April 6, 2000

Ten Fast Facts

NetCompliance.com WHO: A privately held Internet application service provider founded in 1998 by Krish Krishnan and Lloyd Andrews. WHAT: Specializes in helping businesses computerize their compliance with local, state and federal environmental regulations. WHERE: Seattle

Fast Fact #1: NetCompliance recently signed a $100 million contract to develop the Web's first "green" marketplace.

Comment: The five-year deal forms a partnership between NetCompliance and Kafus Industries, a Vancouver, B.C., pulp and paper company that uses environmentally sustainable raw materials to produce its products. For example, Kafus manufactures fiberboard from 100 percent waste wood without formaldehyde emissions and creates paper from kenaf -- an agricultural row crop -- not trees.

Fast Fact #2: The World Eco Trade marketplace will feature businesses with similar philosophies and products from around the world.

Comment: NetCompliance originally was pitching Kafus on its computerized compliance solutions, but as discussions unfolded, NetCompliance saw an opportunity to leverage its existing infrastructure, technology and experience to help Kafus create an electronic marketplace for environmentally sustainable products. "The supply chain for green products is fragmented," says Krish Krishnan, president and CEO of NetCompliance. "Using the Internet as an e-marketplace [can] bring products to market much cheaper."

Fast Fact #3: World Eco Trade should be up and running in three months.

Comment: The interactive format will allow buyers and sellers to "haggle" and will serve both retail and wholesale consumers, says Krishnan. Along with creating, hosting and maintaining the site, NetCompliance will develop

standards for the site's products and establish a "green index" so consumers can weigh the environmental sensitivity of each product. Kafus will own World Eco Trade, but NetCompliance will collect transaction fees and retains an option to take an equity position in the marketplace.

Fast Fact #4: Krishnan is a former environmental consultant.

Comment: The technical complexity and constant changes in environmental regulations provide a tremendous challenge for businesses. "That's why there's a thriving consulting profession," says Krishnan. However, after 10

years in that profession, Krishnan became convinced that computers could provide a more cost-effective way to deliver and manage environmental information than the traditional model of billing clients by the hour for personal service. "It doesn't give any incentive to try to do the job faster and cheaper," he says of the traditional model.

Fast Fact #5: If at first you don't succeed ...

Comment: Krishnan's first compliance-related startup failed. It was based in Washington, D.C., "the mother lode of all compliance regulations and standards," quips Krishnan. The trouble was, the software he developed required customers to spend too much additional money on the hardware needed to run it, he says. Then came the Internet. Together with Andrews, who was one of his previous investors and the founder of Chem Nuclear, Krishnan launched NetCompliance using proprietary Web-based software known as eComply.

Fast Fact #6: Some NetCompliance's software developers are based in Nepal.

Comment: "I'm tapping into some personal connections," says Krishnan, himself a native of India who graduated from the Indian Institute of Technology. The 12-hour time difference between Nepal and Seattle allows NetCompliance to work round the clock, he notes.

Fast Fact #7: NetCompliance currently targets companies in four main industries.

Comment: They are pulp/paper, oil/gas, health care and chemicals. Clients for NetCompliance's customized, subscription-based services include Arco, Chevron and Nebraska Health Systems. Krishnan declined to disclose sales figures, but says the Kafus deal represents a "big shot in the arm" to the bottom line.

Fast Fact #8: NetCompliance also is developing a suite of generic solutions for various categories of small businesses.

Comment: The first of these "one-size-fits-all" products is gasstationcompliance.com. It provides stations with online employee training, paperless recordkeeping and printable fact sheets for hazardous materials. "All it takes is a computer, a modem and a Web browser to add a comprehensive safety department to every gas station," says Krishnan. Similar services are being considered for auto body shops, lube/oil services and laundromats.

Fast Fact #9: NetCompliance has international aspirations.

Comments: The formation of the European Union is creating a new set of uniform environmental standards -- and a tempting market for NetCompliance's services, says Krishnan. In addition, NetCompliance may add solutions for whole new ranges of government regulations, everything from education to customs. eComply "can be applied to any area with standards," says Krishnan.

Fast Fact #10: An IPO or acquisition may occur in the near future.

Comment: Angel investors provided initial funding. A second round of financing came from ULLICO, a venture capital firm once featured on the cover of Forbes magazine as the most successful VC ever. These days, says Krishnan, the company is getting plenty of feelers from larger companies as well as from investment bankers and the board is weighing its options.

Previous columns:

• Ten Fast Facts, 03-30-2000
• Ten Fast Facts, 03-23-2000
• Ten Fast Facts, 02-24-2000
• Ten Fast Facts, 02-10-2000
• Ten Fast Facts, 02-03-2000
• Ten Fast Facts, 01-27-2000
• Ten Fast Facts, 01-20-2000
• Ten Fast Facts, 01-13-2000