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Small companies build on region's infrastructure

Jesse Wallace got a credit on the movie Toy Story when he was just an intern at Pixar. When that gig ended, he went on to work as a graphic artist at other West Coast firms.

So when he came home to Western New York in 2002, he was anxious about finding job openings for someone with his background - "if I was lucky enough to find anything."

What he eventually found was a cubicle at Synacor in Buffalo, a seller of Web services to cable companies. The Web pages he designs are seen by millions of cable subscribers when they link to the Internet.

"This," he says, with his sneaker-clad feet up, "is more like what I was used to in Silicon Valley."

The Buffalo company is one of the survivors of the dot-com bust that continues to grow their Internet-based businesses here, helping to diversify the local economy with relatively scarce high-tech jobs. Synacor plans to add 100 jobs this year, nearly doubling in size.

It's not Silicon Valley, but neither is Buffalo without a share of the Internet economy.

Infotech Niagara, a technology business group that formed in the boom year of 1998, now counts about 240 members, executive director Christine Plowucha said. The number includes Web-based businesses as well as service providers and other tech firms.

"Everything has come from entrepreneurs in our area, which is good," she said. While development officials might have wished for a technology giant to set down a plant here, the region's small businesses have pulled the sector up by its bootstraps instead.

In addition, many companies had to reinvent themselves and scramble for new business to survive the tech crash.

"If you talk to people in my business, they think we're in the first, maybe second inning of a nine-inning game as it relates to the Internet and d o t - c o m s , " said Jordan Levy, a partner in the tech-oriented venture capital fund Softbank Capital Partners. Levy is also an investor in Synacor outside the fund.

> A transformation

Synacor is a successor of a start-up called Chek.com, which provided Web mail accounts for corporate sponsors. It survived the bust by inventing a niche for itself as an outsource builder of home pages for cable companies. The job includes maintaining some of the Web's high-traffic sites. It also means distributing premium content to cable subscribers nationwide over the high-capacity Internet pipeline that passes through Buffalo.

To make the switch, it also had to attract new capital. Original backers lost much of their investments in 2002 when new investors came in, but the company lived to fight another day. Now it has 115 workers, and plans to add up to 100 more this year, having attracted $17 million in additional capital to fuel growth.

"They're working on new releases, new products," president Ron Frankel said.

Skeptics scoffed when analysts in the '90s predicted that electronic commerce would become an important economic force. But the predictions actually underestimated the volume of Web-based business activity seen today, said Robert D. Atkinson, president of the Information Technology and Innovation Foundation in Washington, D.C.

"Some dot-coms are driving the [infotech] train," Atkinson said, "but in a lot of cases it's regular old companies using the 'Net and e-commerce to go forward."

In addition, many dot-coms that seemed to disappear managed to keep going with a different name and structure. Atkinson studied 100 "dot-bomb" failures and found that 60 are still operating, but under another name or Web address. That indicates that their underlying business ideas were sound, but were hampered by the companies' initial management or financial structure, he said.

> Several survivors

Western New York has its share of Web companies that were born in the boom years and reborn in the bust.

Kanoodle.com started in 1999 as a search engine based in Amherst. Now it's called Seevast, the head office is in New York City, and the company's business has morphed into selling "sponsored links" - clickable ads - alongside Internet content. But it continues to have an 85-job office in Amherst that handles much of the company's operations.

In downtown Buffalo, Steve Kiernan's company has strung together eight profitable years by building Web software for clients, including local governments. His Algonquin Studios helps institutions do business and collect payments over their Web sites. Now the 25-job firm is buying a building on the 700 block of Main Street.

"I think there's opportunity here for anybody," Kiernan said, as long as they have a solid business idea that gives value to customers.

An affiliated firm called Intuitek is working on a deal with the Mexican government for a wireless system to stymie gasoline pilfering. A pair of radio devices - one on the pump, another on the vehicle - will act like a key and keyhole, allowing only authorized vehicles to fill up at government pumps. The $100,000 test project could lead to a $2 million deal for Intuitek, Kiernan said.

The tech boom years also left behind big assets in the region's digital infrastructure, including a robustly built-out fiber optic network and a supercomputer center at the University at Buffalo.

"Now, Dell is a big player at the UB supercomputer center," noted Cian Robinson, one of the founders of Infotech Niagara. The Austin, Texas-based computer giant partnered with UB, supplying the main processing power of the Center for Computational Research and working with computer scientists here to maximize its potential.

Then there are the companies that perished but left their imprint on e-business. One of Levy's big investments locally was in a company called Reciprocal, which developed anti-piracy software for music and other media. The tech bust hit home for Buffalo when Reciprocal was shut down by chief investor Microsoft in 2001. But the copy-protection technology now used on millions of downloads traces its origins to the former Buffalo company.

"The digital rights management that Microsoft uses is Reciprocal's," Levy said. "We were right about [copy protection], wrong about the timing - it was just too early."

e-mail:fwilliams@buffnews.com

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