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By TUX TURKEL, Staff Writer Friday, December 15, 2006

In one hand, Markus Wuersch held a digital compass. He pointed it at the Custom House, a granite landmark on Portland's Commercial Street.

In his other hand, Wuersch held a personal digital assistant. The screen displayed a photo of the Custom House. An audio track stood ready to recite a brief history of the building.

"You point at something and it will tell you something," he said.

Take this idea a step further. Point a cell phone at a restaurant. See what recent diners had to say about their experience. Think of it as geoblogging.

"It's almost like you're walking through cyberspace," Wuersch said.

Wuersch is chief technology officer at Intelligent Spatial Technologies. The company develops so-called location-based services, a new technology field that provides information via mobile and field units based on individual geographic positions. One example is helping pedestrians navigate a city.

IST is trying to find a niche for its patent-pending search technology in this growing field. The company was founded in 2003, supported by the National Center forİGeographic Information & Analysis at the University of Maine. The firm expanded to Portland this year. Last week it moved to a downtown headquarters on Congress Street. It has five employees.

Now iST is at a critical point. Like many technology startups, it has an appealing idea, a little money and a lot of enthusiasm. But moving to the next step -- attracting venture capital to grow into a viable, Maine-based enterprise -- is proving difficult, according to Chris Frank, the company's founder and chief executive officer.

Potential clients are leery about buying something from a company that has developed a prototype but might not be around a year from now. Investors would like to see some clients before they put up money. Competitors, meanwhile, are developing similar products and services.

If iST can't make progress, Frank said, the company would look to be acquired by a stronger partner with the resources to take advantage of the technology.

"We're in this Catch-22," Frank said. "If we can't raise capital and build a good Maine company, we're willing to sell."

IST's lead product is called iPointer. It's a pointing-based search platform for exploring a defined area, such as a national park, college campus or city street. Information is captured through a device -- like a personal digital assistant or cell phone -- that combines the global positioning system, a digital compass and pocket computer technology with a database holding locations and landmarks.

The iPointer technology was rolled out to the public this fall at the University of Maine, where it's being used on the Orono campus for self-guided tours. Pointing an iPointer-enabled cell phone at campus buildings and landmarks brings up text, audio and images.

The demonstration conducted earlier this week in downtown Portland by Wuersch was meant to show what iPointer could do in a city. Ultimately, the digital compass and wireless device will be packaged in a small handheld unit.

The iPointer technology grew out of concepts developed by Frank while he was working as a research assistant at UMaine, part of a mobile mapping project funded by an arm of the Department of Defense. Frank graduated with a degree in spatial information science and engineering from UMaine.

Recognizing the commercial applications, Frank created a company that has won more than $1 million in state and federal research grants, as well as some private equity investment. Now 29, he was named Maine's 2006 Young Entrepreneur of the Year by the U.S. Small Business Administration.

But this early success has gone only so far in bringing iST to a commercial level.

Frank figures the company needs $2 million over the next 18 months to hire the sales and engineering staff to fully develop and market the platform.

Frank has been making the rounds over the past year to members of Maine's small venture capital community. He has found the process discouraging.

He also has been in touch with wealthy individuals in the Boston area who provide capital for technology startups. But these so-called angel investors want stronger participation in product development, Frank said, and Portland is too far away. At the same time, iST is too small to interest institutional investors.

IST's challenges are not unusual, according to Kip Moore, chief executive officer at Little Diamond Island Enterprises in Portland.

Moore, who invests in technology startups, met with Frank last summer. The company has an interesting product, Moore said, but also some shortcomings. In his view, Moore said, Frank and his team didn't have a clear plan of how to package the digital compass and PDA to make the product user-friendly. Partnering with a major player that makes GPS devices might be one answer, he said.

"I probably see a new company every week," Moore said. "Most of them, the idea is good. But to make it work, they need a stronger management team and a stronger business plan."

Investing in consumer electronics is tricky, according to Michael Gurau, president of CEI Community Ventures Inc. in Portland, a subsidiary of Coastal Enterprises Inc. These devices are discretionary purchases, Gurau said, so demand is hard to define.

Gurau has been in touch with iST as the company's business plan has evolved. One of his standards for investment, Gurau said, is whether a product or service relieves "a pain in the market." The iPointer doesn't rise to that level, in his view.

But Frank and his team are optimistic and continue to refine their business plan.

Earlier this year, the company hired Jerry King as its president and chief operating officer. King has long experience in entrepreneurial sales, marketing, software development and executive management.

A year from now, Frank said, he hopes iST will have the financial resources to get into the market. Short of that, the company will look to be acquired, probably by an out-of-state interest.

"We have a working,İinnovativeİlocation-based service platform ready to go to market and a strong management team with good business connections," Frank said. "Our biggest challenge is that we are having trouble finding theİfinancial and businessİresources in Maine to support aİpotential high-growth technology company."