Corrections or additions?
This article by Barbara Fox was prepared for the July 2, 2003 issue of U.S. 1 Newspaper. All rights reserved.
E &Y Awards: RSS
To avoid copy cat competitors Gregory Besner kept his
Research Park-based company, Restricted Stock Systems (RSS), flying
low under the radar screen for several years. And last June when the
company expanded from 12 to 15 people and from 1,500 to 3,500 square
feet, he kept that quiet too, and was reticent about being interviewed.
So it only seems like all the good news is breaking at once: RSS got
venture capital, signed a contract with Nasdaq, won a state Ernst
& Young entrepreneur award, and — most important — has a product
that addresses a crucial regulation of the Sarbanes-Oxley act.
This act is designed to even the playing field for the ordinary investor,
and RSS software helps to do this by timely distribution of news on
insider trading. “We actually benefit from the focus on increased
scrutiny of insider and restricted transactions. Our firm has been
getting a lot of attention,” says Besner. “Before we started
our company, the disclosure process was very opaque.”
In a phone interview on Friday on the last business day before Monday,
June 30, the date the regulation was to take effect, Besner spoke
by telephone from near Nasdaq headquarters in Rockville, Maryland.
He was about to train field directors in how his product pertains
to Sarbanes-Oxley’s Section 403.
He didn’t expect the June 30 deadline would cause havoc: “I don’t
think all hell will break loose, because many companies have done
preparation.”
With its integrated solution for managing restricted stock transactions,
RSS aims to reduce the time needed to sell restricted stock to one
day, as demanded by the Sarbanes-Oxley act. RSS accomplishes this
with a “glass pipeline” workflow and tracking system based
on advanced data architecture.
Commonly known as corporate insider trades, restricted stock can be
the private placements issued before a company goes public, or the
stock that results from a merger, or the stock that executives receive
as compensation. Keeping track of this used to be a laborious, paper-based
process that could take weeks or even months to complete.
The much less onerous former timeline allowed insiders to make SEC
filings just once a month, so the reporting of a March 1 transaction
could be as late as April 10, leaving outsiders really out in the
cold. Now the disclosure needs to be made within 48 hours and needs
to be made electronically so as to be available to a broader audience.
Another rule is that a company must electronically post the filing
of sales by certain insiders on the corporate website within 24 hours
of the filing.
By smoothing the path for these filings, RSS tools can make the relationship
between an investor relations department and the restricted stock
shareholder a happy one. RSS clients might be brokerage firms, shareholders,
transfer agents, venture capital and private equity firms, issuers
of stock, wealth management portals, application service providers
in such areas as human resources or accounting — even the Securities
and Exchange Commission.
RSS’s system is, in fact, an improvement on SEC’s own online filing
system, deemed by Besner “a clumsy process, with numerous sign-ins
and few safeguards.” He points out that the SEC did encourage
technology companies to build service solutions.
RSS will not have this marketplace to itself. Other companies participated
in the SEC’s webcasts and conference calls about future products.
But RSS had a big headstart. “No one knew the exact act that would
be passed but we did know that insider transactions would be more
highly scrutinized as the general investing public became more involved
in their wealth management,” says Besner. “We were in the
right business at the right time for an important area of disclosure.”
Companies that have traditionally been in paper management, such as
Bowne and CCH, will be among the competitors. “Our advantage is
that we are not an 800 pound gorilla, we are a nimble software firm
that focuses 100 percent of our time and resources on this problem,”
says Besner.
He admits that small companies are at a disadvantage when it comes
to sales and marketing. “That’s why it is so wonderful that we
have formed a partnership with Nasdaq. We can take advantage of Nasdaq’s
brand recognition and distribution.” Nasdaq partnered with RSS
as part of Nasdaq’s Corporate Services Network to provide listed companies
with a reliable solution for dealing with insider disclosure requirements,
and Nasdaq exclusively recommends RSS for this job.
The RSS tool works in both directions, both in filing the trade and
reporting the filing. For the report, it goes to the SEC site every
15 minutes and pulls the insider trading filings from it, updates
the RSS database, and informs the RSS clients who now need to post
the transaction on their own websites within 24 hours. “Our application
helps to alert the public company that a transaction has been filed,”
says Besner.
