@LARGE

Serve yourself

By Scott Kirsner

Andres and Antonio Rodriguez are already living in a better world than you or me.

Their digital photos and videos are meticulously organized into albums that they can share with friends and relatives. They can listen to MP3 music while at work, even if the files reside on a computer at home. They can easily create and manage their own e-mail accounts and those of family members, and they can split a broadband connection so it can be shared among multiple computers.

The Rodriguez brothers' Watham start-up, Memora, has been selling a standalone machine, the Servio, that does all that, since May. (Antonio says they've sold between 60 and 100, but won't be more specific.) This week, at the MacWorld Expo in New York, they'll announce a software-only version of Servio, compatible with the new Macintosh operating system OS X, that will sell for $200.

"Our premise is that everyone is moving toward digital photography, digital music, digital video," says Andres, "and those things, because they're digital, deserve universal access. You'll want to share them with others, and be able to get to your content from wherever you are."

In a demo, the Rodriguez brothers show how Servio can be used to invite others to listen to an MP3 track, view a child's finger painting, or watch an entire `Star Trek' episode. (They insist that such sharing is legal, because, unlike Napster, it's more analogous to lending an album to a friend than offering it to anyone on the Net.) There's even a feature Antonio created called WebJay, not yet included in the current Servio product, which can grab articles from Web sites, turn them into MP3 files read by a voice synthesizer, and load them onto a portable MP3 player so he can listen to them while running.

The company hasn't yet received any venture capital investment, though they've had conversations with CommonAngels, Walnut Ventures, and Bob Metcalfe of Polaris Venture Partners. (It was Metcalfe, in fact, who suggested that Memora release a software-only version of its product for the Macintosh.)

"This is a consumer bet, which VCs are scared of," says Andres, who was one of the founders of Abuzz, a knowledge management software company that was sold to the New York Times in 1999. "They have to believe we can find the right partners [to get Servio into the market.]"

The brothers' goal is to get a hardware maker to produce and market machines with the Servio software on it. (Right now, Memora buys its own machines, configures them, and sells them on an Amazon.com storefront.) Antonio says the company has had productive conversations with companies like Philips, Compaq, and Hewlett-Packard, and a deal with any of the three could heat up funding discussions with the VCs.

"We think $500 or $600 would be the right price point for Servio," Antonio says. "For a PC maker selling at killer margins, [partnering with us could be attractive.] They'd load up their standard hardware with our software, and be able to sell it at a premium price. You might even be able to sell some subscription services, like back-up."

Memora's software is elegantly-designed and easy-to-use. While only the "early, early, early adopters," in Antonio's words, have so far invested in supplemental servers to manage their mail, photos, audio, and video, it's not too difficult to imagine a much larger market demand a year from now for something like the Servio Personal Server. This week, Apple acolytes could give the company its first big boost.

Minding the gap

At a moment when many early-stage companies are shivering through a capital freeze, there's a bill stuck in the Senate Ways and Means Committee that could help.

In 1978, the Massachusetts Technology Development Corporation (MTDC) was founded to address what it termed the "capital gap" ? the dearth of available financing in a tech company's first, second, and third years of existence, when the concept had been proven but revenues weren't yet sufficient to support the company's continued growth.

With the frenzy of venture capital activity over the past five years, the capital gap may have temporarily disappeared. But now, it's back, and MTDC president John Hodgman says its bigger than ever.

Not only are venture firms once again shying away from supporting unproven young companies, but having raised funds of $500 million or $1 billion, they're reluctant to invest less than $5 or $10 million on a single deal. It simply takes too much energy to make and monitor investments of a piddling few million.

"MTDC is now in a position where we have to play much more of a leadership role in putting together deals of less than $4 million," Hodgman says. "But currently, we're limited to making an initial investment of $500,000, and a total, including follow-on [investments], of not more than $1 million."

Those limits have been in place since 1978, and the new bill, sponsored by State Senator David Magnani, chairman of the Senate Science and Technology Committee, would double them, and allow them to be adjusted periodically for inflation.

"The objective is to fix a hole in the capital markets," says Senator Magnani. He says the bill would help encourage continued small company creation in Massachusetts, especially in economically-depressed areas.

"We'd like to see if we can get [the bill] to the senate floor for a vote before the summer recess, on July 31st," says Magnani. "There's no question it will pass, when and if it reaches the floor."

Sooner is better than later for a bill like this one. You can prod Senate Ways and Means chairman Mark Montigny at MMontign@senate.state.ma.us.

Battery banter

The partners at Wellesley's Battery Ventures seem to be reacting to the downturn not with bitterness, but with wit. This even though they acknowledge that the worst isn't over for Battery or the rest of the venture community.

At a lunch in Battery's main conference room last week, Todd Dagres, Oliver Curme, Tom Crotty, and Battery co-founder Rick Frisbie riffed on the state of the tech sector:

Dagres: "Remember in the 80s, when George Burns would have a birthday and everyone would go, `I didn't realize he was still alive'? That's what it was like with WebVan, and that's what it'll be like with a lot of other Internet companies. They'll go out of business, and people will say, `Weren't they dead already?' We still have a lot of companies that are like the walking dead."

Curme: "In the venture world, there are a lot of firms that are constantly looking for the next hot thing. It's like party-goers looking for the next bar to go to or the next party. After [business-to-consumer] and [business-to-business] shut down, they wanted to know where to go next. Energy? Bio-informatics? The thing is, drunken dollars looking for the next hot area will always get misspent."

Crotty: "People are talking about broadband the way they used to talk about the year of the LAN. It was always supposed to be the year of the LAN, and now it's always supposed to be the year that broadband will get huge. It will happen eventually, but it will happen in a way that's almost not perceptible. Broadband will happen slowly. It's very expensive to deploy."

Dagres: "Over the past few years, you had something like an expansion draft. Talent was really thin. A company would only have one or two people with real relevant experience. It was like having 100 baseball teams, and each of them would have just one good pitcher and one good hitter. That's changing back, and you're seeing companies now with more of a concentration of talent."

Frisbie says that while Battery funded about 25 companies in 2000, this year's pace will be about half that. Which should give the partners ample time to cook up more colorful imagery...

Scott Kirsner is a Boston freelance writer and a contributing editor at Wired and Fast Company magazines.