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7.0. EDSR 01-13-2003 Item # 7 • of Elk River MEMORANDUM TO: Economic Development Authority FROM: Heidi Hall, Economic Development Assistant - 04 DATE: January 13, 2003 SUBJECT: Business Incubator Update Attachments • Vertical Publishing Update, E-mail Message from Vertical Publishing President Ben Moyer,December 27, 2002 • KnowledGenetica Newsletter,November 2002 • Vertical Publishing Current Incubator tenant,Vertical Publishing, enables print publishers of business magazines to place their content on the Internet. Background July 2000 Vertical Publishing enters Incubator, subleasing 2,267 SF of space Sept. 2001 EDA extends company's sublease, company moves into 1,493 SF of space July 2002 Company re-enters Incubator after not occupying space for several months Sept. 2003 EDA extends company's sublease to last until April of 2003 Issue Staff received notice from Ben Moyer that Vertical Publishing will move its offices from Elk River to St. Paul due to the reasons outlined in the attached e-mail message provided by Mr. Moyer. A regular payment schedule has been established with the company to cover the cash portion of outstanding rent. KnowledGenetica Current Incubator tenant, KnowledGenetica, develops interpretation and translation computer software to manage and reduce call center operational costs. See the attached newsletter for an update on the company. 411 • KnowledGenetica is currently in the process of issuing the EDA with the equity portion of rent due. SolarAttic Former Incubator tenant, SolarAttic, uses renewable solar heat energy from inside the roof and attic of homes for heating swimming pools, hot water and space. SolarAttic recently issued the EDA with a stock certificate equal to the cash rent outstanding. Future Incubator Update Incubator consultant Harlan Jacobs will provide the EDA with a verbal Incubator update at the March EDA meeting. • • Page 1 of 2 0Hall__ , Heidi From:� Benjamin Moyer[bmo er vertical ub � �� y @ p lishing.com] Sent: Friday, December 27, 2002 1:30 PM To: Jeff Gongoll; TedGenesis@aol.com; dheld@hotmail.com; aaangeloni@prodigy.net; Hall, Heidi; Roger Jensen; mkanter@sdkcpa.com Subject: VP Update Greetings, I hope everyone had a Merry Christmas. I wanted to email this note to update everyone on Vertical Publishing's progress. This has been a very challenging year for my wife and I, especially since I had not been receiving a salary until this month. We had some very difficult decisions to make regarding whether or not to keep Vertical Publishing going into next year. After much though,we have decided that there have been too many positive things happening in VP's growth to let it go, so we are moving forward! However...There will be a few changes. One is a temporary move to Saint Paul. We have been offered very inexpensive office space with all of the technology that VP requires for today and for near future growth. This includes telephony, servers, internet connectivity, and other office equipment. This will allow for an immediate monthly cost savings as well as the ability to grow with out any additional cost. This will also allow me to interact more easily with our new customers in the Saint Paul/Minneapolis area. It is my full intention to return to the City of Elk River in the near future to continue the growth of Vertical Publishing. Elk River has been very hospitable in my very short months here. The incubator space has provided me much contact with people and companies that I would not have otherwise met one my own. I hope that Vertical Publishing's success is soon that I may be able • to return quickly. The end of this email will contain the new contact numbers and address. Harlan introduced me to Internet Everything, a Swedish technology company that purchases software to resell to the communities in Sweden. After looking at a few software packages in the US and attending a Content Management Systems conference in England, they decided that Vertical Publishing's e-zNow! package was potentially the best fit for them and their audience. We are working on the terms of the contact now, so I will update you when the deal is done. It is a small contract, but proves the need for the software, and is being resold in a market that is not competitive to us. I think