This article originally appeared at: http://www.redherring.com/insider/1999/0224/vc-pixel.html. Verticality funded $2.6 million of the total raised by Sunrise Securities.

The Pixel Company rides the edge

By Georgie Raik-Allen
Red Herring Online
February 24, 1999

Entrepreneurs are always been encouraged to think out-of-the-box, but at The Pixel Company, it's more a case of out-of-the-screen.

The Seattle-based startup has found a tiny slice of unused space on the otherwise Microsoft-dominated desktop and is using it to grab -- and sell -- the user's attention.

Pixel has developed MySpace, a menu bar that lives in the black space at the very bottom of the computer display. The 25-pixel control bar includes customizable TV-like channel buttons that let users do things like click on Web sites, open applications, and control a CD player.

Pixel operates beyond the traditional screen area by bypassing the operating system and writing directly to the video driver of the monitor. "We're allowing someone else to own part of the glass without having to go through the Windows desktop," says CEO Tom O'Rourke.

The startup has just raised a first round funding of $7.1 million from New York-based investment bank Sunrise Securities.

NEW FRONTIER
The funding will be used to expand the product line from MySpace, which lives on the bottom of the screen, to a range of products for all four edges. The startup recently announced NetSpace, which will live on the right-hand side of the screen and provide content from partner Web brands such as CNN Interactive and ZDNet.

It is also looking at developing a product called WorkSpace for the enterprise market, so that employees can email each other, chat, and share applications along another edge of the screen.

Mr. O'Rourke, who sounds like he may have spent a little too much time on the edge, says eventually Pixel products will frame video, television, handheld, and all other types of screens, and will remain visible while users move between the Internet, television, and computer activities.

"We are the glueware between all new technologies," he boldly claims.

Maybe, but it's hard to see the masses latching onto the idea with the same enthusiasm. The space is tiny, and except for the ability to remain on at all time, provides no extra functionality over My Yahoo, or any other customizable interface.

Advertisers and marketers, on the other hand, love any extra space that may attract consumers' attention. As Mr. O'Rourke says, unless Amazon.com (AMZN) is an icon on a desktop, it can only advertise and send messages to users when they are on the Web. With MySpace, it has a captive audience, no matter what the user is doing on the computer.

LIVING ON THE EDGE
The Pixel Company makes money from its content partners, which include Walt Disney (DIS), ESPN, Amazon.com, eBay (EBAY), and GoTo.com. The partners pay Pixel on a clickthrough basis, as well as a percentage of sales.

The key to profitability is broad distribution, which the company is pursuing through OEM deals and downloads off the Internet. So far, Packard Bell NEC, Pixel's former parent company, and two undisclosed PC vendors are distributing MySpace, and are using it to gain visibility and develop marketing opportunities.

It's too early to tell how the edge of the screen will be exploited, but Pixel insists the one sliver of space not controlled by the startup's Redmond neighbor is a valuable piece of real estate.

"I'm sorry, Bill, but you can't control it all," Mr. O'Rourke says. "There is a vacuum of opportunity outside a box called Windows."

That may be so -- for now -- but in the meantime, the desktop still belongs to Microsoft (MSFT).