Editor’s note: Engineous Software is one of 23 companies preparing for presentations at Venture 2003, the Council for Entrepreneurial Development’s 20th annual venture capital event. As it did a year ago, Local Tech Wire is featuring in-depth profiles of presenting firms built around a Q&A with a company executive as well as a Fact Box of important information. One profile will appear each day.

LTW put together a Q&A designed to not only produce facts about the presenters but also to give each a chance to state the case for venture capitalists to invest.

Kicking off the series is Janet Wylie, president and chief executive officer of Engineuous.

Venture 2003 is set for April 22-23 in Chapel Hill.

Times are tough. If you had only one chance and one paragraph to convince an
investor, how would you answer this question: “Why should an investor choose
your company?”

From an investor perspective, we already have 180 blue-chip customers and our technology is complete. The hard part is behind us. New investors can participate in the upside without the risk of the downside involved in customer acquisition or technology development. Additionally, Engineous Software has proven it can weather the hard times. When many software and technology companies were struggling and failing, Engineous continued with steady growth. In the last three quarters of our fiscal year 2002, we recorded record revenue numbers. After a challenging first quarter in fiscal year 2003, we rebounded nicely and expect another record quarter ending in March. We are the proven leader in our space, securing more than 50% of market share. We believe our continued growth is attributable to primarily three things: An absolutely outstanding team of dedicated professionals, a diverse mix of clients (from consumer products to defense contractors), and an annual license revenue stream that provides a stable financial base quarter by quarter.

What is the “pain point” (or points) you address for your customers?

Inefficient use of resources (human and hardware)
High cost of poor quality products
High cost of prototyping and testing products
Competitive advantage

What makes your company unique? Do you have a proprietary and/or a patented
technology? Please explain why it is unique and what the status is of any
patent filings.

Our company is uniquely positioned as the only one that provides a truly comprehensive solution for integration and automation of design processes, and the optimization of products. Our expertise in design driver technology is well established in the market place. Engineous holds a patent on a knowledge-guided optimization algorithm known as DHS, US6086617. We will be seeking a patent on some of the technology in our new product to be launch mid-2003.

What makes your product(s) and/or services unique vs. your competition? (Who
is your competition, and what do they offer?) If you have no competition,
why not?

Engineous has two separate product lines:

iSIGHT … automates the iterative design process, integrates the numerous codes involved in the design process so that they can be utilized in a single run, and optimizes the design for user-defined parameters (e.g. cost, weight.) The combination of benefits, along with the quality engineering tools included, creates an attractive return on investment for customers within a very short period of time. Currently shipping version 7.1, Engineous released the first version of iSIGHT in 1996.

FIPER … The Company’s emerging product provides a framework for enterprise application integration that can be sold stand-alone, or in conjunction with the earlier products. Key features of this product include its ability to do integration among disparate third party or home grown applications, provide a common GUI for all of the applications, handle data exchange among the applications, provide workflow across the applications, provide a framework for knowledge-based engineering, and provide a true collaborative engineering design environment inter- or intra-enterprise. The product is currently in alpha test and is expected to launch in the second half of 2003. There are more than 25 paid pilots among 5 customers that will be completed prior to launch.

Engineous combines best of breed automation and integration tools with leading-edge design, exploration and optimization tools. There are very few companies with software in the same category as iSIGHT. The primary competitors are LMS Optimus (Belgium), and Boss-Q (Belgium). However, these companies’ products represent only a small part of the total software sold by them. A new company, Frontier (Italy), appears to be a more direct competitor. However, their product has less functionality than iSIGHT. Other competitors are either focused mainly on process integration capabilities (e.g. Phoenix Integration), or on optimization techniques (e.g. VR&D).

Commercial FIPER competition is just emerging, but can come from a number of existing sources. The software market is crowded with products that compete and overlap with each other. In addition to the existing market landscape, new competition is emerging from commercial vendors that offer competitive capabilities to specific aspects of FIPER. These include CAD-to-CAD or CAD-to-PDM interoperability providers such as CoCreate, Proficiency, and Vulcanworks. Also included are existing CAE vendors moving from their traditional analysis space into the design automation and collaboration space. They include Dassault, Ansys, and MSC.

