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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

OR

For the transition period from                  to                 

Commission File Number 000-29609

ONVIA.COM, INC.

(Exact Name of Registrant as Specified in its Charter)

1260 Mercer Street, Seattle, Washington 98109

(Address of Principal Executive Offices)

(206) 282-5170

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, $.0001 Par Value per Share

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

The aggregate market value of the voting and nonvoting stock held by nonaffiliates of the registrant based on the closing price on March 1, 2004, as reported on the NASDAQ National Market, was approximately $22,905,985⁽¹⁾. The aggregate market value of the voting and nonvoting stock held by nonaffiliates of the registrant, based on the closing price on June 30, 2003, as reported on the NASDAQ National Market, was $14,041,838⁽¹⁾.

The number of shares of the registrant’s common stock outstanding at March 1, 2004 was 7,689,295.

Table of Contents

ONVIA.COM, INC.

FORM 10-K

For the Year Ended December 31, 2003

INDEX

Table of Contents

PART I

CAUTIONARY STATEMENT

In addition to the historical information contained herein, the disclosure and analysis in this report contains forward-looking statements. When used in this discussion, the words “believes,” “anticipates,” “may,” “will,” “should,” “expects,” “plans,” “estimates,” “predicts,” “potential,” “continue,” “intends” or the negative of these and similar expressions are intended to identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and are subject to risks and uncertainties that could cause actual results to differ materially from those expected or implied by these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the factors described under “Risk Factors” and elsewhere in this report. We undertake no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of anticipated events. Readers are urged, however, to review the factors and risks described in reports we file from time to time with the Securities and Exchange Commission.

ITEM 1. BUSINESS

Overview

Onvia.com, Inc. was incorporated in January 2000 in the state of Delaware. Onvia is a leading notification and information service for government agency buyers and business suppliers. A leader in notifying businesses of government projects, Onvia now also alerts its customers of private sector opportunities across the United States. Our DemandStar procurement solution helps government agencies inform and update suppliers electronically of government procurement opportunities.

Our service makes it more efficient for companies of all sizes and industries to access and compete for new business opportunities. Businesses no longer have to scour newspapers, trade periodicals, or the Internet in search of government and private sector opportunities. Customers are automatically notified of and updated on government opportunities that match their business profile.

Our network efficiently matches government agency bid requests to suppliers of the requested product or service, saving time and money for agencies and businesses alike. Government agencies reduce costs by streamlining the bid process and create a larger and more diverse pool of suppliers, resulting in increased bid competition. Government suppliers can more efficiently keep up to date with public sector projects because they receive automatic daily notifications of government opportunities.

We also have a variety of products that keep businesses informed of private sector opportunities, including a news clipping service and a lead notification service. Currently, these private sector products are focused on the architecture, engineering and construction industries (AEC), but will expand in the future to cover additional verticals.

Onvia delivered positive results in 2003 and created the foundation for improved performance in 2004.

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Our common stock trades on The NASDAQ National Market System under the symbol ONVI.

Industry Background

Most businesses continually strive to find new revenue opportunities to grow their businesses. Public sector projects provide these businesses with a reliable source of opportunities. Tracking public sector projects can be difficult and time consuming, and staying informed about private sector projects can be even more challenging. The Internet can improve profitability for both buyers and sellers by increasing efficiencies in exploring new sales opportunities and establishing business relationships.

Government agencies spend billions of dollars annually on the procurement of a large array of goods and services. Government agencies can reduce their cost of procurement by lowering the expenses associated with bid notification and by increasing the competitive bidding environment. The use of the Internet for the distribution of information can greatly improve the efficiency and timeliness of this process. Many organizations are adopting various Internet-focused strategies aimed at improving operating efficiencies and communications with trading partners and customers.

Government agencies are challenged to make contract opportunities available to existing and potential new vendors to attract competing bids. Historically this process has taken place through expensive and time consuming traditional methods such as mailings, newspaper listings, postings in agency buildings or more recently, online and offline bid aggregation companies. The paperwork required for these processes can make government contracting frustrating for both the agency and its potential vendors.

