because it suggests that they merely provide care and feeding to developing companies. Because of the specificity of inOvate's targets and the depths it goes to when helping to steer and make self-sufficient a mobile Internet start-up, the outfit clearly does not classify itself that way.

“If what you're trying to do is provide office space and legal services, that's nice but it's not sufficient,” Kaczmarek said. “And a lot of incubators try to be too broad. There's something about having to deal with things like your own office space that helps make you stronger.”

According to inOvate founder, president and CEO Perry LaForge, who is also the executive director of the wireless industry's CDMA Development Group, the formation of the company was a “serendipitous” event that came about when he and several industry executives found themselves at a turning point in their careers and the sources of much inquiry about company development. LaForge, who is a partner in the consulting firm Pittiglio Rabin Todd & McGrath, said the number of wireless types seeking technology consultation led him to form inOvate.

“We had all done interesting things and felt there was a huge opportunity staring us in the face. We found that a lot of people were coming to us asking for help with ideas in launching companies,” LaForge said. “I went to my partnership about two years ago and said, ‘We've been asked to do all this work, and I want to create this company.’”

PRTM helped LaForge set up the company separately and funded it separately with venture partners, he said. Because inOvate is not itself a venture capital firm, it can focus on all aspects of the development of new companies in the wireless Internet realm rather than act as just their initial funding sources, LaForge said.

“We basically believe that for a variety of reasons, stuff just doesn't happen fast enough,” LaForge said. “We believe we can make stuff happen more quickly.”

As for focus, inOvate is intent on fostering development on the infrastructure side of the business, and the first group of companies it has brought under its wing reflects that. Galleon Wireless Broadband, for example, is making antenna systems for fixed broadband wireless. WaterCove Networks is developing data networking infrastructure for mobile IP networks, inServ is building customer relationship management software solutions and inCode is a systems integrator.

“Everything we're doing is in the wireless information services space,” LaForge said. “If you narrow that a little, we're looking at things on the radio access network side — both fixed and mobile.”

The reason for that particular focus rather than a broader aim — such as one of mobile Internet applications development — is primarily one of differentiation. inOvate's principals felt that to home in on applications would be to duplicate the efforts of other outfits whose aim it is to foster the wireless Internet — namely holding company and venture capital firm Ignition, founded by former AT&T Wireless and Microsoft executives.

“The difference is that we came from wireless and have a deeper wireless domain expertise,” said Farrill. “The Ignition folks are more focused on making investments in software and come more out of the software domain. Because of our domain expertise, we're very much involved in the strategy development of these companies.”

Ditto for why inOvate is not merely a straight venture capital firm. Given the experience of its founders, the company felt it could be much more than that and provide much more intense assistance as it helped start-ups start up.

“VCs might not have the domain expertise at that level,” Kaczmarek said. “Most of the VC groups I've met have a certain level of expertise in certain areas, but it doesn't always go real deep.”

And depth of experience is what it's all about as far as inOvate is concerned. Just knowing what not to do or how to avoid the pitfalls is an extremely valuable asset, at least according to the people lending the know-how.

“I've lived through the nightmares of the deployment and operations of a network,” Kaczmarek said. “There's a lot of pain out there and there always will be. It's that sort of operational experience and depth we can provide — finding the pain and helping relieve it.”

With just 6.8% of its total population using wireless phones, China represents a largely untapped market, according to a recent study by The Strategis Group. And the declining cost of cellular services, market competition, rapid adoption by pre-paid users, and the introduction of new services by operators are all expected to accelerate usage. Subscribers will grow at a cumulative average growth rate of about 21% between now and 2007, with about 41% growth this year. In addition, the still relatively low penetration rates of PCs means the Chinese will be sterling prospects for mobile Internet services.