this a perfect example of what the incubator space can do for a startup company. The magazine market is moving very slow, but have been able to pick up one more magazine company. Minnesota Monthly has agreed to try our services for one of their new magazines. Although this is not a very big account for us, we are very hopeful that it will open the door for their other magazines. Minnesota Business is looking good. We had some bumps along the way, but we have improved their site significantly, and added some tracking software for them to use as a sales tool. This will be helpful as a sales tool for us as well. CSC Publishing is very happy with the installation of its last magazine which will go live Jan 6th. We have dramatically improved their site and successfully archived all 15 years of their publication to their website with a complete redesign in less than 3 months! That's all for now. I want to wish everyone a Happy New Year. Best Regards, Benjamin Moyer 0 • 1/2/2003 Page 2 of 2 Vertical Publishing, Inc. 210 E.Tenth Street Suite 225 Saint Paul, MN 55101 Main 651-287-8609 Direct 651-287-3567 bmoyer@vertiolp.01ishituz.com • 1/2/2003 11111 Wed An Update of KnowledGenetica Corporation Volume 1.2 November 2002 Introducing KnowledGenetica: Mr. Matzek lead the project KnowledGenetica Corporation was formed in 1999 teams that successfully to develop software that readily understands G defended a number of Blue people rather than forcing them to adapt to the - Cross-plans from class action computer. Imagine calling a company to inquire litigation, savings these plans about the status of an order, and NOT being L more than $100,000,000 in forced to listen to an extensive menu of options __ excessive damage claims. and then press or say a number which may get ° Mr. Matzek has also served you to the next step. KnowledGenetica's patent- on the board of directors of pending technology provides a simple and his local electrical coop and is the co-chairman of elegant answer to the difficult challenge of his churches $14,000,000 building expansion managing and reducing call center operational program. See www.knowledgenetica.com for bios costs. of other members of the KnowledGenetica team. The technical advisory board: l ` KnowledGenetica has contracted with Chuck // a row Iguipreire Fillmore of UC Berkeley to serve on the technical advisory board. Dr Fillmore has a Ph.D., Visit our web site: Our web site is located at Linguistics, University of Michigan, 1961. After • www.knowledgenetica.com. Our site provides ten years at The Ohio State University and one more information on our company's focus and a year at the Center for Advanced Study in the directory of our key resources. Behavioral Sciences (Stanford University), he joined Berkeley's Department Educational CD: KnowledGenetica has updated of Linguistics in 1971. His our educational CD product "NeuroPedia" toresearch has concentrated operate on operating mainly on questions of I, 1 ."9 systems up to win2K and syntax and lexical semantics. 4 ' XP. This educational CD The research explored the .�_ provides you with relationship between proper- t ' Ei::,:,,E:iF insights into the design ties of linguistic form and and theoretical base of matters of meaning and use. :7;.— l"et'c° our ISYL (I speak your He is currently collaborating ;.f ' Language) interpretation with Paul Kay on a mono- , and translation products. graph on construction grammar. Chuck is also directing a research project to put advanced General Manager and VP of Operations: translations of Japanese texts on the Internet. KnowledGenetica has hired a new VP and General Most important to KnowledGenetica, Chuck is the Manager, Kent Matzek. Kent has recently retired driving force behind "FrameNet", a project that from Blue Cross Blue Shield of Minnesota, where resembles our ISYL Interpreter Architecture. he was a senior project manager. He has more Details are available on the project's web page, than twenty-five years of experience in the http://www.icsi.berkeley.edu/'framenet/. One of design development and implementation of large- Dr. Fillmore's published papers; "'Corpus scale computer systems, e.g. billing, claims linguistics' vs. 