The Internet and other technological advancements in hardware and software can ease many of these challenges. Automated processes can ease the process and reduce the costs to notify vendors of upcoming opportunities and to keep them updated on active projects. Electronic notification can also reduce the amount of time businesses devote to tracking new and current public and private sector projects.

Onvia’s Business Solution

Onvia’s solution is designed to meet the needs of businesses and government agencies. Through Onvia, businesses obtain leads for public and private sector opportunities with a variety of geographically based customized products, which are offered on a nationwide level, down to the county level. Businesses save considerable time and resources traditionally spent searching for new opportunities by using Onvia’s service that aggregates and automates the searching and matching process for government and private leads.

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Government buyers are faced with inefficient notification systems requiring significant paperwork and high costs associated with the procurement process. Our solution provides them with reduced operating costs, increased administrative efficiency, heightened competition leading to more competitive pricing, and a network that enables them to quickly and efficiently notify businesses of their requirements online.

As a recognized leader in the lead generation market, we have been able to develop a unique set of proprietary tools and resources that include both supplier-side and buyer-side components. The goal of our lead generation solution is to connect new and existing suppliers with business opportunities from the public and private sector. The size and strength of our network allows buyers and suppliers to find better matches quickly, saving time and money.

As a leading source of business opportunities for suppliers, we aggregate leads from around the nation and provide suppliers with The Onvia Guide. The Onvia Guide provides subscribing suppliers with a daily listing of new revenue opportunities in an easy to read format personalized for each supplier by their location and business category selections.

Our direct relationship with government agencies provides agencies with a suite of buyer tools that enable agency buyers to quickly create Requests for Proposals (RFPs), Request for Quotes (RFQs), and other requests for bids. In addition to lists and support for direct marketing, the agency relationships provide a direct connection between suppliers and buying agencies, providing suppliers with bid documents, and online response tools.

Product Description

Onvia’s Agency Solution

Onvia’s agency tools automate the process of RFP and RFQ creation, posting, and document distribution. By providing agencies with online tools for creating templates for RFPs and RFQs, we help agencies eliminate many manual steps in the bidding process and increase the overall efficiency of their procurement process.

Onvia’s buyer tools consist of BidWire and QuoteWire. BidWire is a web-based tool set that provides agency buyers with a step-by-step template for creating and posting RFPs and other requests for bids. All posted bids are coded by the buyer and distributed to subscribing suppliers and supplemental agency suppliers. Some of BidWire’s features also include bid document distribution services and tools to update open RFPs and view a list of suppliers who have downloaded bid documents.

QuoteWire provides buyers requesting quotes with the same efficiencies as BidWire does for RFPs. All posted RFQs are coded by the buyer and distributed to subscribing suppliers and supplemental agency suppliers. Some of QuoteWire’s primary features include tools that allow the buyer to modify standard RFQ forms and create individual line items for each quote; a specialized version of the RFQ form whereby suppliers can input prices and other information; automatic tabulation of seller responses for comparison and award; and specific award notification to the selected supplier.

Our buyer tools provide agency buyers with numerous benefits. The online tools eliminate many manual steps traditionally found in the RFP and RFQ process. Agencies save time and money by outsourcing the bid package production and distribution to us. Also, by posting bids and quotes to a database of suppliers, buyers increase the number of businesses competing for their projects, which can drive contract prices down.

Onvia’s Supplier Solution

The business purpose of Onvia’s supplier tools is to provide government and commercial suppliers with real time access to procurement opportunities and bid specification documents and blueprints. Because our valuable solution is centralized into one online location, our customers are able to operate much more efficiently. Our database of new government and commercial revenue opportunities are organized geographically and by industry vertical to better serve the specific needs of each subscriber.

