The DEMOfall 09 conference, billed as “the launchpad for emerging technology,” kicks off today in San Diego, with company presentations and new product launches officially starting tomorrow morning. The Seattle and Portland, OR, metro areas are well-represented in the mix, with three Seattle-area startups and one Portland company scheduled to present their stuff. That’s all according to VentureBeat, which co-produces the conference.

It’s a big deal in the tech industry, and a great opportunity for a select group of startups. Here’s a little bit about each Northwest company that will take the stage:

—Intelius, based in Bellevue, WA, provides background checks and identity theft protection for consumers and businesses. Back in May, we reported that the company acquired Spock, the Silicon Valley-based people search engine, for an undisclosed amount. Intelius was founded in 2003 and is led by CEO Naveen Jain, the founder of InfoSpace.

—Point of Wealth Systems, based in Portland, OR, has developed a method that allows employees who make their money in cash and tips (waitstaff at restaurants, for example) to deposit their earnings into a secure register for savings, retirement, or investment purposes. Point of Wealth was formed in March 2008 to bring financial services to this new market.

—Symform, based in Seattle, has been honing its cloud data-storage product in beta trials (and a pre-launch version) since the spring. We first profiled the company back in February, and in April, Symform announced it had raised a $1.5 million Series A round from OVP Venture Partners. Its basic idea is to offer cheap, efficient, and secure data storage and backup services to small and medium-sized businesses.

—Enroute, based in Bellevue, WA, is giving a sneak preview of its product—a unified system to help businesses find the most efficient way of shipping packages from A to B. Enroute is one of the finalists from the Zino Society investment forum, which took place last Thursday in Seattle. It is in the running for a $50,000 Zino investment prize, to be announced within the next few weeks.

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There are a couple centuries of progress separating wood-burning stove technology from MIT-bred logistics software. But the two are more closely related than you might think. In Goffstown, NH, a startup that just raised millions of dollars from two Boston-area venture firms is using the latest in supply chain management technology to build a national business around distributing wood pellets.

This lumber industry byproduct, made from wood waste that would otherwise decay and return methane and carbon dioxide to the atmosphere, is becoming an increasingly popular alternative to fuel oil or propane for home heating. And the startup, called WoodPellets.com, announced today that it has raised $11 million more to pursue the wood pellet market, in a Series B financing round led by Cambridge, MA-based Monitor Clipper Partners and joined by existing investor .406 Ventures of Boston.

Company president and co-founder Jon Strimling tells Xconomy that the cash, which augments a 2008 Series A round of $4 million, will help the company continue development of its website, which uses patent-pending software to customize the options offered to wood pellet buyers depending on their location. The company’s business model revolves around shaving a few cents off the costs of distributing the pellets to consumers; using advanced software to match stove owners with the most economical local sources of pellets allows the company to charge less and earn higher profits, Strimling says.

“I’m not going to say we invented the wood pellet—we didn’t. And I’m not going to tell you that pellets are high-tech—they’re not. But what we’re doing in logistics and distribution is significant, and that’s where we see the opportunity for huge efficiencies,” Strimling says.

Venture investors haven’t traditionally ventured into prosaic fields like home heating. But wood pellets are a unique commodity with a market that varies in several interesting and enticing ways from the markets for other fuels.

The pellets themselves are a small, dense, form of biomass, usually made from sawdust compacted into small cylinders resembling rabbit feed. The material was invented in the United States in the 1980s, but first caught on as a home heating fuel in Europe in the 1990s. Over the last few years, it’s been making new inroads in the U.S., where there are now several dozen manufacturers of home pellet stoves. Consumers like the pellets because they’re less expensive, on average, than cord wood, and because they are seen as greener, burning with greater efficiency and lower particulate emissions.

Most stove owners buy pellets in 40-pound bags at their local hardware stores or discount chain stores. Strimling’s company, which was formerly known as American Biomass and recently changed its main Web address from PelletSales.com to WoodPellets.com, is one of several that let consumers order the pellets online, but he says it’s the only one that can deliver to a variety of regions around the country. The company works with 25 pellet mills across the U.S., he says.

