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PDA Market Space Draws Venture Capital

SAN FRANCISCO – Handspring, a company designing the next generation of personal digital assistants (PDAs), recently raised an undisclosed amount of capital in a first round of venture financing from Benchmark Capital and Kleiner Perkins Caulfield & Byers.

The company’s founders, PalmPilot developers Donna Dubinsky and Jeff Hawkins, plan to make a more consumer-oriented product than the PalmPilot in the hopes of penetrating a market they believe has the potential to rival the portable phone in popularity.

The pair, who recently resigned from PalmPilot Computing buyer 3Com, remain tight-lipped about their new product, except to say that they have secured a license of the PalmPilot technology from 3Com.

Benchmark, a backer of PalmPilot Computing, was a natural choice to seek funding from, Ms. Dubinsky said. Handspring also wanted Kleiner Perkins famed technology guru John Doerr as a board member and therefore sought funding from his firm.

Neither Benchmark Partner Bruce Dunleavie nor Mr. Doerr returned calls. Ms. Dubinsky has kept mum about the size of the preferred-stock equity deal because Handspring wants attention focused on its product rather than the amount of capital the company has raised.

She does not foresee Handspring raising another round of venture financing, although the company might at some point raise capital through other securities.

The potential for a new generation of PDAs was good news to the unabashedly quirky staff at Concept Kitchen, a company that makes PDA hardware and software and maintains a Web site for PDA users.

Concept Kitchen, also a maker of accessories including cleaning products called the Karma Cloth and BrainWash, views itself as “a lifestyle brand product” because PDAs are like wallets in that they are more personalized than cell phones.

Financially bootstrapped for four-and-a-half years, Concept Kitchen raised $1.5 million in its first round of venture backing in late October after realizing revenues could not adequately fund growth if Concept Kitchen wanted to keep up with the burgeoning PDA market. Two Chicago-based VC firms, Kettle Partners and Perfect World Technologies, L.L.C., each put up $750,000 in the preferred-stock deal.

“We love the whole PDA space,” said Mark Achler, a general partner at Kettle. “We think that the market’s growing considerably faster than the PC market,” he added.

On the software side, Concept Kitchen makes SmallTalk, a program that translates simple conversational questions into six languages.

Dale McAdams, who started the company in his San Francisco home while gathering for meetings around his own kitchen table, expects the first round of venture capital to last the company a year. He anticipates pursuing a second financing by the fall of 1999.