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Suppliers can subscribe to any combination of our DemandStar by Onvia service or The Onvia Guide publication to obtain government and commercial revenue opportunities quickly and cost-effectively. Our DemandStar by Onvia platform provides real-time RFP and RFQ postings from participating government agencies through our BidWire and QuoteWire tools. Also, subscribers can download bid documents directly from the network, saving time and money. Non-subscribers can also review new postings to the network, which offers them the ability to look for postings from specific agencies.

The Onvia Guide is an excellent alternative or complement to our DemandStar by Onvia offering. The Onvia Guide is a daily e-mail publication of business leads from the private sector and from more than 45,000 government-purchasing offices. The leads published daily to each subscriber are professionally formatted and are customized based upon the selected locations and categories of the customer.

Strategy

We intend to continue to enhance our position as an electronic notification and document distribution service. Key elements of our strategy, which collectively aim to strengthen our competitive market position and financial performance, include:

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Acquisitions

In 2001, we completed an acquisition of certain assets of ProjectGuides, Inc., as well as the acquisition of DemandStar.com, Inc. The integration of both platforms was completed in September of 2001.

DemandStar.com, Inc.

In March 2001, we completed the acquisition of DemandStar.com, Inc., a leading provider of business-to-government (B2G) e-commerce solutions. The acquisition provided us with a proven buyer side B2G platform, a well recognized set of online buyer tools and more than 270 signed agency buyers. The number of signed agencies has increased to over 430 as of December 31, 2003.

ProjectGuides, Inc.

In June 2001, we completed the acquisition of certain assets of ProjectGuides, Inc., one of the nation’s largest online bid gathering and distribution services. The assets included proprietary technology capable of aggregating large numbers of government requests for bids and quotes, as well as a sophisticated team of research associates responsible for daily bid aggregation efforts. This acquisition established us as a leading provider of government bid and quote opportunities to businesses in the United States. Furthermore, it expanded our reach into the construction vertical—the largest market for government contracting at all levels—and encouraged our expansion into additional industry verticals.

The acquisition also allowed us to dramatically and cost-effectively increase the flow of bids through our online network, giving suppliers access to construction-related opportunities from public agencies at the local, state and federal levels. This acquisition helped us to deliver approximately 99,000 leads to our supplier network in 2001. In 2002, we delivered over 291,000 leads to our subscribers, a 194% increase over 2001, and in 2003 we delivered approximately 554,000 leads to our subscribers, a 90% increase over 2002.

Customers

We serve two primary and distinct customer groups: businesses and government agencies.

Businesses

To effectively compete for and win new business, businesses need to continually look for ways to save time and increase their potential for securing revenue generating opportunities. A key element of these efforts is the successful discovery of available revenue opportunities. Suppliers spend a significant amount of time and expense researching their markets for public and private sector sales leads. To maximize the value of their time and decrease the time spent on non-billable efforts, suppliers require a product that delivers timely customized leads for their business.

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Compared to traditional methods of finding leads, our system not only saves time and money, but it is simple to use and has a variety of delivery mechanisms. We have developed highly efficient technology and business processes to gather and publish leads from more than 45,000 purchasing offices in all 50 states, and from a variety of private sources. By coding all aggregated leads and matching customers to leads through each customer’s profile, we automate the process. This makes it easier for suppliers to review and evaluate leads quickly. We can search further and wider than most suppliers can, illuminating sales opportunities that otherwise would not have been found.

Customers are delivered new leads via email on a daily basis. Published as The Onvia Guide, a professionally formatted lead report is personalized for each unique subscriber. It eliminates the need for suppliers to actively search out sources so customers no longer have to spend time searching multiple newspapers or making phone calls. Therefore, other subscriptions can be terminated and time normally spent on searching can be converted to billable hours or more productive sales efforts.

