The news

Atrua Technologies landed a Series B worth $12 million yesterday, led by NeoCarta Ventures with additional funding from Nokia Venture Partners and Ericsson Venture Partners. Nokia and Ericsson co-led the Series A financing round in 2002, which raised $13.5 million.

 

The Campbell, California-based company hopes to supply telephone manufacturers with a sensor that will authenticate a user’s finger print, allow greater control of next-generation games, and provide windows-style navigation. Atrua CEO Anthony Gioeli says, “Phones have gotten smarter but the way you interact with them hasn’t.”

 

Atrua has successfully tapped into the investment money coming out of the telecoms because they are trying to increase their average revenue per user. The industry consensus is that since most people who want a mobile phone already have one, the path to profit is to get customers to use special services offered through their phones, such as downloading games, surfing the Internet, or even using their phone as a debit card. Mr. Gioeli claims Atrua’s technology will make it safer and easier to extend mobile phone functionality.

 

 

Why it matters

Mobile phone security concerns could be allayed if a caller verified that he or she actually was the phone’s owner. Mr. Gioeli says, “We joke with our customers that with our technology, you have to lose your phone and your finger for someone else to use it.” Mr. Gioeli hopes that strong, multi-point identity verification could clear the way for “m-commerce,” or buying things with a mobile phone.

 

Scrolling through lists can be an annoying way to interact with a data device. Mr. Gioeli says the Atrua sensor could be used to enable mouse-like navigation on multi-function phones. The sensor, he says, could be used just like the track-pad on a laptop to move an on-screen pointer. An analog controller on mobile phones would allow users to play more complex games.

 

The team

Anthony Russo, the CTO, founded the company, originally named I-Control Security, in 2002. His expertise in algorithm design was honed at Bell Labs. Dave Weigand, the vice president of engineering, runs the hardware side of the operation, and cut his teeth designing chips at National Semiconductor. The two-pronged technical expertise, when coupled with CEO Mr. Gioeli’s experience as a manager at an original equipment manufacturer (OEM) with chip designer Xircom, makes for an experienced team.

 

The competition

Authentec, a Melbourne, Florida-based sensor maker, sells finger-print authentication technology, but does not offer navigation. Andre Turenne, a venture capitalist at NeoCarta Ventures and an Atrua investor, says “There aren’t that many suppliers that can provide both authentication and swipe-sensor navigation. Atrua has a very good likelihood of being number one or two just because nobody else is in this market.”

 

Skepticism

The company has secured at least two potential customers as investors, has developed its technology to be easily produced and integrated into new phones, and has an experienced, well-rounded team with both technological and sales experience. Phone makers and carriers want to see this product come to market, and with some 600 million mobile phones sold each year, the market is sizable. The question is: will end-users actually want the new functionality?

 

“There really hasn’t been much use of mobile phones for large-value purchases,” says Adam Zawel, of technology analyst firm The Yankee Group. “Are phones going to be the easiest way to pay for things? Does it make sense to use your phone to buy things unrelated to your phone? That’s still up in the air. It’s not going to explode overnight.”

 

Still, buying phone-related add-ons such as ringtones and games is growing. Mr. Zawel says his firm estimates that consumers will buy $1 billion worth of mobile phone games annually by 2008. Atrua’s technology would enable new games for hardcore gamers, but most people who use their phones as a gaming platform are only casually interested in improved features. “Improvement in quality may be good and may improve the experience, but the big market is for killing time and the games out there already do that.”

 

Alex Slawsby, a mobile phone expert at technology analyst firm IDC, says the market potential for new telephone technology is huge. He estimates that some 1.5 billion people use mobile phones worldwide and that in the first half of 2004, companies sold 320 million mobile phones, but new functionality designs can be difficult to get right. Mr. Slawsby said, “Were you to get it right, the upside would be enormous. Not many companies get it right”

 

Atrua says it has seven customers and some phones in Asia will integrate its sensors by the end of the year. If Atrua gets it right, it should know quickly. Mr. Slawsby, of IDC, warns, “It’s an extremely fickle market. You’ll know real fast if your solution is acceptable.”