Sunday, April 08, 2001
Investing in end of downturn
The slump in the stock market represents a recession of resources and not of ideas. That's what we hope, anyway that the downturn is temporary and relatively short, and that there are brilliant people out there with great ideas that'll make life better and create lots of millionaires.
And when that downturn ends, we hope there's money to help them get started. How much money is in question. A report to Ohio's Technology Action Board said that while $4 billion in venture funds is under management in the state, just 6 percent is available for early-stage companies.
In Cincinnati, there are efforts to raise seed money for new companies. Here are a few public efforts:
eRhine Capital is a private seed fund run by Marc Fisher. He raised under $2 million last year and invested in three companies. One, bSurplus.com, is hibernating, having run out of money without customers. Two are working: the video email service Connectmail, and Applied Business Technologies, working to put insurance underwriters online.
Mr. Fisher said he's saving his remaining money to help the two surviving companies. I may not have raised the most money, he said, but I've been able to raise money and fund companies. A lot of people haven't been able to do that.
Work on Virgin Ventures started in August. The fund got tentative approval as a small business investment corporation (SBIC) in January, which means the Small Business Administration gives it access to $2 for every $1 it invests.
Partner Michael Bacevich won't discuss specifics of the fund-raising efforts. In January, Virgin said it intended to raise $60 million, up to half of that targeted for startups, and says he expects to close on a substantial part of that within 60 days.
BioVentures in Blue Ash, aimed at biotech startups, is attempting to raise $10 million in Cincinnati, then another $15 million in the Midwest. Like Virgin Ventures, it received tentative SBIC approval in January. It already has a commitment of $2 million from the University of Cincinnati.
We've got to get to the $10 million mark here in Cincinnati to get credibility anywhere else, said co-founder Pat Snider. We're getting very good response, better than I expected, frankly.
The Regional Technology Initiative's startup capital team turned in its recommendations, which will be unveiled in early May. A seed fund is almost certainly among the proposals, but co-chair Rich Kiley of Procter & Gamble Co. wouldn't say.
There's no question that there's a great gap in Cincinnati in seed and early stage capital, he said. We'd be remiss if we weren't recommending some way to deal with that.
There's enthusiasm, he said, but will the local corporate citizenry write checks to fund it? It's like anything else: To drive this you need some resources, like full-time people and money, to get it done. I've got to believe that they will.
E-mail John Byczkowski at firstname.lastname@example.org or call 768-8377. Find a list of local New Economy companies at http://enquirer.com/neweconomy/.
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