Government Agencies

Although many government agencies maintain long-term supplier relationships, the agencies still must publicize contract opportunities to both existing and potential suppliers. By using our solution, government agencies save time and money through the increased distribution of their RFPs and RFQs. In addition, the agency relationships provide a direct connection between suppliers and buying agencies, providing suppliers with bid documents and online response tools.

Sales Strategy

The primary objectives of our sales strategy are to increase our number of premium subscribers, increase our penetration into the enterprise customer market, and to continue to secure relationships with influential government agencies.

Supplier Sales

In 2003 we realigned our sales teams into distinct teams targeting two separate size opportunities to better service our customers. The teams are the enterprise sales group and the small/medium business group. Our newest team, the enterprise sales group, focuses on selling our products to enterprise level customers. Enterprise customers are customers who purchase Onvia data for redistribution to their employees or customers, or for marketing their own products. Our small/medium business group is divided into an outbound acquisition team, an inbound acquisition team and a customer retention team. Our inbound acquisition team receives incoming calls from direct marketing respondents and educates potential customers on the costs and benefits of our services. Our outbound acquisition team tracks leads and places outbound calls to convert new leads and non-paying subscribers, who are allowed to use the system to review new postings to the network, into paying subscribers. Our retention team is focused on servicing, retaining and upgrading our existing customers and educating them on the benefits of new products and enhancements to existing products. Each of these teams manages opportunities to ensure that the customer or prospect receives the appropriate level of service and suite of products for the size of the customer or prospect’s organization.

Agency Relationships

As of December 31, 2003, we had signed over 430 government agencies nationwide. These relationships were established in key metropolitan areas in many states including California, Florida, Illinois, Texas and Washington. We continue to sign a variety of government agencies including cities, counties, housing authorities, transportation authorities and school districts. Some recent agencies include Dallas Housing Authority, TX, King County Housing Authority, WA, Oklahoma County, OK, Carroll Independent School District, TX and Hickman Mills C-1 School District, MO. We will test new sales and marketing tactics as well as continue to leverage our current partnerships to secure additional relationships with government agencies.

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Marketing Strategy

We target our marketing efforts towards the estimated one million businesses in the United States that currently contract for government work. We target vendors from participating agencies for our DemandStar product, and businesses in a variety of verticals for our Onvia Guide product. We acquire leads for our in-house sales force through direct marketing, including direct mail and e-mail.

In 2003, we focused our marketing efforts on generating high quality new sales leads at the lowest cost, while providing the proper sales tools to support higher-value sales. We also devoted significant marketing efforts towards generating repeat business from current and past customers and towards introducing new products to these customers. Marketing campaigns were executed to increase the geographic coverage for current subscribers and to reactivate expired accounts.

Customer Service

We are strongly committed to a high level of customer service to increase customer satisfaction as a means to ensure retention and expansion of our customer base, and we continue to devote resources toward the continual development of a well trained sales and customer service organization. Accordingly, in the first quarter of 2004 we are introducing a new account management program, which will build on the excellent customer service we currently provide to our subscribers, and will provide quarterly opportunities for Onvia to introduce new products to our customer base.

Technology

We support our operations and online solutions using an advanced technology platform designed to serve a large and rapidly increasing volume of web traffic in a reliable and efficient manner without critical failures. We designed our own proprietary core systems for customer interaction, web site design and hosting systems. Our systems have been designed to:

Our systems use a combination of proprietary technologies and commercially available licensed technologies. The backbone of our technology infrastructure consists of database servers running on Microsoft SQL Server 2000 database with Compaq hardware. The front end consists of multiple redundant web servers that are expandable as operations grow. We designed the system to scale easily to support rapid growth, as well as to sustain multiple failures by various components without downtime.

Our web servers, database servers, transaction-processing servers and other core systems that conduct essential business operations are housed at our corporate headquarters in Seattle, Washington. Our network operations personnel provide 24x7 monitoring and engineering support in a climate-controlled and physically secure environment. Our onsite data center has redundant communications lines from multiple Internet connectivity providers and has its own emergency power and backup systems. We also house all non-critical systems such as development servers, quality assurance servers, and internal network servers at our headquarters in Seattle.

