A tech firm learns to see the future

Lesson: Innovate - and then be patient

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Bitstream CEO Anna Chagnon anticipated the typeface needs of a world of Internet users.
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(Fortune Small Business) -- Bitstream (BITS), No. 25 on the FSB 100 2008 list, succeeded by creating forward-looking technology for markets that didn't yet exist.

Based in Cambridge, Mass., the firm makes software that displays text on PCs and mobile devices. It also pioneered a tool that merges stored data, such as addresses, into marketing messages. Bitstream's third venture, MyFonts.com, is an online marketplace that sells a wide range of type fonts to clients including Web and graphic designers and wedding planners who seek to create unique invitations.

Founded in 1981, Bitstream innovated far ahead of existing markets and spent years waiting for clients to embrace its technology. Many companies still stored their data in file cabinets in the late 1990s. But Bitstream saw opportunity in the growing volume of digital information. In 1998 it launched PageFlex, an application that allows businesses to pull customer contact information from their databases to produce personalized web and print mailings. Such technology is now ubiquitous.

Bitstream also foresaw two other key trends: the popularity of online marketplaces and the emergence of open-source font software that would empower a new community of indie font designers. In 2000 Bitstream launched MyFonts.com, which offers more than 60,000 fonts. Bitstream takes a 35% cut of all sales. The firm's latest bet is ThunderHawk, a cell-phone Web browser that could break big if mobile Internet use takes off.

Particularly in recent years, Bitstream has thrived in roles that support the digital revolution. Annual revenues stayed south of $10 million until 2004 but soared to $21 million in 2007. Quarterly revenues hit an all-time high in the first quarter of 2008, up 16% over the same period last year. After dipping to a 12-month low of $4.89 on March 10, Bitstream's stock rebounded to $6.31 by June 9.

Bitstream has always spent more on R&D than on sales and marketing, but that's changing.

"We beat the market and developed the products," says Bitstream CEO Anna Chagnon, 41. "Now it's time to grow aggressively." To top of page

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