Folsom firm carving niche in world of wireless Web
Sep 2, 2005

Sacramento Business Journal

Folsom-based JiWire Inc. wants to broaden its sales, marketing and distribution by attracting $7 million in additional venture capital.

The company sees big potential in its security software for wireless networks, expected to be in demand as cities and phone companies provide more wireless online access points and users demand a hacker-free online environment.

The company just rolled out its wireless security software, offering it for a bit less than $50 a year or $5 monthly. It routes wireless online data between the user's laptop and the Internet, through a military-style encryption.

In Sacramento, wireless online access antennas -- popularly referred to as "hotspots" -- are in Starbucks coffee shops, at Sacramento International Airport and along Capitol Mall, among other areas.

They offer users of laptops and handheld devices wireless online access within 15 feet of the antenna. Some are free, others aren't. But their lack of security from hackers has made some users wary.

Philadelphia and New York are planning to install wi-fi (wireless fidelity) networks in their cities, and others will likely follow. But cities are struggling to come up with a wireless network model that will pay for itself and be secure enough to lure users.

Because phone companies offering wireless broadband -- Verizon Wireless this week announced such service covering Sacramento, Lincoln, Davis, Elk Grove and Folsom -- also want city coverage, they're eventually expected to run citywide wi-fi systems, since few municipalities are now equipped to do so.

And because JiWire CEO Kevin McKenzie hasn't seen any wireless security systems offered by the phone companies, he sees an open market. "We're responding to RFPs (calls for job bids for security systems) now."

The company also offers access software giving users hotspot entry to various wireless networks without having to go through the time-consuming ritual of typing in a user name and credit card number to get in.

JiWire also expects in coming years to transition its software applications to WiMax, the next generation of wi-fi technology, which in an estimated four years will enable online access via antennas offering a much broader 30-mile radius.

Hotspot directory: But the 2-year-old JiWire's centerpiece is its extensive directory showing users where to find hotspots peppered all over the globe. The company started off with a list of 10,000 such sites. It now counts 71,000.

The company gets revenue from online advertising, from licensing its data and from subscribers to its service. So far, 60 percent of its undisclosed revenue comes from data licensing, 35 percent from advertising and 5 percent from subscribers. McKenzie sees enough potential from subscribers for that category to lead the three income streams in the future.

JiWire has already attracted $3 million from investors and has produced wi-fi network access and security software it licenses to buyers. The company has impressed current investors -- a group of local "angel" financiers and DFJ Frontier -- for its ability to keep its administrative costs down using public-domain software and hiring out network maintenance chores.

McKenzie expects JiWire will be profitable by the middle of next year. He will double his staff -- now split between offices in South San Francisco and Folsom -- to 34 by year's end. In January, the company will move its local headquarters to El Dorado Hills.

JiWire is likely to eventually be acquired or become a publicly traded company, but for now, McKenzie, 34, doesn't have a timeline for either move. He believes the best use of the $7 million he's trying to raise is to put it toward sales, marketing and distribution, so the company's software can get more exposure to buyers.

The next big thing: The wi-fi phenomenon started in 2002. Now, the industry's hardware suppliers are consolidating. Snapping up smaller companies have been big players such as McAfee, a software maker; networking titan Cisco Systems Inc.; and German-owned tech conglomerate Siemens.

Leaders are pulling to the front of the pack -- Intel Corp., maker of the wi-fi chips installed in laptops, and Cisco are the biggest. Midsized equipment providers like Colubris Networks, Aruba Networks and Trapeze Networks are emerging.

On the software side, JiWire beat out other companies initially trying to assemble a hotspot locator list. In the beginning the company had trouble attracting venture financing, but managed to get $600,000 in March 2003.

The company next secured $2 million from angel investors last November, getting more attention because it had 15 clients licensing its directory data as a Web site feature, including well known companies like PC World, Tribune Newspapers (including The Chicago Tribune and The Los Angeles Times), USAToday.com, Wired.com and Intel. Now, JiWire has 27 companies using the directory on their Web sites, including more big names: The New York Times, Yahoo and Google.

Scott Lenet, a JiWire investor with DFJ Frontier, says the company's prospects are good because he hasn't seen an online wireless security software application like JiWire already has, and there's increasing demand for it.

"Think of all the stuff Symantec or Norton does for a computer," says Lenet. "These guys are positioning themselves to do the same thing with wi-fi."

The JiWire security software routes the wireless data traffic first through its file servers before passing it to the user's computer, making sure the information is silent to eavesdroppers by putting it through an industrial-strength filter: a military-style 28-bit encryption.

The company will likely nail down the $7 million it is seeking by late this year or early next. While JiWire is focused in the wi-fi marketplace, Lenet also sees the company as a dot-com company with a much-evolved model rising from the ashes of the tech industry crash of early 2000.

The primary lesson learned from earlier high-tech companies, says JiWire's chief technology officer Craig Lurey, is to use "open source" administrative services available for free on the Internet, and hiring outside Internet service providers to maintain them. Millions of dollars otherwise spent on building, configuring and maintaining a server network with three in-house administrators is now saved, and much less money is spent on monthly network maintenance fees.

But even with cost-saving techniques, Lurey is quick to note that to be successful, "You still have to have a good business plan."