In addition to maintaining responsibility for the technical architecture, security and uptime of our online solutions, our technology department works closely with the sales and marketing departments to ensure that customer feedback for new technology features is incorporated into new products and services.

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Operations

We help businesses succeed by aggregating information and providing a network where they can:

In order to provide these valuable solutions we must develop and maintain stable and secure operational processes. We believe that by continuing to provide additional solution functionality online to our users, by continuing to enhance our transactional processing capabilities and by continuing to improve our customer experience, we will significantly grow our business.

Our online network enables businesses and government agencies to communicate their needs for any product or service the business or agency may require to qualified suppliers of that product or service. We aggregate this information and professionally format it into a revenue opportunity that is then filtered and routed to qualified suppliers of the product or service. Suppliers within our marketplace can evaluate the opportunity, respond with a quote, or request more information.

Competition

The market for Internet-based products and services in the bid aggregation arena is evolving and competitive. Competitors include Internet-based and traditional providers of bid aggregation products and services to government agencies and businesses, our primary target markets.

Our current and potential competitors include, but are not limited to, the following:

We may face additional competition in the future as well-funded companies look to develop new Internet-based product and service offerings in the lead generation arena. The markets we compete in have relatively low barriers of entry, providing other companies with opportunities to quickly become more formidable competitors. In order to compete successfully, we must increase the value proposition of our products to create a loyal, recurring base of customers and agency users. To achieve this we must continually enhance our content and sources.

We believe that the principal competitive factors affecting our market include, but are not limited to, content, product quality and features, base of existing customers, base of active agencies, and customer service. In order to excel at these principal competitive factors more so than other competitors in our industry, we intend to maintain a superior understanding of our target customers, develop and strengthen relationships with new and existing agencies, offer superior value in our content and service offerings and sustain a more efficient operating model. We believe that our current product and service offerings compare favorably to similar service offerings available in the market today, and the addition in 2003 and early 2004 of private sector opportunities and premium data to our product offering should further enhance the prospect that our business model will be successful. The success of our business model hinges on key market assumptions, any one of which may not prove to be true, including the following:

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Intellectual Property Rights

Our future success depends in part on our intellectual property rights, proprietary rights, and technology. We rely on a combination of copyright, trademark and trade secret laws, employee and third-party nondisclosure agreements and other methods to protect our proprietary rights. We seek to protect our internally developed products, documentation and other written materials under trade secret and copyright laws, which afford only limited protection. We cannot ensure that any of our proprietary rights with respect to our e-marketplace will be viable or of value in the future since the validity, enforceability and type of protection of proprietary rights in Internet-related industries are uncertain and still evolving.

We license and will continue to license certain products integral to our services from third parties, including products that are integrated with internally developed products and used jointly to provide key content and services. These third-party product licenses may not continue to be available to us on commercially reasonable terms and we may not be able to successfully integrate such third-party products into our solutions.

We presently have no issued U.S. patents or U.S. patent applications pending and we have no current intention to file any U.S. patent applications. It is possible that we may not develop proprietary products or technologies that are patentable and that the patents of others will seriously harm our ability to do business.

We have registered trademarks in the United States for Onvia, the Onvia checkmark logo, DemandStar.com, DemandStar, the DemandStar.com logo, Just Think What You Can Build, QuoteWire, and BidWire, and have filed a trademark application for e-Journal of Commerce. We also have registered trademarks in Canada for Onvia and the Onvia checkmark logo, and a trademark application in Canada for Onvia.com. The trademark applications mentioned above are subject to review by the applicable governmental authority, may be opposed by private parties and may not issue.

Employees

As of March 1, 2004, we had 123 full-time employees working in the following departments: 66 in sales and marketing, 24 in research included in cost of sales, 23 in technology and development and 10 in general and administrative.