One of the unusual things about wood pellets, Strimling explains, is that the source material (sawdust) is extremely cheap, about $30 per ton, and yet the finished pellets are extremely dense, and therefore heavy and expensive to cart around. It’s not unusual for transportation to account for 75 percent of the pellets’ wholesale cost. “So managing logistics in this industry is not incidental—it’s the heart of it,” Strimling says. Things like the distance to the nearest mill, whether the pellets travel by rail or truck, and whether they’re delivered in bags or pneumatically blown into storage bins all make a big difference the final price WoodPellets.com has to charge, and in the amount of money it can make.

The company’s software, developed by a graduate student at MIT Sloan School of Management named Jie Wang, is designed in part to …Next Page »

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Much of the buzz about Amazon’s surprise announcement yesterday that it is acquiring popular online shoe retailer Zappos for more than $900 million is about whether the Las Vegas-based company really needed to sell, or was pressured to do so by its main venture backer, Sequoia Capital. But the first thing I wondered when I heard the news was what the acquisition might mean for Kiva Systems, the Woburn, MA, startup whose robots staff a huge Zappos distribution center in Louisville, KY.

Zappos has been working with Kiva for almost two years, and the company’s shelf-toting robots, which help speed the process of order fulfillment, have been operating in the Louisville location for over a year. And in fact, the shoe seller recently ordered more Kiva gear to prepare for the holiday rush, says Kiva CEO Mick Mountz, whom I reached by phone this morning. “We don’t know anything more than what’s in the press right now, but our reaction is that this is a good thing for Kiva,” Mountz says. “They’re growing quickly, and growing their Kiva system to support that. If you take the press releases at face value, they are going to keep the two companies separate, and it’s all about growth. What that implies to us is that they’re going to need more Kiva equipment to keep doing that.”

Indeed, Zappos CEO Tony Hsieh said in an open letter to employees that the Louisville warehouse might even grow into a hub for Amazon’s own inventory. “As many of you know, we were strategic in choosing our warehouse location due to its proximity to the UPS Worldport hub in Louisville,” Hsiesh wrote. “Amazon does not have any warehouse locations that are closer to the Worldport hub. There is the possibility that they may want to store some of their inventory in our warehouse or vice-versa. Right now, both Zappos and Amazon believe that the best customer experience is to continue running our warehouse in Kentucky at its current location.”

Kiva’s whole mission is to help companies get products off the warehouse shelves where they’re stored and into boxes for shipment to consumers faster, using agile wheeled robots that carry the shelves to stock pickers. That means Amazon has always been one of Kiva’s dream customers—and now, thanks to the Zappos acquisition, it’s an actual one. “What that means to our business is that the number-one and number-two e-retailers are now using Kiva, the number two being Staples,” says Mountz.

E-commerce companies have been Kiva’s strongest customers lately, according to Mountz. “From where we sit, e-commerce is doing pretty well right now,” he says. “Diapers.com recently got some expansion gear from us. Quiet Logistics, which is supporting the Gilt Groupe, just purchased some additional gear.”

And if Amazon wants to keep expanding at its current rate, it’s going to have to look at warehouse automation technologies, Mountz believes. “If you look at their business, they are at $20 billion a year and growing at 5 percent. That means they need to add a billion dollars of capacity a year—that means opening one or two new distribution centers every year. Along those lines, the Zappos folks have plenty of space down in Louisville, and a great location next to the UPS Worldport hub, so if we had to predict, we’d think they’re going to end up using that building for even more beyond the growth Zappos has planned.” [Update: In a follow-up e-mail, Mountz noted that Amazon's recent growth rate has actually been closer to 15 percent or $3 billion in additional gross revenues every year.]

Meanwhile, Kiva is busy building and delivering the equipment Zappos needs for the holidays, Mountz says. “We have ongoing, project-level dialogue with Zappos every week, and we’ll just have to see what they learn over time,” he says. “We think Kiva is going to be a big part of their material handling as they go forward.”

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Say you’re running an oil company and you operate dozens of offshore drilling platforms. You have a fleet of gas-guzzling helicopters to transport the hundreds of technicians who commute every day from the shore to their rig or from one rig to another—but the numbers traveling and their destinations change every day depending on what work needs to be done. How do you get everyone where they need to go while minimizing the number of helicopters deployed and the distance they have to travel?

