AdminiQuest, Interosa and LanguageWare.net are all .../ dot

0 Comments | Gazette, The (Colorado Springs), Jan 14, 2001 | by Chris Walsh

The fallout in the high-tech industry in recent months has been as swift and severe as a Colorado thunderstorm - particularly in the dot-com arena.

The country has seen more dot-bombs explode than fireworks on New Year's Eve, and tens of thousands of high-tech workers nationwide have been dumped by their employers. Pink-slip parties for laid-off workers are the latest fad in Manhattan, and some Web sites now joyously track the demise of high-tech businesses.

The nation's high-tech woes - brought on by a sagging stock market and investors' weariness of technology - are beginning to trickle down to small Colorado Springs companies as well.

Three local companies - AdminiQuest Inc., Interosa Inc., and, most recently, LanguageWare.net Ltd. - have run aground in the past few months, unable to secure funding and cut off by their investors.

More than 100 employees have lost their jobs as a result, which pales in comparison to the thousands of layoffs in such cities as San Jose and Manhattan, but is tangible proof that the local high-tech industry is not as bulletproof as it once seemed.

Several local business leaders believe the turmoil will likely continue at least through the first half of this year, and maybe longer.

"What happened to those companies is a reflection of the market, absolutely," said Valerie Anderson, a local venture capitalist. "I'm seeing really good companies falling all over the place. These are companies that investors would've been fighting to put money into a year or two ago. Some investors are now looking at their portfolios and deciding which (companies) they should let die."

So what happened to AdminiQuest, Interosa and Language-Ware?

Each encountered different obstacles, but all found investors becoming more hesitant to pour money into unprofitable high-tech companies:

AdminiQuest has taken the hardest fall of the three local companies.

The firm, which developed Internet-based business services for the insurance industry, was blind-sided by a costly glitch at the core of its software. The glitch was discovered when the company's chief executive, Darnell Dent, brought in an independent team of technicians in August to test AdminiQuest's software. Dent had become concerned with numerous setbacks AdminiQuest experienced working on a large project and wondered whether it might be the company's software. That's when technicians found a nasty glitch.

The 4-year-old company, which was performing work for its first major customer, originally thought the problem could be fixed quickly, but discovered it would take millions of dollars and at least a year.

AdminiQuest's investors - including US Bancorp Piper Jaffray and General Electric Co. - were unwilling to put more money in the company. US Bancorp declined to comment and executives at GE could not be reached.

In November, AdminiQuest was forced to file for bankruptcy in U.S. Bankruptcy Court for the District of Colorado in Denver and layoff its employees, which numbered as high as 120 in 2000. Executives eventually had to liquidate the company.

"I think we were definitely influenced by what is happening with a lot of the dot-coms - so many of them are going out of business," Dent said in a recent interview. "Had we known about the glitch in April or May, we would've had the opportunity to fix the problems ... because investors acted differently then. It was just really bad timing."

Interosa, which develops software that allows businesses to send and receive secure e-mails, has run out of money and is precariously close to folding.

The company was forced to temporarily cease operations in November when its primary investor unexpectedly pulled the financial plug. The investor, Mill Creek, Wash.- based Dominion Income Management Corp., had previously said it would fund the company until March, said Geoff Mulligan, a member of Interosa's board. But, without warning, Dominion decided to stop funding the company - offering no explanation for the decision.

The news devastated Interosa, a two-year-old company that was just beginning to ship its first product to clients. Interosa was unable to pay its 20 employees for work performed in November and told its work force that the company would not be able to pay them further until, and if, additional funding is raised. Executives are trying to secure money to save the company but have been unsuccessful so far.

Mulligan believes the company's problems are purely a reflection of the market.

"Investors have a lot less money to invest now," Mulligan said. "When companies run into money problems, it's hard to find a venture capital firm with funds readily available. Before, investors were literally throwing their money at companies like Interosa. Now, you have to have more than a great idea to get funded. It takes more than just six smart guys getting together to get money."

Mulligan remains optimistic. He said Interosa is talking with an investor, and he hopes to cement an agreement in the next few weeks. But, he added, it is by no means a done deal.