None of our employees are represented by a union or collective bargaining agreement. We have never had a work stoppage and consider relations with our employees to be good.

Risk Factors

In addition to other information in this Report, the following risk factors should be carefully considered in evaluating Onvia and its business because such factors may have a significant impact on Onvia’s business, results of operations and financial condition. As a result of the risk factors set forth below and elsewhere in this Report, and the risks discussed in Onvia’s other Securities and Exchange Commission filings, actual results could differ materially from historical results or those projected in any forward-looking statements.

We may not be able to meet our projected renewal rates, which could hurt our growth and profitability

Our ability to appropriately categorize and distribute leads, to provide excellent customer service, to maintain competitive pricing and meet our customers’ expectations for source coverage will significantly impact our customers’ satisfaction with our products and services and will impact their decision to renew their service. If we are unable to meet our customers’ expectations, our projected renewal rates and our projected growth and profitability will suffer. The loss of renewals from our current and future subscribing suppliers would harm our business, operating results and financial condition.

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If our products are not broadly adopted by targeted enterprise customers, our growth and profitability will be slowed

We anticipate that a significant portion of our future revenue will be generated by our enterprise sales team. The enterprise sales team targets larger companies who will purchase multiple licenses for daily lead notification, for redistribution to their employees or customers, or for remarketing their own products. Failure to achieve our expected market penetration with our enterprise product would harm our business, operating results and financial condition.

If we are unable to increase subscribership to our premium, higher priced products, our business will suffer

We must continue to attract and retain subscribers to our premium, higher-priced services to achieve our growth and profitability goals. Subscribers to our premium services have higher average subscription prices (ASPs), higher renewal rates and provide greater lifetime value to the Company.

Our ability to grow our business depends in part on government agencies and businesses increasing their use of the Internet to conduct commerce

Our growth depends in part on increased use of the Internet by government agencies and businesses. If use of the Internet as a medium for government, consumer and business communications and commerce does not continue to increase, demand for our services and products will be limited and our financial results may suffer.

We may fail to develop and market comprehensive, efficient, cost-effective and secure electronic access to public information and new products and services

Our success depends in part upon our ability to rapidly establish our own products and services as the standard used by businesses that transact with governmental entities and agencies in the United States. To increase revenue in the future, we must continue to develop products and services that businesses, governments and citizens will find valuable, and there is no guarantee that we will be able to do so. If we are unable to develop products and services that allow us to attract, retain and expand our current subscriber base, our revenues and future operating results may be adversely affected. We cannot ensure that our products and services will appeal to a sufficient number of Internet users to generate continued revenue growth.

We may be required to increase our marketing expenses in order to generate sufficient sales leads to achieve our revenue goals

We currently generate a significant portion of our marketing prospects and sales leads from our in-house database of vendors. If we are unable to continually refresh this database via agency referrals, visitors to our web sites or by other means, we may be required to purchase marketing lists from outside vendors, which would increase our marketing expenses.

We may lose the right to the content that we distribute, which is provided to us by governmental entities and other third parties

We do not own or create the content distributed to our vendors in the form of request for proposal and related information. We do not have an exclusive right to this content and we cannot ensure that these data sources will continue to be available in the future. Moreover, public disclosure laws, which require governmental entities to produce bid information directly to the members of the public, may negatively impact our business and reduce the value of our services to government entities. Governmental entities and other third parties could terminate their contracts to provide data or restrict the distribution of such data. The loss or the unavailability of our data sources in the future, or the loss of our right to distribute some of the data sources, would harm our business, operating results and financial condition.

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We may not be able to maintain adequate bid flow to our customers if governmental agencies collectively reduce spending

If at any time governmental agencies reduce spending for an extended period of time, there may be a shortage of procurement bids available in our network. In order to continue to increase the number of bids published, we may be required to add additional resources to our research team, which would increase our cost of sales. If we cannot provide an adequate supply of government procurement bids to our subscribing suppliers, these customers may not renew their subscription to the service. The loss of our current and future subscribing suppliers would harm our business, operating results and financial condition.