For the filing, it puts information from previous trades in the application
— cloning the information and applying business rules to be sure
it is compiled and prepared properly. “We are helping to mitigate
error,” says Besner. “Our expert system helps the individual
prepare the information accurately and validates the forms to be sure
that all information is completed.”
How they got the Nasdaq contract: “Nasdaq conducted
focus groups to evaluate what products and services made sense,”
says Besner. Several RSS advisers introduced the company to Nasdaq,
which spent almost a year of due diligence on RSS and the competitive
landscape before they determined that RSS had the best product.
In December, 2002, the company closed a $1.25 series B round of financing
that was led by New York City-based Beehive Ventures LLC.
Besner majored in finance and English at Rutgers (Class of 1987),
has an MBA from Wharton, and started out in the retail industry before
switching to Wall Street, where he managed restricted stock transactions
at Goldman Sachs’ private wealth management group. Most recently,
as vice president in the private client group at Merrill Lynch, he
and his team were managing $13 billion of restricted stock.
Besner and his wife, Leslie, have an infant daughter, and Leslie has
her own company. Under the trade name Leslie Hsu she designs handbags
that made in the United States from Italian leather and sold in Manhattan
at such stores as Henri Bendel and Verve.
Of the Ernst & Young award, he says: “The work we’re doing and
the systems we’ve been developing are resulting in a better way to
manage complex restricted stock procedures, and we’re very grateful
to be recognized for that.”
Most of the other founding members of the team are Princeton alumni
(U.S. 1, May 2, 2001). Joe Studholme graduated in the Class of 1986,
earned a degree at Rutgers, and spent 10 years leading projects and
Internet development in Princeton University’s Advanced Technology
Group. He has also been a vice president at New York-based Connect
Systems, which does large scale data integration and client service
projects for financial institutions.
Ted Nadeau, chief technical architect, was a computer science major
at Princeton University, Class of 1986, and has been a consultant
for Prudential on the Applied Data Research class-action settlement,
the project manager for wealth management technology systems for J.C.
Bradford, and chief technology officer for CyberSites, a New York-based
Internet firm.
Other alumni include Nick Karp, Class of 1985; Hugh Lynch and Vadim
Polyakov, both in the Class of 1990; David Genetti and Andrew House,
in the Class of 1997, and Todd Meierhans, Class of 2000.
The board of advisors includes Richard Marin, most recently the CEO
of Deutsche Asset Management, vice chairman of BT Alex, Brown, and
general partner for B2B-Hive LLC, a New York-based venture capital
fund. He has a BA and MBA from Cornell. With him on the board are
Rick Bunker, Michael Ellis of SunGard Banking Systems, Gary Kaminsky
of Rose Glen Capital Group, Charles Stryker, the chairman and CEO
of Naviant, a supplier of precision marketing information, and Jack
Sunday, founder and president of Group Five Inc., an independent research
firm that focuses on shareholder and issuer satisfaction in the securities
industry.
RSS is a young company and a family friendly one. In the past year,
a handful of babies have been born, and the seven founders have more
than a dozen children between them.
Have these shoemakers’ children gone without shoes? Or has RSS, which
promotes insiders holding stock, managed to distribute stock to all
its employees. Yes, says Besner, everyone in the company holds some
equity.