'Computer-aided armchair adjudication, and membership. Mr. Matzek's linguistics". Directions in Corpus Linguistics, operation experience including being the Vice Mouton de Gruyter, 35-60, 1992. (Proceedings • president of Blue Cross-Third Party Claim's from a 1992 Nobel Symposium on Corpus Boutique', CCSystems. Linguistics, Stockholm.) 111/ Development Status: KnowledGenetica has a proper nouns. We , ,, _.,_("0,,,,-, I •,, team of five developers working to develop a do not, therefore, AtTllflIl working prototype, which will demonstrate the deny reference to J -„ ,, ''-. viability of ISYL to effectively, simplify the call our hidden desires , 1_• --v,I ',' center experience. The prototype code will be to take a long ......, +„ 44 then productionized to work in the first alpha vacation to far-away M 1' _1-14k.„..1-°: demonstration demonstration project. places, such as �-' - Sydney Australia. y. The development team has completed the high- level specification of the ISYL Call Center product Strategic Partnerships: KnowledGenetica has (code-named Sydney) and 50% of the detailed conducted fruitful discussions with many potential specification. With specifications complete for strategic partners including, but not limited to: certain components 25% of the actual code has IBM, Avaya, Cisco, Novell, United Health Group, been developed, including knowledge mining and and StarBridge Systems. Through establishing management components. This software provides strategic partnerships with leading call center brain-like processing to understand the intent of systems vendors and customers, we expect to callers using their own words, no matter how improve our ability to penetrate the market and inaccurate or grammatically incorrect the words deliver fully integrated solutions that bring real appear to traditional syntax-based products. This value to a broad range of customers. is possible because of the deep context knowledge possessed by the ISYL system. New office: We have moved into our new office facility at 16820 Hwy 10, Suite 120. The offices The context information is a knowledge database are part of the Elk River New Economic that contains the molecules of knowledge. These Development Effort. Call us if you are interested molecules are logical propositions about relations in a tour of our new offices. 0 between objects and concepts that enable ;-'""�'��* 69 °°'er°PF..----. r Francis � r tG Mar4n-LaK�jaM deep context analysis ; Q i � 13 m 4N°rt �tijnWOQA... in our ISYL software. .�to�, dlcy r. �Nowt„ept�U Grove East Bethel This database currently 3 seg mkRiver ,,.,_,11 67 h IF °d[r°lila' ,$ -.. contains more than S3 ITI 9 bLdl tiN[ttd 500,000 molecules. "'`'' ' a ,„°n.. ” `notanEeb c Lake Z3 b-e,t�ille I + Andover iiim: a^�erni ill� �y no r� Jghns�ul �a KnowledGenetica plans to have the prototype Roger :ri ® 2s �c„er `� 11e�p-,4‘ ...:,.-- BI ine readyfor a demonstration bymid-January2003. q er '< „° ,n R,ere,ew� 93 s z f R, rr r RK J'Dan vines Call us to set up a time and place to see this 4 enrockoile Sem �a •6fti=- ,��; o-reenfi=d Coreon,n k r ms.View demonstration. aKe ,,,,,,,,----,3F77-7 „,,� Lk ,,,.viw Joh ew 6 reLorettoeigkn r H Is Code Name Sydney: The project team has _„, I named our current develo ment effort S dne R” i,' r'P Y Y _ ��e after a linguist who championed stratificational 6 „; �6j ri 5E nu_� wa,nata'1 ",:167,, i G.1�o`� rammar - Sydney Lamb. ":9crystaler L7 a - effIr -7- 9 Y Y 5 pound M(nn m 1 rdill11104:17r,. .. Stratificational grammar is DeL.'"fin �"n'ai' ill ® ■,w :,41°41,19, Skoiewaod .�ar� r° � EKcelsibr 1Edin LSI riv„,,,,,\ Important to us at ozo�°ouest.com Inc.t02202GDT.ins.'_ '41"'t° ... •,�, , • .t KnowledGenetica because, rather than a narrow focus Investors: Investors who are interested in i v;: '--- _" on syntax alone, Sydney investment opportunities should contact Joe " Lamb proposed that each of Roushar at KnowledGenetica, (763) 274-1000 for the layers, or strata, of more information. language is important. Our 44 revolutionary products Published by: Published by KnowledGenetica, 11) emphasize context even Inc. 16820 Highway 10, Suite 120, Elk River, MN more than syntax for understanding language. 55330. Contact us: Kent Matzek, (763) 274-1000. Words can have multiple meanings, including 1 AN-14-03 06 :05 AM P. 01 --.