Increased blocking of our emails could negatively impact customer satisfaction with our product and could inhibit the effectiveness of our marketing efforts

Some network administrators could flag and block emails from Onvia due to increased filtering of email attachments as a result of the threat of email borne viruses or unwanted “spam”. Our content is currently delivered in the form of an attached file via email. Excessive filtering of our emails could negatively impact customer satisfaction and would harm our business. Our emails also may be flagged and blocked as “junk-email” or “spam” due to heightened security, state and federal anti-spam laws, or for other reasons. Blocking of our emails would harm our marketing efforts and our business.

Intense competition could impede our ability to gain market share and could harm our financial results

The B2G e-commerce markets are new, rapidly evolving and intensely competitive, and we expect competition to intensify in the future. Our business could be severely harmed if we are not able to compete successfully against current or future competitors. Although we believe that there may be opportunities for several providers of products and services similar to ours, a single provider may dominate the market. We expect that additional companies will offer e-commerce solutions in the future.

Our current and potential competitors include Internet-based and traditional companies such as BidNet, TrueAdvantage, AMS, FedMarket, Epylon, Simplexis, BidMain, McGraw-Hill, Contractors Register, Input and other companies focused on providing services to government agencies and their vendors.

Many of our current and potential competitors have longer operating histories, larger customer bases and/or greater brand recognition in business and Internet markets and significantly greater financial, marketing and technical resources than we do. Our competitors may be more successful than we are in developing their technologies, adapting more aggressive pricing policies and establishing more comprehensive marketing and advertising campaigns.

Our competitors may develop web sites that are more sophisticated than ours, with better online tools and service and product offerings superior to ours. For these and other reasons, our competitors’ web sites may achieve greater acceptance than ours, limiting our ability to gain market share and customer loyalty and to generate sufficient revenue to achieve profitability. If we are required to increase our source coverage due to competitive pressures, we may be required to add additional resources to our research team, which would increase our cost of sales.

Our stock price is volatile

The market price of Onvia’s common stock has fluctuated significantly and could continue to fluctuate significantly in response to various factors, including:

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In addition, the stock market in general, and the NASDAQ National Market and the market for Internet and technology companies in particular, have experienced extreme price fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. These broad market and industry conditions may materially and adversely affect our stock price, regardless of our operating performance.

We have implemented anti-takeover provisions that may discourage takeover attempts and depress the market price of our stock

Provisions of our certificate of incorporation and bylaws, as well as provisions of Delaware law, Onvia’s state of incorporation, can have the effect of making it difficult for a third party to acquire Onvia, even if doing so would be beneficial to our stockholders. These provisions include:

In addition, in November 2002, our Board of Directors adopted a Stockholders Rights Agreement, designed to protect stockholder interests in the event of an unsolicited takeover attempt by distributing one preferred stock purchase right for each outstanding share of common stock.

Uncertainty in the commercial real estate market in Seattle may harm our chances of eliminating the monthly lease payments on our idle office space

We currently have approximately 59,000 square feet of idle office space in the Seattle area. The commercial real estate market in Seattle for space of our size continues to show weakness, therefore, we have come to the determination that it is not probable that we will be able to sublease this space by mid-2004 as we had previously estimated. Based on our most recent analysis, we now believe that it will take until the end of 2005 to find suitable tenants to sublease the entire space. As a result, we recorded an additional reserve in the fourth quarter of 2003 of approximately $2.0 million. We anticipate that this additional accrual will cover our remaining contractual obligations, assuming that we will have the space sublet by the end of 2005 at estimated current market rates, which are below our contractually obligated rates, through the remainder of the lease obligations. If the commercial real estate market in Seattle remains depressed and we are unable to eliminate or reduce the monthly lease payments on our idle office space, our business, operating results and financial condition would be adversely affected and our stock price could decline.

