BOULDER, Colo. – With many companies going paperless in the digital economy, a problem arises: how do you keep a paper trail. IWitness has a solution. The company is developing software to capture, store and manage digital business records.
IWitness closed its $11 million second round of venture funding last month. Boulder-based Sequel Venture Partners led iWitness’s funding. Sequel was joined by 75 Wall Street Partners as well as first round investors Telesoft Partners, Geneva Venture Partners and Wolf Ventures. Telesoft led iWitness’s initial $4 million financing in December 1999.
“I think one of the reasons that we got funded is that we have a pretty traditional, understandable business model,” said Michael Donaldson, iWitness’s chief executive and president. “We have identified a really compelling business problem that really affects everyone. In 10 or 20 years from now everyone will have this software just like they have a file cabinet.”
IWitness’s software enables companies to alleviate some of the legal and compliance risks associated with doing business digitally by creating the equivalent of a paper trail for all of their electronic communications and activities.
In fact, the company has even coined a new term for its industry space – digital business records management, or DBRM. “The industry really didn’t have a name and the term DBRM covered everything iWitness did,” Donaldson said.
In the past, most companies kept paper trails in various filing cabinets and storage facilities to preserve such documents as purchase orders, invoices, contracts and receipts. With the advent of email and the Internet, many of these processes now take place online leaving no lasting records.
“Basically, we are giving customers what they had in the paper world in the digital world,” Donaldson explained.
The company was founded in 1997 by Frank Lambert, who is now its co-chairman and chief technology officer. As Donaldson noted, the initial concept behind the company was to build a service to support online contracts in the real estate industry – such things as using digital signatures and moving highly valuable contracts back and forth on the Internet. As Lambert was building prototypes and working with beta customers, he realized companies would need a way to archive the digital documents. He also realized that the software wasn’t just applicable to online contracts; it was applicable to any digital document that is used for critical business purposes, where the Internet has come along and displaced paper.
VeriMail is iWitness’s first product and addresses many companies’ most pressing concern: email. The product is still in the final stages of early customer testing. Donaldson said the product is being considered by a number of banks. He declined to name them, but did say an announcement could be made later this summer.
VeriMail integrates with iWitness’s archive center and enables companies to manage and archive email messages and the attachments as digital business records. “Over time we will introduce additional – what we call – capture agents, which will work with other media and document types,” he said.
Donaldson added that pricing for the software will be similar to traditional enterprise software in that the user pays a licensing fee as well as annual maintenance fees.
IWitness’s target market includes the financial services community, both brokerage and insurance, as well as companies in the energy and pharmaceutical industry.
“The common thread is that these industries tend to be subject to heavy regulation, which requires them to document records,” Donaldson noted. “They also tend to have a number of lawsuits, so that requires that they manage their information carefully.”
As Donaldson pointed out, one of the key aspects of iWitness’s software is its flexibility – allowing customers to manage what they keep and the time they retain it.
“There are several different ways to categorize content, one of which is that the user can put things into buckets,” Donaldson explained. “We also have the ability to generate key words which companies can look for and treat accordingly.”
He added that iWitness is planning to add an auto categorization capability, which would allow it to look at the content of the document and then, since it has been trained to recognize a certain type, archive it and assign a retention period to it. “That becomes very important from a risk management standpoint. You can say, okay for internal memos, we keep those for three years. Customer communications, we keep those for six years.'”
The Securities and Exchange Commission requires brokerage firms to retain and archive customer communications for six years, while the Internal Revenue Service requires business to keep records for seven years.
IWitness will use the proceeds of its latest $11 million financing to build up its sales and marketing efforts. The company will continue to focus on building alliances with technology providers, which provide the platforms on which iWitness’s software operates, as well as with business consultants, which are involved in helping businesses work out the related storage and archival issues.
Donaldson said the company’s current round of financing is enough to last for the next year. “Assuming the market cooperates, we would probably raise more money,” he said. “However, we have a number of scenarios in place for the various outcomes in the market.”