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2001 Small Business profiles
Friday, May 4, 2001
4thpass didn't boom, didn't bust
By Tricia Duryee
But now, when the number of investments in companies just starting out has decreased to two-year lows, 4thpass has collected $8 million in its first round of venture-capital funding from various investors, including OVP Venture Partners of Kirkland.
"When it's a party, no one's talking to us," Ramadan said. "Then we start looking (for venture financing) and the party was already over."
Ramadan, who founded the company with his brother Zeyad and Samir Mehta in 1997, said he didn't think about raising money until June because he was busy getting the company off the ground from a basement in Leschi. Two months after starting the company, it launched its first product, SourceGuard, software used to prevent hackers from stealing source code or the instructions that run programs.
The venture funding will be used to help develop the company's most current product, Mobile Application System. It allows telecommunications companies to launch new applications on handheld devices, such as cell phones, while having the 4thpass software also handle such processes as billing. It is being tested by four global telecom carriers.
"There's been a number of people I've introduced (the product) to it, or have come to see it on its own, and they say, `All they are doing is a browser,' " said Chad Waite, general partner at OVP Venture Partners. "People miss it. ... Yes, it involves using a browser, but it includes provisioning and billing systems. It's going to be a key piece in using mobile handheld devices."
4thpass expects to move to Pioneer Square later this month to accommodate its growth. For now, 25 employees work in 1,800 square feet. The servers for the operation are in a kitchen and, where a small lunch table might sit, a stack of computers stands shoulder high with three people looking over it.
The one-man office next door houses three of 4thpass' employees.
"I offered the space," said Fred Thornes, president of Thornes & Associates, which manages public and private portfolios. "They were hiring at a rapid rate and bursting at the seams. I've been overtaken."
Thornes, who said he's sold on the technology 4thpass is building, invested $550,000 last year.
"The closer I work with them, the more positive I am about the people at 4thpass," he said. "I'm in an unique position to see the progress day-to-day and minute-by-minute. I'm thrilled by the product and the people that work there."
Staff members come from eight countries. Ramadan jokes that one of the only common languages is Java, the software code.
The company is still small enough that Ramadan can circle through and stop and chat with each employee, remarking that one of his brightest programmers not too long ago was working full time, going to school and had a young child.
If you spend enough time with him, he will invite you for a cigar.
Waite said there may be many reasons for making any given investment, but with 4thpass: "I like a lot of their grittiness, no-nonsense. They boot-strapped this thing and clearly understand the value of a dollar," he said.
With the downturn in the market, valuations of companies have gone down. Waite said one of the hardest decisions he and Ramadan had to make was the price at which the company should be valued. He would not specify what they agreed on.
New York-based Investcorp/(212) Ventures and other corporate investors also participated in the round.
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