It’s a classic problem in what computer scientists call “optimization.” To solve it, you could employ a staff of fleet planners to come up with a new helicopter manifest every night—or you could just hand the problem over to a computer. Dynadec, a new Brown University spinoff in Providence, RI, hopes to commercialize software tools that can help companies handle urgent but mind-bending problems like this one.

The company’s core software platform, called Comet, is the brainchild of Pascal Van Hentenryck, a professor in the Optimization Laboratory at Brown’s renowned Department of Computer Science. Now the startup’s chief technology officer, Van Hentenryck is one of the originators of “constraint programming,” a school of software design that emerged in the 1990s. Constraint programming is built around a form of logic that seeks general answers (within a certain range of values or constraints) rather than specific numerical solutions to mathematical problems.

Comet uses constraint programming, along with a form of constraint-based search and a kitchen sink’s worth of other techniques, to come up with cost-saving answers to data-rich problems. In situations like the oil-rig helicopter scheduling problem—or, say, the question of how best to deploy a staff of power-line repair technicians to restore electrical service after a storm—Comet doesn’t try to find the best solution possible, Hentenryck explains. That would take too long. Instead, it aims for a “good enough” solution—or at least one that’s better than what humans could come up with on their own.

In a context such as electrical grid management, “You may have to make a decision in 30 seconds or less,” says Hentenryck. “In that time, you don’t care if the decision is optimal; you care about getting the best solution in the time frame.”

Dynadec, which was in stealth mode until June 9, is already working with customers on pilot projects in areas like vehicle routing, employee scheduling, and inventory management. The company has raised an undisclosed amount of venture funding from Providence-based Liberty Capital Partners and a group of private investors. I interviewed Hentenryck by phone last week. An edited transcript follows.

Xconomy: Tell me briefly about your career path and what led you to launch a company around your optimization techniques.

Pascal Van Hentenryck: I did my PhD in Europe on a new approach to optimization. After my PhD, I worked at European Computer-Industry Research Center on a very different way of approaching optimization problems that was much more combinatorial and less based on traditional math programming techniques. After that I joined Brown and continued to do that kind of work for about 10 years, and some of the products I developed were licensed to ILOG, which was bought by IBM and has been very successful commercially.

Around 2000 we perceived a fundamental change in technology that would affect the optimization world tremendously. I’m talking about the telecom industry, which was really changing the way the world was functioning. You have much more access to data and you can monitor almost all of your activities in real time and know where everything is in your company. So what we decided to do was take a new approach to exploiting that wealth of information.

Instead of doing long-term planning like the airlines typically do—where they schedule where their planes will be a year in advance—we wanted to …Next Page »

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Needham, MA-based Scenic Technology has raised $1.4 million in new funding out of a planned $2.1 equity round, according to documents filed with the Securities and Exchange Commission. The company makes Microsoft .NET-based software for tracking barcodes and RFID tags on items moving through warehouses.

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Visiting a warehouse equipped with Kiva Systems‘ robotic fulfillment technology is a spooky experience: the little orange robots scoot about in busy silence, toting shelves full of products to human pickers who move the right products into boxes for shipping. There are no grinding, beeping forklifts, and not even much conversation, since there are so few human workers. So it makes sense that the first company to specialize in outsourced fulfillment services using Kiva’s technology would be called Quiet Logistics.

The startup announced today that it has installed a Kiva fulfillment system at its Andover, MA, site and that the so-called “QuietCenter” is already handling orders for Massapequa, NY-based Internet retailer Music Parts Plus.

The Andover center is envisioned as just the first in a network of automated warehouses, each of which would handle fulfillment for multiple customers. The buzzword for this practice in the warehousing industry is “third-party logistics,” or 3PL, and it’s similar in spirit to the multi-tenant architecture offered by Software-as-a-Service companies such as Salesforce.com. But Quiet Logistics is the first 3PL company to use Kiva’s technology.

