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WiseWire executives turn venture capitalists for Downtown firm
Friday, July 31, 1998 By Michael Newman, Post-Gazette Staff Writer
Less than a year ago, Ken Lang was begging for money. Now he's giving it away. Easy come, easy go: Welcome to the Internet Economy.
The beneficiary of Lang's largesse is a small Downtown startup, Storm Systems. The company, founded in February, makes software designed to improve the speed of the computers that serve the World Wide Web.
"This is my first investment in a startup," says Lang, who, as founder of Oakland's WiseWire, cajoled several million dollars from private investors before selling the company three months ago. How does he like sitting on the other side of the table?
"It's strange," he says. "I think I actually worried more when I was spending other people's money."
In some ways, Storm is like WiseWire, the Oakland firm that Lang himself started three years ago: It's small, it has proprietary technology that's hard to explain and it plans to make millions from the Internet.
In other ways, however, Storm is different. Each of its four founders has at least a decade of experience in the high-tech field. Its business plan was hatched at the same time as its technology, not afterward.
And Storm is more realistic - and perhaps less romantic - than the usual startup. Like the others, the company started in someone's basement, and its offices, on Fourth Avenue, are sufficiently cramped and temporary. But these aren't exactly college kids on an adventure.
"We're probably a little bit more of a traditional company" than the typical startup, says co-founder Sam Leinhardt, 54, Storm's president and chief executive officer. "We made sure we were comfortable with our product before we got out of the basement."
That would be the basement of Thomas Marnik, another of the company's founders and, like Leinhardt and fellow founders Michael Faulkner and Rich Koch, veteran engineers from Formtek. Storm's name, like that of another prominent local high-tech firm, Fore Systems, is an acronym of the founders' first names - plus an 'O.'
Leinhardt founded Formtek, which makes software to help in mapping phone and utility lines, in the early 1980s. In 1989, what is now Lockheed Martin acquired it for $45 million.
Leinhardt continued as executive vice president of Formtek until the end of last year. A month later, he and the other three - all of whom are in their 30s - founded Storm.
The company was formed to solve a fairly simple problem: The World Wide Web is too slow. "The problem of performance on the Web is like the problem of memory on computers," Leinhardt says. "There's never enough."
The problem is usually expressed in terms of bandwidth (traffic piles up on the "Information Highway" because it's too narrow) or as a hardware issue (the jams occur because the traffic signals aren't well coordinated).
Storm approaches the problem from a third angle: It's a software problem. Its solution is to give the cars on the highway more powerful engines.
"We see ourselves as an enhancement," Leinhardt says. "It's as if you poured ethyl alcohol into your gas tank."
Of course, everyone is trying to come up with a way to eliminate the "World Wide Wait" so familiar to anyone who's ever used the Internet. "We're not the answer to everything," Leinhardt says. "We're a piece of the puzzle."
Whatever improvements other networking or hardware companies invent, he says, Storm's software will work with them.
That's the idea, anyway. The actual product is not yet available. The company hopes to have it ready for sale by the end of the year.
The idea has attracted not only Lang but also Rob Frasca, another former WiseWire executive who invested in the company. Others included in the company's initial round of $1.5 million in capital are Regis McKenna, a well-known Silicon Valley consultant; Sydney R. Knafel, a New York venture capitalist; and the Safeguard Scientifics Venture Fund, based outside Philadelphia.
But perhaps the most unlikely investor is Lang, 32, who founded WiseWire Corp. in Oakland three years ago. Just last September, he was still courting financiers and venture capitalists in an effort to raise capital for his company, which makes "intelligent" software designed to help users navigate the Web.
Then, last spring, WiseWire was sold to Lycos, a publicly held Internet company founded here and now based near Boston, for about $40 million. The sale left Lang with more than a little change in his pocket.
He decided to spend some of it on Storm Systems.
"I like their technology," says Lang, who is now chief technology officer for Lycos. "They have a great solution for a very common problem. It seems like an obvious money maker."
Of course, it would not be the first time someone has described a so-called "Internet company" in such a fashion. And more often than not, at least recently, they've been right - at least for their investors.
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