Underwater broadband, image classification software, wearable iPod control modules and digital animation software for teenagers ­ these are just a few of the more recent innovations coming from budding UK entrepreneurs looking to make it big in the IT industry.

But transforming a promising concept into a real product and then selling it is no easy task.

For an existing business looking to capitalise on new ideas, one of the more straightforward ways to get the ball rolling is the soft start approach. David Connell, director of TTP Capital Partners and senior research associate at Cambridge University’s Centre for Business Research, says this approach relies heavily on synergy between a company and its customers.

“Soft companies are relatively easy to manage. You basically go around pushing a load of projects at customers until you find one you like who is willing to pay you to do something for them,” says Connell.

“These are projects you can do with two people or 20 people and growth can be more or less self funded, which allows you to gradually gain understanding of customers and their business, and anticipate what they will need.”

The soft start approach allows a modest investment in intellectual property (IP) that can be patented and sold within some form of licensing arrangement. It is not without its challenges, however, not least because the business needs to incubate management and marketing skills across its team, while execution is critical to build market share ahead of the competition.

“The biggest challenge is that you are only as good as your last customer, and it tends to be feast or famine. You can get a contract which is four to five times bigger than anything you’ve had before and you can struggle to scale up to meet its requirements,” says Connell.

For inventive individuals or tiny garage-based startups working on the next game-changing technological breakthrough, that all-important financial backing usually comes in three stages:

Seed capital is used to launch the business for the first time, and is usually stumped up by the founders of the company themselves or at least their friends or family using savings or loans. The value of the initial investment is usually measured in thousands, or tens of thousands, of pounds.

Angel funding is commonly sought as second-round funding, after seed funding has proven successful and the startup is ready to expand. The value of the investment usually ranges from tens to hundreds of thousands of pounds. Angels are usually trusts, businesses, limited liability companies or investment funds and typically invest their own cash, or administer a pool of money invested by others in a centrally managed fund.

Private equity capital, otherwise known as venture capital funding, comes from institutional investors such as finance houses or wealthy individuals willing to invest large sums of cash into what they have identified as a startup with plenty of potential for growth. In return for putting up the money, these investors are given part ownership of the company, shares and some control over its direction, and look to profit when the company is eventually sold or traded on the stock market.

Would-be technology tycoons recently gathered at the Tigers of Tomorrow event in Cambridge, a sort of Dragons’ Den for freshman IT companies to pitch their wares and canvas for additional investor funding. Here are just a few of the technologies that might, or might not, become
runaway successes over the next few years.

Short Fuze
Short Fuze was set up four years ago but spent the first three years in stealth mode, trialling its MovieStorm software, a computer animation tool that lets users create digital animated movies using customisable templates and 3D character models. The basic software is available free, but users can download additional content packs containing costumes, sets, props and animations, for under £10.

MovieStorm has been generally available since August 2008 and Short Fuze estimates there are already 14,000 people using the software, though company chief executive David Bailey would not say how many had paid for the additional content.

“People didn’t think they can do this because the technology was too difficult, but this allows those in the 14-25 age group to use their imagination and self expression to try their hand at animation then share it with friends or use it for school projects,” he says.

Short Fuze initially received about £2.8m of funding from venture capitalists Create Partners and IQ Capital Partners, and has recently secured £1.5m more to help it expand.

SureFlap
Nick Hill, director of SureFlap, estimates there are six million cats in the UK, and he is hoping he can persuade their owners to spend about £70 on an RFID-enabled catflap.

The flap reads the standard microchips bearing unique ID numbers now being implanted underneath the skin of domestic pets by vets. Because the chip ID is unique, there is no chance that the catflap can be opened by other cats.

“The beauty is that you do not need a collar for the cat,” says Hill.

SureFlap was personally funded using £100,000 of Hill’s own money.

The first SureFlaps, which use RFID technology licensed from Cambridge Resonant Technologies, went on sale in April through microchipping organisation Animalcare. Hill spent £100,000 of his own money to get the firm off the ground and is currently looking for further investment from venture capitalists.

He may have missed his opportunity to gain market share with an innovative idea ahead of the rest of the market, however. A rival product, UK manufactured Pet Porte, has been selling in the UK since last year though it is about £35 more expensive.

SonarLink
SonarLink has developed an underwater broadband product based on acoustic signalling technology.

According to SonarLink chief technology officer Hong Kwang Yeo, the system should appeal to oil and gas exploration companies, environmental monitoring firms, military organisations and diving companies that currently use similar, but slower, undersea technologies.

“Current technology transmits at about 38.4Kbit/s ­ we can multiply that by a factor of at least five to extend equipment battery life, reduce noise and cut carbon dioxide emissions,” he says.
SonarLink is in talks about patenting its technology, and has received research and proof-of-concept grants from the East of England Development Agency.

To date, it has received a total of £240,000 in funding from various sources, including UK private equity firm Hatton Investments, with a further £850,000 currently being sought.

QIO Systems
Wearable computers have long been seen as a desirable fashion item among the IT community, but startup QIO Systems is looking to take the concept to the mainstream. It has developed fabric-based electronic touchpads that can be used to control iPods, mobile phones or walkie-talkies that retailers can embed into off-the-peg clothes and luggage.

QIO has struck a deal with clothing company Celio to embed its iPod version into business suits, for example. High street giant Marks & Spencer has ordered about 10,000.

Italian clothing company Zegna Sport has also incorporated the player into a line of waterproof jackets and rucksacks, being sold in Harrods for about £450. And there has also been interest from Samsonite and others, said QIO’s founder and chief technology officer Vassilis Seferedis.

“About 80 firms are sampling the products right now, and we will look to create more modules for the international market. We are looking for angel development and venture capital funding ­ we can sustain the company ourselves right now as long as we do not draw salaries,” he says.

Imense
Founded by two former members of the AT&T lab in Cambridge University, Imense is developing a search engine designed to classify the billions of images posted on the internet.

Due to launch next month, Imense identifies patterns such as facial features, trees, animals or cars within the photographs and adds identifying, searchable tags to their metadata.
Imense business development manager Tony Rowland believes the market for accurate photo classification and search software among publishers, photographers, graphic designers and other media companies is worth £2bn.

“There are also lots of opportunities at photo editing software companies and larger search engines,” he says.

The company, which employs 12 people and has offices in London and the use of a laboratory in Cambridge, has so far received over £1m of investment having started with an initial round of £250,000.