Venture Capital Forum : Ideas Don Finery for Dance of the Dollars
Like nervous debutantes eyeing a crowd of prospective beaus, the heads of 60 new companies are coming out in Irvine next week, hoping to meet the financiers of their dreams.
These entrepreneurs have products ranging from a wristwatch that can zap open a locked door with a beam of light to computers that can handicap a horse race in seconds. They will have nine minutes and a slew of meals and meetings in which to show their stuff to representatives of 100 venture capital firms looking to invest millions of dollars in new companies.
Welcome to the entrepreneurial dating game--or the second annual California Venture Capital & Pacific Rim Financial Symposium.
Seeking the Right Chemistry
The three-day forum, sponsored by a group of area businesses, will start Wednesday morning at the Irvine Hilton. Its aim is to link entrepreneurs and investors from around the country, enabling them to see each other’s wares, according to the symposium’s executive director, William J. Anthony.
“It’s letting us see them and them see us, and seeing where the chemistry clicks,” said Anna Henry, a principal at 3i Ventures Corp. in Newport Beach. “There is definitely a mating dance that goes on at these things.”
Douglas Pinnow, for example, is looking for $200,000 to complete a sales and marketing campaign for his Dick Tracy-like wristwatch that unlocks doors with an infrared beam of light.
“I’ve been doing the hard work of trying to talk to (potential) customers,” said Pinnow, a 47-year-old Laguna Hills scientist who recently quit his job to work on his invention full time. “Now I need to have the finances to manufacture and market the final product.”
Hal Linderfelt, a 76-year-old retired aerospace engineer, and his partner Robert A. Bueker, 70, say they need $7.2 million to develop “Project Seamill,” an underwater turbine that can generate low-cost electricity from ocean waves.
Checkbooks Plus Expertise
Linderfelt said he has been working on the hydro power project for four years.
And Debra Guerin, a spokesman for a 3-year-old Phoenix company that is launching the “MusicMentor,” a computer and video display terminal that teaches students to play the piano, hopes to get $2 million. And more.
“We are hoping to meet the venture capitalists at this seminar who will bring not only their checkbooks to the table, but their management expertise, contacts and general business knowledge,” Guerin said. “No company can be self-sufficient when they are in a start-up mode.”
As for the investors being courted, the symposium not only provides an opportunity for money-making deals, but a look at the smorgasbord of new businesses springing up in Southern California.
“This is a business where you look at a great number of companies before you decide to back them,” said Keith Geeslin, whose $220-million, New York-based venture capital firm, the Sprout Group, has financed such companies as the Home Club, a discount lumber and hardware chain, and Bullwinkle’s family restaurants, as well as the more traditional panoply of high-tech firms.
“Making an investment is extremely risky,” Geeslin added. “The companies have little or no financial track record, management is not proven, and if they are really a good and unique company, they have a concept that is not proven.”
Typically, venture capitalists are financiers who specialize in giving entrepreneurs money to start or expand companies in return for a piece of the company. They usually hold a seat on the company’s board of directors and make their money back when that company goes public or is acquired by someone else.
“It is not unlike a marriage,” said Geeslin, adding, “It’s important to date for a while before you do it.” Moreover, Geeslin warned, “A prospective entrepreneur should be very careful about whom he takes the money from and ought to make sure the investor shares his objectives and vision for what the company should become.”
Henry of 3i Ventures agrees.
“Entrepreneurs really need to explore alternatives and not jump at the first person who waves a dollar at them,” she said. “It might come back to haunt them.”
Venture capital forums began several years ago in Monterey to bring together money people and idea people in the San Francisco and Silicon Valley areas. As these gatherings have spread to high-technology areas across the country, it has become apparent that there is a third element needed for these partnerships to thrive.
“Most entrepreneurs are very good at what they do, whether it’s an invention or a new technology, but they are not businessmen,” Anthony said. “They do not know how to go about raising money, or putting a management team together.”
Toward that end, Anthony said, the forum’s sponsors--among them major accounting, law and public relations firms--will also be on hand to offer tips on business management and marketing. In addition, representatives of 11 foreign countries, including Australia, Korea and Taiwan, will discuss business opportunities and new technologies of the Pacific Rim countries to which 40% of California’s high-tech goods are exported.
“If we can give that new entrepreneur enough information to be able to develop the proper business, the conference will be a success,” Anthony said.