-anCtOU-A- 10 Elk River Incubator Program Summary Report 13 January 2003 Prepared by Genesis Business Centers, Ltd. Alive Prospects for Incubator Program: •Aview, LLC •Randy Timo's New Enterprise* (not yet named) • •TransMed Corporation •Verdantes Corporation* *New Prospects since report dated 14 October 2002 Current Tenants; •KnowledGenetica, Inc. Recent Graduates/Terminations: Graduate Success Storiesz *Bixby Energy, Inc. •Cymbet Corporation •Solar Attic, Inc. •Vertical Publishing, Inc. JAN-14-03 06 :05 AM P. 02 1 • Information about New Prospects: 'Randy Timo was one of the co-founders of Visual Circuits Corporation, a 1996 Genesis incubator graduate. Visual Circuits does over $10 million in annual revenues in the field of video compression algorithms and delivery systems. Randy is working in the field of computer games and is currently working out of the basement of his home in Ramsey, Minnesota. (Visual Circuits started in the home of Dan Sullivan, the other co-founder of Visual Circuits.) Randy left Visual Circuits about 4 months ago and is considering the Elk River incubator program for the location of his new business. •Verdantes Corporation is an Edina based software company that delivers updates to large files over the internes in the `background'. An obvious application for this is the new field of what has been called 'BMW Movies', the new 8 minute advertisement done in the framework of an entertaining short movie. These are being distributed over the internes. The ability to • deliver the content (large files) over a dial-up modem is problematic if it's done on line real time. However, if it is done in the background while other information is being processed or when the computer is on but the computer user is away from the console, then the problematic aspect of a dial-up modem is eliminated. The founder of Verdantes operates out of his home. He has been working on this technology for over one year. He is self-funded to date because of the capital gains that he made when he sold his last business. Existing Prospects: Aview, LLC continues to make progress with its new sleek prototype. Several modest investments have been made to date based on the company's progress. Upon receipt of a commitment from the Anoka Sherburne County Capital Fund (pending the review process currently underway) and some level of support from the Elk River Investment Club and/or the Central MN Initiative Fund, the company should be ready to enter the incubator program in the late spring or early summer of 2003. JAN-14-03 06 :05 AM P. 03 1 1111 TransMed Corporation must complete certain tasks before it will be possible for the company to raise funding from the investment community here in the twin cities. Once the company has completed these tasks, then a new CEO and a Bridge Loan financing will begin. At a certain level of funding, the company will be seeking to move out of the owner's garage/basement in Elk Ri ver. Current Companies: i KnowledGenetica continues to make products in respect of its call center software and systems. It was recently informed of a $50 thousand loan approval from the Central Minnesota Initiative Foundation. Several investors are also close to making an investment. Those investments along with the investments already made by the Anoka Sherburne County Capital Fund and the Elk River Investment Club will become part of the one for one match required by that loan program. • Recent Graduates/Terminations: Bixby Energy has left the incubator facility as was previously reported. Also, Vertical Publishing has left on an interim basis to be nearer its customer base in the St. Paul area. Solar Attic has moved back into the founder's garage. Bixby Energy has raised over $600 thousand in its recent offering; according to the CEO and the CFO, the company's product line has been well received. It is hoped and it is likely that the company will move back into Elk River proper in the next few years; in the interim, it is helping the general level of the economy in Elk River by virtue of its location in Rogers. Solar Attic and Vertical Publishing each continue to eek out modest sales revenues. Vertical Publishing is confident that it will continue in business and eventually become a significant employer in Elk River. The present CEO indicated that he would have pulled the plug on the company at the end of December if he did not have strong convictions that success is achievable.