“We’re excited to see Quiet Logistics delivering on its vision,” Kiva CEO Mick Mountz said in today’s announcement. “Their 3PL multi-tenant model is the perfect platform for bringing the value of Kiva Systems material handling to customers who rely on best of breed service partners.”

Quiet Logistics said the online catalog at Music Parts Plus—a playground for guitar aficionados—contains over 5,000 separate products, from picks to lubricants. The company was growing so fast it could no longer manage its inventory efficiently, yet it’s too small to afford its own Kiva setup. So it turned to Quiet Logistics.

“Companies like Music Parts Plus want and need to focus their time and resource on their core capabilities such as merchandising and marketing,” Bruce Welty, Quiet Logistics’s CEO, said in the announcement. “We deliver the service they need to fulfill a customer’s order and expectations. We operate in the background rapidly, efficiently, accurately and above all quietly.”

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Lowell, MA-based MicroLogic, which developed the wireless technology behind the LoJack theft recovery system for vehicles and has recently focused on wireless tracking of heavy construction equipment, will be acquired by the StarTrak Systems division of Alanco Technologies (NASDAQ: ALAN), the Scottsdale, AZ-based company announced today. StarTrak makes cellular- and satellite-based systems that track “cold chain” equipment such as refrigerated trucks, trailers, and shipping containers. The terms of the acquisition weren’t disclosed.

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It may still be a while before robots can actually change diapers, but at least they can help move them around inside warehouses. That’s the word today from Kiva Systems, the Woburn, MA-based maker of “automated fulfillment systems”—i.e. fleets of squat orange robots designed to move shelves to human order pickers, rather than forcing workers to endlessly walk warehouse aisles. Online retailer Diapers.com plans to install Kiva systems at all three of its distribution centers, where they will “store, move and sort a variety of baby products, including diapers, wipes, formula, bottles and clothes,” according to a statement from Kiva.

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Over the past couple of weeks, I’ve been exploring the relationship between tech startups in Seattle and investors in the San Francisco Bay Area. We ran a story about what Seattle entrepreneurs can do to attract more attention from Bay Area VCs, and then a follow-up about whether there might be a brain drain of early-stage startups from Seattle heading south in search of funding. The pieces have generated some pretty spirited feedback.

One of the most provocative responses I got was from Shan Sinha, an MIT alum, former Microsoftie, and co-founder of DocVerse, a collaborative-document software firm originally based in the Seattle area. This summer, Sinha and fellow co-founder Alex DeNeui raised $1.3 million from Bay Area investors and relocated their company to San Francisco. Sinha has a very interesting take on Seattle versus San Francisco, for early-stage entrepreneurs. “After reading your article, most of the folks seemed to espouse a viewpoint that there is no advantage to being in the Bay Area and that starting a company and trying to raise money from Seattle is straightforward. There also seems to be a second thread through your anecdotes attempting to espouse that Seattle investors were plentiful and competitive,” he writes. “Our experience did not support either of those observations.”

For balance, I should point out that I recently spoke with data-visualization firm Tableau Software, which moved from the Bay Area to Seattle a few years ago because its founders wanted to live here. So it’s not like there’s an exodus of startups in one direction, or any big trend yet—these are just individual cases. (But I am curious to hear what others have to say, particularly those on the early-stage side of things.)

Sinha wrote, “We moved to the Bay Area for the same reason why people move to Hollywood to make movies. The Bay Area is for startups what Hollywood is for movies. Starting a company is hard enough, not being in the Bay Area is just introducing another hurdle in an already risky endeavor. Why not eliminate as much risk as possible? Any reasoning to justify not being in the Bay Area is a rationalization, in my opinion (often times valid… like “my family is rooted here”… but nonetheless a rationalization that must be overcome).”

He then fleshed out four concrete observations from his experience. The most interesting part to me is his discussion of meeting logistics—trying to build relationships and do deals from afar—as well as the idea that Bay Area VCs move faster and may be more willing to take risks. But I’ll let Sinha speak for himself:

— “Bay Area investors are made of a different ilk than anywhere else. In our experience Bay Area investors just moved at a different velocity. There were some exceptions…we did meet some amazing folks in Seattle …Next Page »

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Kiva Systems may be winning its battle against the science-fiction robots.

