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Software firms draw investors

John Seelmeyer

Sometime during the fourth quarter, Reno-based First Warning Systems Inc. expects to begin European marketing of a sophisticated technology that, its executives say, can detect breast cancers years earlier than traditional screening tools such as mammography.

The company’s sensors, which might be placed in a garment that looks like a sports bra, collect temperature data from a patient’s body twice a minute for 12 hours.

The data then is run through predictive analytics software artificial intelligence, essentially that can identify temperature anomalies that might indicate the presence of a tumor in a very early stage.

“The bread and butter of this company is the software,” says Matt Benardis, a project manager for First Warning Systems.

The company is part of a growing cluster of software-based companies in northern Nevada, and investors see the sector as a potentially important source of new jobs for the region.

Last week, for instance, Trans World Health Services of Reno said it’s closed a funding round with members of the Reno Angels, a group of investors who provide the seed and early-stage capital that generally isn’t available to young companies from traditional venture capitalists.

The investment in Trans World Health Services, a developer of software for community health centers, is the fourth software deal that’s drawn investment from the Reno Angels.

Along with Trans World Health Services and First Warning Systems, the 11 investors who participate in Reno Angels also have put money into InTUUN Systems LLC, a Reno company that’s developing healthcare information systems, and Maslow 6 Entertainment, a developer of video games.

Dave Archer, a member of the Reno Angels whose day job is president and chief executive of Nevada’s Center for Entrepreneurship and Technology, said the investor group also has been watching with interest the recent growth of 3G Studios, a Reno company that writes game software, and ShortStack, a Reno company that helps users of social media develop custom pages.

Neither Trans World Health Services nor the Reno Angels disclosed details of the funding round, but Archer said its typical deals are in the range of $100,000 to $300,000. Chicago-based Ziegler Corporate Finance served as an advisor to Trans World Health Services in the transaction.

Trans World Health Services will use the money to expand its marketing reach and implement recent sales, said Stephen Kay, its chief executive officer.

The company has increased its customer count from one clinic to more than 30 in the past nine months.

Among its recent sales, the company has landed contracts with South Bay Free Clinic in the Los Angeles area and Borrego Community Health Foundation in California’s San Diego and Riverside counties.

The company’s software helps community clinics discover trends and improve their operational performance.

First Warning Systems, meanwhile, will use investment by members of Reno Angels, along with other private funding, to prepare for the European rollout of its technology.

That rollout will accomplish two tasks for the company, said Benardis.

At the same time that the European sales are generating revenues, the company will be collecting more data to support its belief that the technology is far more accurate that mammograms even as it detects tumors years earlier than other technologies.

That data, in turn, will help support the company’s efforts to win approval from the U.S. Food and Drug Administration to market the system to American physicians.

While the company has been working to upgrade its hardware, the biggest task, Benardis said, has been creating software that can handle data from hundreds, then thousands, of patients.

Its team isn’t alone.

Software-based companies fit well into northern Nevada, said Jim Belosic, chief executive officer of ShortStack.

Their professionals typically can work anywhere with good Internet access, and the sector often draws young workers who are enthusiastic about outdoor recreation such as those available in the Reno-Tahoe region.

Although Belosic said job candidates look at him askance when he says ShortStack is in Reno “It’s a tough sell at first,” he said he uses the city’s proximity to skiing and other mountain sports to get the attention of potential employees.

Then the economics kick in.

Software salaries, Belosic says, don’t vary much from one region of the country to another.

That means that software engineers who work in Reno make salaries similar to those they’d command in Silicon Valley. But they have a much lower cost of living, particularly for housing, northern Nevada.

“All of a sudden, they’re rich people,” Belosic said.

His company created a popular tool that allows Facebook users to create their own custom pages it’s now used in more than 180 countries and now it’s looking to hire a couple of people this year to expand its 12-person staff, Belosic said.

Part of that expansion results from the company’s diversification into the creation of tools for other social media sites beyond Facebook.

Archer, meanwhile, noted that software companies also are a good fit for the small venture-capital community in northern Nevada.

Software firms don’t require big investments in equipment or real estate, he said, which means relatively modest investments can bring larger results.

Doug Erwin, vice president of entrepreneurial development for the Economic Development Authority of Western Nevada, says the relatively low capital costs for most software startups also means they typically can be launched quickly.

That, in turns, means the new firms can contribute to diversification of the region’s job base.

Greg Crawford, owner of Alliance Trust Co. and an investor with Reno Angels, said, “We believe that lasting economic growth and stability for the region will come from attracting and funding local new clean-tech companies in the area like Trans World Health Systems.”