— Barbara Fox
Restricted Stock Systems Inc., 412 Wall Street,Princeton 08540. Greg Besner, CEO. 609-430-7400; fax, 609-430-7500.Home page: www.rssgroup.comTop Of PageE & Y Winner: FloorgraphicsUsing the slogan “Advertising that closes the sale,”brothers Richard and George Rebh of FloorGraphics create and installtrademarked FLOORads — laminated vinyl decals that cover aboutsix square feet of tile — on the floors of retail stores. Thecompany leases aisle space from the retail store and sells the adsto the consumer product companies (U.S. 1, April 28, 1999).The company has been raking in the awards, notably the Ernst & YoungEnterpreneur of the Year award for marketing, manufacturing and distributioncategory for New Jersey. More important, it had $70 million in revenueslast year, and its ads are in more than 13,000 locations and 10 countries.With 28 employees in Princeton and 80 nationwide, it moved into bigger,posher digs at 5 Vaughn Drive, the lavish 20,000-foot suite formerlyoccupied by John Torkelsen’s Princeton Venture Research.FloorGraphics’ success has been hard won. The company suffered whenone of the first important clients, K-Mart, went into bankruptcy andits competitor — News America, owned by Rupert Murdoch — snaggedthat contract. And it didn’t help that Murdoch’s firm filed a lawsuitwhen one of its employees left and was hired by FloorGraphics.Because of the K-Mart loss, the Rebhs’ company lost 20 percent ofits contract stores. Nevertheless, it has increased the square footagein each store. Currently FloorGraphics is in 10,000 grocery stores.(Some stores have two divisions, so the total count is 13,000 locations.)The company started in 1996 when founder Fred Potok was working fora Montclair-based fleet graphics business, which had just come acrossa decal that could be protected from road hazards by a bullet-prooflaminate. This laminate — less slippery than the floor itself— could make floor advertising viable, Potok realized.Potok, who was formerly a resort condo salesman, turned to GeorgeRebh, a Williams College alumnus, Class of 1973, who was a graphicartist but had also sold real estate. For the job of CEO they broughtin George’s brother Richard, a 1976 graduate of Princeton University’sWoodrow Wilson School with a business and law degree from Stanford.The Rebh brothers’ father, a graduate of West Point and a Rhodes scholar,retired as a major general in the Corps of Engineers.Because the partners positioned the floor ads as media, manufacturerscould pay for the floor space from their advertising budgets —funds that might otherwise be used for print advertising or directmail. This represented extra income for the store. The other option,to tap funds set aside to pay for display space, would not have representeda new source of income for the stores.”Chain stores have their own trade relationships with packagedgoods companies who can provide local marketing funds, often calledco-op dollars. What we brought was the ability to tap into nationalfunds — promotional or advertising funds — that retailerswould never have access to. By creating an advertising medium thatcould be purchased, retailers could monetize the media value of theirstores,” says Rebh.Rebh secured $200,000 in angel funding and a total of $10 millionin venture capital, half from Interlaken Capital and half from Simon& Catterton. Both firms are based in Greenwich, Connecticut. In August,1998, these funds helped FloorGraphics buy out a division of 3M, whichmade the strong vinyl film for the decals, but which had also beena competitor. FloorGraphics has been cash flow positive since 1999and has not paid a dividend.With its recent expansion, the company inherited a lavish fitout —light oak parquet floors, built-in light oak cabinets, simulated oakceiling beams, and a unique mirror design that lets those in the executiveoffice see around corners. “It creates an atmosphere where itis very easy to connect,” says Rebh, who was very pleased to inheritthis space. “In some cases, mirrors bounce off of mirrors —as many five mirrors in line, all lined up so you can see around corners.It also makes the space seem very large.”Rebh’s major competitor is News America, which got intothe business in 1997 when it bought ACTMedia, known for inventingthe instore marketing business — shopping cart ads, shelf signs,and point of purchase coupons. “Nobody was doing floor ads then,”says Rebh. “We didn’t file a patent then because it would havehad to have been filed as a business concept. The patent office isopen to that today, but it wasn’t then.””We have never sued Murdoch and we try to stay out of legal contention,but they sued us,” says Rebh. The suit concerned Rebh’s hiringa News America employee who was not bound by a non-compete clause.The suit is still pending. “In retaliation News America hiredfive of our people and dedicated $50 million to put us out of business,”he says. “They didn’t count on the fact that we would work 24hours a day to keep going.”FloorGraphics meanwhile has applied for patents for its three dimensionaland electronic floor ads. But News America dominates the drugstorebusiness and has the contract for K-Mart, the only mass merchandisechain that allows third-party in-store marketing programs.As for the biggest retail advertiser, WalMart, FloorGraphics startedthe floor program there and ran it for a year. WalMart