A Funny Thing Could Happen After Attending a Venture Forum

Is venture capital really dead? From the conversations that I recently had with some of my fellow CPAs, you might think so, but the answer of course is no—nothing could be further from the truth. Venture capital is alive and well, but acquiring it now is more difficult than it was during the 90s go-go dot-com era. The events of Sept. 11 have also taken a toll on the venture capital market, but there still is capital available for entrepreneurs with a good idea, a marketable product and a hard-working management team.

In October I attended two venture capital forums, one in Albany and one in Philadelphia. The one in Albany, Smart Start Venture Forum, was the first of its kind for New York. Pitches to venture capitalists were confined to New York state companies. The one in Philadelphia, Mid-Atlantic Venture Fair, was broader based and has a 10-year history.

Venture capital forums are a meeting place for entrepreneurs and venture capitalists. Entrepreneurs present a summary of their business plan and the venture capitalists decide whether the product or service is worthy of further investigation. The ultimate goal of these events is to bring the two parties together to create a match.

There were 27 featured companies in Albany and 76 in Philadelphia. The applicant pool in Philadelphia numbered in the hundreds, while Albany received approximately 100 applications. A panel of experienced judges selected the companies, primarily in the communications, bioscience and electronics sectors.

Both forums provided selected start-ups and experienced companies with an opportunity to make their case. An assigned coach helped each company hone their presentations, limited to eight minutes. They were delivered by the chief executive officer or a high-level executive. It is remarkable how so much information can be disseminated in such a short time.

The presentations included biographies and accomplishments of the management team—a venture capitalist’s most important consideration—a business description, a listing of products and services, and information on strategy, technologies, special know-how, markets and distribution, competition, and projections of annual revenue and earnings before income taxes (EBIT) through 2003. Realistic projections are highly favored by investors, while pie-in-the-sky projections are a turn-off. Very few of the presentations included positive earnings (EBIT) prior to 2002 and many did not have positive results projected until 2003.

In Philadelphia companies were seeking financing between $3 and $30 million. The majority of them were looking for $10 million or less, with a handful of companies looking for $20 million or more. Desired financing topped out at $10 million in Albany, with a few companies looking for a million dollars or less.

By most accounts, the forums were successful—the Albany forum went very well for a first-time attempt. About 1,000 attendees gathered at the Philadelphia forum while approximately 200 went to the forum in Albany that allowed only New York-based companies.

CPAs who advise clients on financing start-up ventures or future growth of an existing company can really benefit from these forums. The presentations are models for developing financing proposals, and the business plans of companies that found financing provide insight into investor interests.

Forums provide wonderful opportunities to network with investors to find out what they look for in a potential deal and how they structure a win-win situation for both the venture capitalist and the entrepreneur. As financing continues to dry up, these forums are becoming increasingly important to start-ups and small, experienced companies that are growing.

If you are interested in finding out more about venture capital and related forums, the Internet is a good resource. The National Venture Capital Association’s website at www.nvca.org is a great place to start. Capital Growth Interactive (www.capitalgrowth.com) publishes a monthly newsletter on private capital markets and growth company financing that includes a synopsis on venture capital markets and deals, interviews with venture capitalists, and private company profiles of organizations looking for capital. Information on the Albany and Philadelphia forums can be found at www.smartstartvf.com and www.midatlanticventurefair.com, respectively. Jim Morrell is a member of the NYSSCPA Future of the Profession Oversight, Consulting Services Oversight, Industry Oversight, Furtherance, and Management Tools and Techniques committees. He has developed and taught several FAE courses on strategic planning and management tools. He can be reached through his website at www.chezstrategy.com or at jfmorrell@hotmail.com.