Lead generation services are at an early stage of development and market acceptance and may not prove to be viable

Broad and timely acceptance of our lead generation services, which is critical to our future success, is subject to a number of significant risks. These risks include:

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Although we expect to derive a significant portion of our future revenue from bid notification services, we have not yet fully evolved our revenue model for services associated with the network. The revenue associated with network services may be a combination of transaction and/or subscription fees. Examples of such services might include electronic payment and bid/quote, among others. However, we cannot predict whether these services will be commercially successful. The Company will be seriously harmed if our lead generation model is not commercially successful.

Failure to introduce new products or product enhancements on a timely basis that are compatible with industry standards and expectations could delay or hinder demand for, or market acceptance of, our products, which could hurt our growth and profitability

To be successful, we must develop, test and deploy new products in a timely fashion that meet the usability expectations of the marketplace. Due to the importance of timely introduction of new products in the marketplace, we may release a product that contains defects. If we release a product that contains defects, or inadequate functionality and features, potential customers may become discouraged from using our products, and therefore harm our reputation and business. In addition, if market acceptance of these new products and subsequent renewals on these new products are not in line with our projections, our projected growth and profitability will suffer.

If we fail to expand our current technology infrastructure and network software system, it will be unable to accommodate our anticipated growth

To be successful, we must expand and develop our technology infrastructure and network software system. To maintain the necessary technology in the future, we must continue to expand and stabilize the performance of our web servers, optimize the performance of our network servers and ensure the stable performance of our entire network. We must improve, and potentially replace, our network infrastructure and application servers to handle additional customers and to provide additional functionality. We may not be successful in our ongoing efforts to upgrade our systems, or if we do successfully upgrade our systems, we may not do so on time and within budget. Failure to achieve a stable technological platform in time to handle increasing network traffic may discourage potential customers from using our network, and therefore harm our reputation and business.

We have a limited operating history, making it difficult to evaluate our business and future prospects

Onvia was incorporated in March 1997. We have been serving businesses since that time and have been focusing on including government agencies in our network only since April 2001. We have a limited operating history upon which an investor may evaluate our business and prospects. Our potential for future profitability must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in early stages of development, particularly companies in new and rapidly evolving markets, such as e-marketplaces. We may not successfully address any of these risks. If we do not successfully address these risks, our business will be seriously harmed.

We have incurred negative cash flows from operations in each quarter since inception. Under our current operating plan we expect to continue to incur negative cash flows for the near future

To increase revenue, we will need to continue to attract customers and suppliers to our network and expand our service offerings. Under our operating plan, it is also projected that we will continue to incur significant sales and marketing, technology and development, and general and administrative expenses. As a result, we will need

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to generate significant revenue to achieve profitability in the future. Any failure to significantly increase revenue and achieve and maintain profitability would materially affect our business, operating results and financial condition and may adversely affect the market price of our stock.

Our quarterly financial results are subject to fluctuations that may make it difficult to forecast our future performance

We expect our revenue and operating results to vary significantly from quarter to quarter, making it difficult to formulate meaningful comparisons of our results between quarters. Our limited operating history and unproven business model further contribute to the difficulty of making meaningful quarterly comparisons. A significant portion of our subscription revenue for a particular quarter is derived from transactions that are initiated in previous quarters. Other factors that may affect our quarterly results include those discussed throughout this section.

Our current and future levels of operating expenses and capital expenditures are based largely on our growth plans and estimates of future revenue. These expenditure levels are, to a large extent, fixed in the short term. We may not be able to adjust spending in a timely manner to compensate for any unexpected revenue shortfall, and any significant shortfall in revenue relative to planned expenditures could harm our business and results of operations.

Our limited operating history and rapid growth make it difficult to assess the seasonal factors in our business. Nevertheless, we expect seasonal fluctuations in our business, reflecting a combination of seasonal trends for the services and products we offer and seasonal trends in the buying habits of our target business customers and government agencies.