now does itsown floor ads both in the big box stores and its newer smaller grocerystores. Though this took away some business, Rebh relishes the voteof confidence this gives to his medium. “The world’s leading retailerhas put its confidence in floor advertising as a good spend for manufacturers,”says Rebh. “WalMart is probably the only retailer that can reachbeyond its local trade relationships and put pressure on packagedgoods companies to deliver more money to it.”FloorGraphics is moving from a sales phase to getting involved inthe creative process. “We have strong marketing and graphics staffto help us to become a marketing driven company,” says Rebh, citingJane Mullen-Sampson, the vice president of marketing, who used tobe with Carlson Draddy, a well-known promotional agency that had theU.S. Tennis Association as a client.George Rebh, executive vice president, heads the sales departmentand the graphic arts group that works with the manufacturers to createthe six-foot vinyl signs. The signs are pasted on the floor with strongadhesive but can removed in one minute by a trained installer. MikeDevlin heads the retail operations group and outsources the installationtasks to Spar Marketing, a merchandising services firm in Tarrytown,New York, which has 1,000 installers nationwide who do the FloorGraphicswork for one week out of the month. FloorGraphics has its own auditingstaff, supervised by Chip Graham, so that 20 workers across the countrycheck up on the installers’ work and resolve any issues in the stores.FloorGraphics now focuses on grocery stores. Money spent on ad campaignsto garner brand loyalty has to be reinforced at the moment of purchase,says Rebh.Recently Rebh has introduced a new larger product, the Floor Billboard,which at 12 square feet is the double the size of the standard product.”Size matters,” says Rebh. “Ours is the only advertisingmedium that combines the product with the campaign and the consumerin the buying moment because we are the only large format communicationvehicle in this market allowed in retail stores. In advertising, sizeequates to impact and therefore media value. “Richard Rebh is so much of an evangelist for big ads fastened to floortiles that he labels his enthusiasm as a calling — to make societybetter by helping to tone down ad campaigns. Today’s advertising hasto be provocative and edgy, he theorizes, because it has to be burnedinto your name so you remember it for a long time. “But if yourimage is associated with your product at the point of sale, you don’thave to resort to provocativeness for it to be remembered. With ourproduct, the advertising campaign can be softer.”FloorGraphics Inc., 5 Vaughn Drive, Suite 311,Princeton 08540. Richard Rebh, CEO. 609-514-0404; fax, 609-514-0204.Home page: www.floorgraphics.comTop Of PageLeaving TownNursefinders, 25 Pompton, Suite 305, Verona 07003.888-476-0900; fax, 888-823-7261. Home page: www.nursefinders.comThe Princeton Meadows Office Center branch of Nursefinders has closedand been consolidated with one in Verona. The company offers contingencyand fee-based search for temporary and permanent assignments in casemanagement, utilization review, medical management, mental health,and disease management. Another branch is located in Mercerville (609-631-9112).Realization Services Inc., 116 Village Boulevard,Forrestal Village, Suite 309, Princeton 08540. 609-243-0500. Homepage: www.realizationservices.comThis consulting firm has closed its Forrestal Village office and istaking calls at its headquarters, Box 189, Bedford Hills, NY, 10507,800-887-6070; fax, 914-234-6424.To companies on the brink of liquidation or bankruptcy, RSI offersinvestment banking, negotiations, bank financings, exit strategies,and litigation skills. “RSI has a 100 percent proven track recordof full-loan repayment to the secured lender while simultaneouslypreventing a potential foreclosure of the business,” says thewebsite.Top Of PageBankruptcyVelocient Technologies Inc., Box 3407, Princeton08543. Upinder Zutshi, president & COO. 609-919-1266; fax, www.velocient.comVelocient Technologies, which did on site or offsite software developmentin the United STates, Europe, and Asia, filed for Chapter 11 bankruptcy(Case 03-2574-KCF) on May 27. Three years ago it had moved from PrincetonMeadows Office Center to 214 Carnegie Center, Suite 102, but lastyear it moved out and has a post office box mailing address. The phonetakes messages but the website is not available.Top Of PageStock NewsVoxware Inc. (VOXW), 168 Franklin Corner Road,Suite 3, Lawrenceville 08648. Bathsheba J. Malsheen PhD, presidentand CEO. 609-514-4100; fax, 609-514-4101. Home page: www.voxware.comIn April Voxware Inc. announced it would receive $5.6million in private financing, and it received the funds on Monday,June 30. Leading investors were Lenox Drive-based Edison Venture Fundand Cross Atlantic Capital Partners of Radnor, Pennsylvania.”We are impressed with Voxware’s technology and increasing momentumin the marketplace,” says Joe Allegra, general partner at EdisonVenture Fund.”Now that the financing has closed, Voxware has a strong cashposition and a debt-free balance sheet,” says CFO Nick Narlis.”The combination of our increased sales momentum and the new financingwill help Voxware to meet its growth targets.”Next StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