The Woburn, MA, company is a newcomer to a hidebound business. It builds “mobile fulfillment systems” that are overturning all the traditions of warehousing by making the shelves move around, rather than the people. The moving is done by squat wheeled robots that maneuver under the shelves, pick them up, and trundle them over to a person at a picking station, who grabs whatever items are needed to fulfill the next order and boxes them up to be shipped to a retail store or a mail-order customer.

It’s amazing to watch dozens of these little orange robots working in concert, lifting and spinning and scooting without once colliding or spilling anything. (For a lighthearted look at Kiva’s system in action, see this YouTube video of the robots dancing the Nutcracker ballet.) But warehousing is a centuries-old industry in which the last major innovation was the forklift. Convincing a warehouse manager that he should hire a fleet of R2-D2s to staff his next facility is a tough sell.

“If you just go to the people who run these factories and warehouses and say ‘We’re going to have a bunch of robots help your workers,’ they are going to say ‘Obviously this is an East Coast pointy-head who doesn’t understand what a real warehouse is like,” says Mitch Rosenberg, Kiva’s vice president of marketing. To them, the word “robot” is likely to evoke visions of Robbie the Robot from Lost in Space. But show these same people a Kiva warehouse in action, Rosenberg says, and they start to understand the practical potential, he says—including potential productivity increases on the order of 200 to 300 percent.

There’s certainly room for improvement in an industry where most pick workers spend hours each day walking up and down miles of warehouse aisles. This isn’t a terribly efficient process, as online grocer Webvan learned the hard way. After raising some $800 million in venture capital, the onetime dot-com darling went bust in 2001 because—among other things—it never found a low-cost way to fulfill orders.

After all, if every customer’s order sends a pick worker scurrying around a warehouse just as if they were at the supermarket, most of the fabled efficiencies of Internet-based commerce shrivel away. “When you go grocery shopping, what percentage of the time are you actually putting what you’re looking for into your basket?” asks Rosenberg. “Most of the time you’re just walking and waiting to encounter it.”

It’s recognizing and grabbing items that supermarket shoppers—and warehouse stock-pickers—are really good at. Webvan executive Mick Mountz realized that if he could somehow make the bins full of stock come to the pick workers, rather than sending the workers to the bins, the humans in a warehouse would be able to spend more of their time being smart and less just walking around.

The idea came too late to save Webvan. But after the company folded, Mountz went enlisted Raffaello D’Andrea, an expert on automatic controls at the Swiss Federal Institute of Technology, and Peter Wurman, a computer scientist at North Carolina State University, to help him put the concept into action. The result was Distrobot, founded in 2003. (The company changed its name to Kiva Systems in 2005.)

The system Wurman, D’Andrea, and CEO Mountz have now spent five years perfecting is as much about software as it is about robots. A master inventory database knows which shelves in a warehouse hold which items. When an order comes in at the Staples warehouse for a box of green pens and a ream of paper, the system wirelessly instructs two robots to find the appropriate shelves, pick them up (a platform atop a large screw lifts up the shelf a couple of inches as the robot spins underneath), and carry them to a designated stock-picking station.

If both units arrive at the same time, the system tells one robot to wait until the other moves out of the way. The robots have infrared sensors to warn of nearby objects—but collisions are unheard of, because the units are continually reporting their positions to the master system. They keep track of their own locations by watching for small bar code stickers attached to the warehouse floor.

At the station, a laser pointer shows the stock-picker where to look for the green pens or the paper. The worker grabs the needed item out of the indicated bin, places it into a box, and punches a button to let the system know the action is done. When the whole order is assembled, the box coasts off to the …Next Page »

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News coming across the wire yesterday from Kiva Systems in Woburn caught my eye. Not so much for the news itself, which is about a routine corporate partnership, but because I had just learned about the company’s incredibly cool little robots the night before.