Does your company already generate revenue? If so, how much? Are you cash flow positive?

The company is currently cash flow neutral to positive. Historically, the summer quarter is slow for Engineous and may cause us to go cash flow negative for a short period. Our revenue this year will be between $10M and $20M.

What is your target market? What is the size of that market in terms of dollars? What share of that market do you believe you can win?

Market size estimates place the market opportunity for the Company’s design driver technology, branded under the name iSIGHT, at greater than $4 billion on an annual basis and its enterprise integration framework at more than $10B per year. Currently, Engineous’ market focus is engineering/industrial product design focused on the aerospace/defense, automotive, industrial manufacturing, and electronics industries. With iSIGHT, Engineous has established itself as the leader in process integration and design optimization software. The Company’s framework product, code named FIPER, has little competition at the moment and has been met with great excitement in the automotive and aerospace industries where we have test marketed it. Our channel partners (IBM, Infosys, Ricardo) have given the Company sales estimates for Engineous services and FIPER software revenue of nearly $50M within 18 months of product launch and nearly $100M the following year. The partners themselves would realize additional revenues of about 75% of this amount for hardware, software, and services.

What will you do with the invested funds? What is the timeline for product delivery? If you have existing products and services, how will additional funding help you expand your company, if that is the intention, or will you develop new products?

Additional funds will allow us to launch our FIPER product this summer, as well as build some key support infrastructure for this new technology.

What do you want from an investor other than money?

We prefer an investor who understands our space and can help with business or partner development in it. We also prefer an investor that will blend well with our current board.

.Why will investors be impressed with your management team?

Our management team has an outstanding mix of business experience from both large and small organizations, as well as a strong background in engineering, which is critical experience for delivering our technical software products to the marketplace.

Janet C. Wylie, President & CEO. Ms. Wylie was previously President & CEO of Intelicent, an e-commerce services company that she grew from $0 to $30M, and was pre-IPO (assembling underwriting team) when the company was bought. Prior to Intelicent, she was a vice president at Computer Sciences Corporation where she started a civil and commercial line of business that had a backlog of $1.5B and a run rate of $150M after 2 years. Prior to joining CSC, Ms. Wylie spent several years as a vice president at Xerox where she ran an image management software company, bid and won a number of large systems integration jobs, and led an international division with more than 4,000 people worldwide. Ms. Wylie holds a Bachelor of Civil Engineering degree from Georgia Tech and attended the business school at the University of Chicago.

Siu S. Tong, Ph.D., Founder and Chairman. Prior to founding Engineous Software, Dr. Tong spent 11 years at General Electric leading a team to develop and deploy the Engineous technology within GE. Dr. Tong has several years of start-up experience and was named a 1998 Entrepreneur of the Year sponsored by Ernst & Young, USA Today and NASDAQ. He has successfully secured four rounds of financing and managed the Company’s growth during its first five years. Dr. Tong holds a Ph.D. degree in Aeronautical Engineering from M.I.T. and minored in management at the M.I.T. Sloan School of Management.

Wade Ficken, Chief Operating/Financial Officer. Mr. Ficken joined the Company in April 1999. He has over 15 years of financial management and business experience, most recently serving as CFO for two start-up technology companies. During his career Mr. Ficken has worked in finance, business development, strategic planning and M&A functions at American Airlines, SABRE Technology Group, NORTEL and United Healthcare. He holds an MBA from Vanderbilt University.

What is the exit strategy for the investor from your company? Are there potential strategic alliances with larger companies? Do you wish to take the company public? Or do you wish to grow the company and either sell it or acquire other companies?

We have strategic alliances with IBM, Infosys, and Ricardo. All are possible acquirers. We have also been approached by two other firms for a possible acquisition. Management would prefer to take the company public, but is keenly aware that market conditions do not support this at this time. Meanwhile, the FIPER technology gives us a perfect opportunity to grow the company rapidly and relook at all alternatives in 18-24 months. There are a few small companies that Engineous would like to purchase.

Just the Facts: www.localtechwire.com/article.cfm?u=3759