Backchannelmedia

The Oregonian

By Mike Rogoway, The Oregonian, Portland, Ore.

May 1--When Dalen Harrison left Intel to start his own company, people were literally throwing money at him. Investors weren't waiting for a formal business plan at the height of the dot-com craze: They just wanted in.

"I had checks thrown at me across the table," Harrison said, recalling an informal April 2000 meeting in New York. "It was just a talk, and I raised $3.8 million."

What followed was a "nuclear winter," when investors closed their checkbooks and Harrison's Portland company, Ensequence Inc., spent the better part of seven years just trying to stay afloat.

That struggle ended last month when Ensequence secured a $40 million investment from an unnamed private equity firm. The financing marked a milestone for the company and for Oregon, which hasn't had a venture round on that scale since the tech wreck.

Ensequence, whose software encourages people to interact with their TVs, remains a small company trying to persuade entertainment industry titans to adopt a novel technology viewers haven't shown they want.

The company doesn't lack for determination or innovative thinking. It made it this far by charting a nontraditional course with backing from small investors. Scraping by, often with just enough cash to make payroll, Harrison once resorted to opening a line of credit on his own home to reassure nervous employees.

"As creative as you are in technology, you've got to get creative in fundraising," said Harrison, now 41, "which is not what I expected when I left Intel."

Buoyed by a high-profile deal with Major League Baseball, announced on the same day last month as its new $40 million investment, Ensequence aims to prove its investors' faith -- and its founder's ideas -- were worth the tight times.

"This is ours to lose," said Bernee Strom, a veteran technology industry leader in Seattle who serves as Ensequence's chairwoman. "We have the technology. We have the expertise. We have the experience."

Ensequence aims to engage TV viewers with technology that encourages them to respond to what they're watching.

Clicking a button on a remote control during a commercial delivers more information about a car. Viewers can vote instantaneously to support, or denounce, a contestant on a reality show. And with Ensequence's new baseball contract, computer users can watch up to six live games simultaneously, shifting among them at will and being notified when a favorite player comes to bat.

The entertainment and technology industries have dabbled in interactive TV for more than two decades, with little result. Ensequence hopes its software, designed to work across a wide variety of cable boxes, computers and even cell phones, will finally break open the market.

That was Harrison's dream when he left Intel seven years ago. But he never thought it would take this long, or be quite so hard.

Ensequence hired about 30 employees in its first year, anticipating boom times. Those ended as investors, disillusioned by Internet flameouts, put away their wallets. The amount of venture capital financing provided by U.S. companies fell by two-thirds in 2001.

At Ensequence, the freeze-out created a crisis beginning in January of that year. "Every paycheck we paid, we didn't have money for the next one," Harrison recalled. For 18 months, Ensequence was living week-to-week.

Fretting for their future, some employees began pressing Harrison to retool the company as an engineering-for-hire firm that could survive by contracting out services. Harrison, raised in Brazil by missionaries from Washington state, was unshakeable in his plan and let employees leave rather than compromise his vision. Harrison never had to tap the line of credit he took out on his home during that period, but he said it demonstrated his personal commitment and helped persuade some to stay.

Ensequence survived by patching together investments from wealthy individuals, most of them in Oregon, who were persuaded by the company's plans at a time when professional investors had no appetite for unproven concepts. Ensequence declined to identify them by name but said their support and advice kept the company in business until big investors re-emerged.

"If we were reliant on the traditional VC community," Harrison said, "we'd be dead."

The persistence with which Harrison pursued his goal came as no surprise to Mike Richmond, who was Harrison's boss in Intel's home products group during the 1990s and watched from afar as his former employee fought to launch his startup.

"Unlike a lot of people, Dalen is not motivated by getting rich or getting rich quick," Richmond said. "He's more motivated by being proved right."

Richmond, currently on a year's leave from Intel's software division, said that Harrison became convinced that a market for interactive TV existed, provided the technology existed to make it happen. As people become accustomed to using TiVo recorders, DVD players and computer downloads to manage their viewing, Richmond said Harrison's vision for interactive TV may finally come to fruition.

"Time is on his side as far as being right," Richmond said.

Not everyone is convinced.

"There have been attempts at bringing the prospect of interactive television to American householders for many, many, many years," said JupiterResearch analyst Todd Chanko, who recounts decades of failed efforts to launch interactive TV by high-profile companies including American Express and Microsoft.

The problem, Chanko said, is that TV viewers prefer to sit and watch.

"TV is classically understood to be a lean-back medium, and the PC is a lean-forward medium," he said. "If you're going to turn on the TV, it's generally because you're looking for a passive experience."

Some of Ensequence's latest products, including its multi-game baseball telecasts, run on computers rather than televisions. Chanko said that's a better fit for interactivity.

"Certainly being in the online environment makes more sense," he said. But even with baseball, Chanko said that the number of people who would pay extra to watch six games at once will be a small niche of the sport's total audience.

Ensequence sees the mediums melding, and says that's where its technology sets it apart. The difference between computers and TVs is breaking down, Harrison said, and Ensequence hopes to stand out with software that makes it easy to provide the same interactive features in any format.

"This changes the dynamic of how video is watched on any device," Harrison said.

As its technology ripened, Harrison said, Ensequence's financial needs grew. To make deals with entertainment giants, the company needs to reach the entertainment industry where it lives, in such faraway cities as Los Angeles, New York and London.

And money, or the lack thereof, has been standing in the company's way as it sought deals with major networks, sports leagues and others. Last month's funding will open a lot of doors, Harrison said.

"Our biggest problem was that we didn't have enough money in the bank for the length of the deal," he said. "This (funding) round really helps us with that, the level of credibility."

-----

To see more of The Oregonian, or to subscribe the newspaper, go to http://www.oregonian.com.

Copyright (c) 2007, The Oregonian, Portland, Ore.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

INTC,