Adapx Raises $9M to Bring Digital Pen Technology to Mobile Field Workers

A few local tech companies have still been able to raise significant new funding rounds in a very tough climate. The latest is Seattle-based Adapx, which is announcing today it has raised a $9 million Series B round, led by new investor UV Partners in Salt Lake City, UT. Existing investors OVP Venture Partners, based in Kirkland, WA, and Paladin Capital Group in Washington, DC, also participated in the round, which closed in March.

Adapx (pronounced “adapts”) makes digital pen technology that allows workers in the field to take handwritten notes and efficiently upload them to a computer. The technology allows workers to use pen and paper to collect data, mark up charts and maps, and draw on design diagrams, and then digitize their pen strokes by docking the pen to their PC. That way, they can automatically integrate the info with mainstream software applications like Microsoft Office, Excel, Autodesk (for engineering design), and ESRI (mapping).

“Investors and customers really get our story. Adapx has exceeded our expectations for adoption,” says CEO Ken Schneider. The company, founded in 1999, counts more than 500 companies and government organizations as customers, including the U.S. Department of Defense, NASA, the Port of Seattle, Holland America Line, and various public works agencies and construction firms.

OK, but digital pen technology has been around for many years, and has never really taken off. So what’s special about Adapx? From what I can tell, two things. First of all, the technology really seems to work. In the past, everyone from Apple to Logitech to Microsoft has developed digital pens to capture handwriting and integrate it with digital files. These systems have tended to be clunky and unreliable, or just too much of a pain for mainstream customers to get started on. Some have required special paper, for instance.

The Adapx version, which uses technology from the Swedish firm Anoto, requires no special paper—though it does require you to print out the form (a spreadsheet or chart, say) you’ll write on, using software that prints a special watermark to help the pen keep track of where on the page you’re writing. The pen, which is the size of a magic marker and writes regular ink, contains a tiny scanner that captures your handwriting and stores it until you dock the pen with your PC. “That allows the paper to become the device,” says Schneider.

Which then leads to the second main advantage of Adapx. The handwriting is uploaded, recognized as text, and integrated into an Excel form or Office document automatically. The point here is that Adapx is targeting business users and companies with mobile field workers—not mainstream consumers, who have not been compelled to use digital pens so far. So a construction worker, utilities manager, soldier, or emergency rescue team leader can take handwritten notes on a map in the field, say, and then e-mail the information to their boss or commanding officer when they get to a computer.

“From a return-on-investment perspective, what our customers are seeing is, we let them keep their natural workflow,” Schneider says. “And it’s a much lower cost of ownership. They can get data back rapidly off the paper, without having to re-key the data.”

Schneider says the digital pen technology is not meant to replace PDAs or laptops, but it can work in situations where a PDA or laptop won’t, and it’s cheaper. A basic version of the product, including the pen and software, costs around $300. “We see ourselves as being part of the next big computing phase and wave of technology that will come from natural user interfaces,” he says.

Until recently, Adapx was primarily a research and development company, doing work for federal government organizations like the Defense Advanced Research Projects Agency. Schneider came on board about two years ago to help the company introduce its first marketed product. Adapx raised a $10 million Series A round in 2007, and shipped its product in 2008. It now has 45 employees. Schneider says he is expecting to see revenue growth of more than 200 percent in 2009, and looking for the company to break even by the middle of 2010. The new funds will be used to expand the Adapx product line, partner network, and sales and marketing team.

As for the competition, Schneider says there are no other companies in the digital pen space that have both a developed product and a focus on business and government customers. But there are companies like Oakland, CA-based LiveScribe that make digital pen technologies for the consumer market. The main goal for Adapx now, Schneider says, is to “continue to get large companies deploying us broadly.” In this climate, he adds, “your products have to be a must-have, not a ‘nice to have.'”

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