Kiva is the best kind of startup: one built around soothing an ache rather than finding an application for a technology widget. The ache, in this case, is the hassle of order fulfillment in giant mail-order warehouses like those operated by Amazon or Staples. A typical order might call for five different books or CDs or pens stored in bins scattered across a vast warehouse. Rather than sending people to the bins, Kiva figured out how to bring the bins to the people—on top of cute orange robotic drive units that, somehow, remind me of the little motorized trolley that connected Mr. Rogers’ house to the Neighborhood of Make-Believe.

Watching a Kiva-managed warehouse in action is an oh-my-gosh-how-clever-is-that moment. Scores of tall blue-plastic shelving units move across the floor in an elegant software-driven ballet, each one carried atop a robot that is partly autonomous (reading barcodes on the floor to stay oriented) and partly acting on instructions transmitted wirelessly from a central computer. The robots carefully avoid collisions and politely line up behind stations where human operators transfer the needed items from the mobile shelves into mailing containers. Then they move out of the way, taking shelves with low-demand items back to the far corners of the warehouse and keeping the high-demand items close by. (There’s a terrific Flash video of the whole process at Kiva’s site, but you need to register your e-mail address with the company to see it.)

In warehouses equipped with Kiva’s system, fulfillment agents can process three times as many orders per day, the company claims. A fleet of 150 Kiva robots already handles more than half of the products that pass through Staples’ 500,000-square-foot order-fulfillment facility in Chambersburg, Pennsylvania (featured in a nice Fast Company article in July). Today’s news is that Tompkins Associates, a consulting firm that helps big companies design and fine-tune their logistical operations, has put Kiva’s “Mobile Fulfillment System” into its Orlando, FL, Emerging Technology Center, where the company tests and demonstrates the latest supply-chain technologies.

Coincidentally, Kiva’s founder and CEO Mick Mountz was one of the panelists at an MIT Enterprise Forum October Innovation Series robotics event Wednesday night. The event starred Rod Brooks, the Panasonic Professor of Robotics at MIT, former director of the MIT Computer Science and Artificial Intelligence Lab, and co-founder of iRobot (and Xconomist). Brooks made two points in his pre-panel keynote talk that caught my attention, and that also seem to apply directly to Kiva.

The first was that while you might expect that the most autonomous robots are also the most expensive, it’s actually the other way around. Robots like Sony’s Aibo robot dog and iRobot’s Roomba vacuum cleaner, which operate completely without human input, cost only a fraction as much as robots like Honda’s Asimo and iRobot’s Packbot that are remotely tele-operated (i.e. that require almost continuous human intervention to prevent disaster—an expensive proposition, technologically speaking).

The other point was that the biggest, most profitable business opportunities in the robotics industry will probably revolve around applications that benefit from Moore’s Law—Gordon Moore’s famous (and so far, accurate) prediction that the computing power of a microprocessor doubles every 18 to 24 months for a constant price. “If you find a way that an exponential will change the way you do robotics, there is a business model there,” Brooks said.

Mountz impressed the forum audience with a video that hinted how the company might wind up in Brooks’s sweet spot—that is, by making systems that are autonomous, inexpensive, easy to improve, and extremely expandable. Kiva’s two-feet-high, three-feet-long robots and the associated control systems aren’t yet cheap; an operation like the one at Staples’ Chambersburg facility would cost $5 million to set up, the company says. But the technology is highly flexible. Warehouse managers can adapt to changes in operational realities, such as shifts in the types of products consumers are ordering, simply by reprogramming the control system. Adding capacity is as easy as bringing in more robot drive units. And it’s easy to imagine making the robots smarter—by adding RFID-tracking capabilities to their built-in barcode scanners, for instance.

The Enterprise Forum panel also included Chris Hofmeister, CTO of Brooks Automation in Chelmsford, which makes robots that handle silicon wafers inside the vacuum of semiconductor fabrication machines, and Debbie Theobald, CEO of Vecna Technologies, whose research lab in Cambridge contributed to the company’s remarkable Battlefield Extraction-Assist Robot. All of these companies are contributing to the amazing ferment in robotics technology in the Boston area; indeed, Brooks opined that “Boston is the cluster in robotics” today.

Given the number of robotics stories we’ve been running lately, we’re inclined to agree.

Addendum, February 24, 2008: Scott Kirsner at The Boston Globe has published a nice feature about Kiva Systems.

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