In 2002, three students at Stanford University turned their computer-science class research on a new system for securing network messaging into a business plan for a new company.

That plan won first place among the 60 submitted in the annual Stanford Bases Entrepreneurs Challenge and led to the formation of Voltage Security Inc. by Rishi Kacker, Matt Pauker, and Guido Appenzeller. Their plan was aimed at simplifying the exchange of encrypted messages by basing the encryption on some individual identifier, such as a driver's license. Professors Dan Boneh at Stanford and Matt Franklin at the University of California at Davis found a mathematical way to make a user identifier unique; the students implemented the math as a security scheme that's harder to crack than the cumbersome and costly public key infrastructure.

Voltage's story demonstrates the critical interplay among smart people, university research, venture capital, and swift business execution in Silicon Valley. After incorporating in June 2002, Voltage operated out of a Stanford basement for a few months before moving into regular offices. In three years, it has hired a staff, has produced a commercial suite of products, and is signing up clients. It has patented its encryption algorithm and hopes to reach profitability in four to six quarters, Kacker says.

How, besides with money, have venture capitalists helped the entrepreneurs? VC advisers--particularly Ken Gullicksen of Morgenthaler Ventures--remind them to stay focused on what they do best and not get sidetracked, and they're a source of customers, too. "Ann [Winblad, of first-round funder Hummer Winblad Venture Partners] has an amazing Rolodex," Appenzeller says. "One of us might ask if anyone knows an executive of a particular bank, and Ann will say, 'The CTO is coming to my place for dinner next weekend.'"

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