The Players Investing?
Over the past decade, Columbia Capital has invested over $100
million in communications and information technology
companies. Examples of past investments range from business
plans originated by Columbia Capital's professionals to niche
consolidation companies in which the firm has invested up to
$27 million in a single opportunity. Columbia Capital has
invested in firms such as Nextel,
Technology Partners looks to
invest in technology companies which can be leaders in their
segments. Investment areas include Internet/intranet, software
development, data communications, telephony and technology
services. The fund invests primarily in seed and first-round
financings in initial amounts from $250K to $5 million.
Portfolio companies include telezoo.com
Biddle Venture Partners
provides equity financing and assistance to young IT companies
with investments that typically range from $100K to $3
million. The fund invests in companies at their very early
stages through first round and seeks situations where the
combination of ideas, dollars, experience and relationships
can create long-term, sustainable value, looking especially at
key features such as a unique or proprietary advantage, strong
management, creativity, expanding defensible markets,
scalability, liquidity and fun. Portfolio companies include Para-Protect
Services and Blackboard.
(Reston, VA -- February 29, 2000)
Although Bill Bishop has been with PriceWaterhouseCoopers
(PwC) since 1988, he has been based in the DC area as a Principal in
its Technology, Entertainment and Media Practice for only six months.
His impression of the region? "The only thing I can say is, 'Wow,
what a place to be!'"
He spoke this morning at "Shaking The Money
Tree," an event sponsored by PwC and the Morino Institute's netpreneur.org,
on the regional results of PwC's latest MoneyTree™
survey of VC investments, featuring commentary by three leading
venture capitalists: Kevin Burns of Lazard
Technology Partners, Karl Khoury of Columbia
Capital and Roger Novak of Novak
Biddle Venture Partners.
Fran Witzel, Vice President of Investor Services
at netpreneur.org, introduced the event, noting that "Venture
capitalists are now the power brokers, banks, management providers,
gurus and even mothers who hold the hand of the newbie companies and
take them past the training wheel stage into rocket racers." Will
every business get venture capital? "Only a handful in a hundred
actually will," Witzel said, and that just may be the best
indication of exactly how fertile Internet entrepreneurship is today.
Despite the odds, according to PwC's Carl Grant
who presented the MoneyTree results, entrepreneurs collected some
$14.7 billion from VCs in Q4 1999 nationwide, bringing the year's
total to $35.6 billion—about $160 million dollars a day. Most of the
money, 90%, went to technology companies, and over half to Internet
companies. Rather than bombard the audience with statistics, however,
panelists focused on analyzing a few key numbers, exploring how to
grow the pie, not the number of slices.
When you look at Greater Washington's place in
the regional breakdowns—189 deals worth $1.6 billion—it takes
sixth place behind Silicon Valley, New England, New York City Metro,
the Southeast and LA/Orange County. "Have we over-hyped the
region?" asked Grant pointedly. Not at all, said the panelists,
who agreed that the numbers reflect how the region is just getting
started. Funds and new companies have just begun cropping up, and much
of the money going into VC funds has been collected by the biggest
players, most of whom are in Silicon Valley. Burns gave Greater
Washington an edge in deal quality over higher profile areas, and
Novak stressed the importance of DC as the center of global telecom,
as well as the fact that many government technologies are hitting the
mainstream to fill holes in the Net's infrastructure.
"I am really bullish on this area,"
said Novak. "I think it's going to be just enormous over the next
five to 10 years."
Where areas like Silicon Valley and Boston do
have an edge, according to Khoury, is in the number of experienced
managers, but that's changing, too. It also reinforces a point heard
often from investors, that a Class A management team can be one of the
biggest factors in closing a deal.
VC investments in Greater Washington companies
last year averaged $11.03 million each, with 48.3% of them involving
first round funding at an average value of $10.7 million. That's
another number that skews the regional rankings, because service
providers usually garner much larger investments. This region's
strengths are in access, infrastructure, tools and applications.
Nationally, Internet deals broke almost evenly among six sectors:
Access/Infrastructure (17%), Tools & Applications (15%), B2B
E-commerce Sites (13%), B2C E-commerce Sites (22%), Content Sites
(17%) and Services (16%)— that's a total of 32% for infrastructure
and tools. Around the Potomac, 70% of deals were in those two
categories, along with respectable representation in E-commerce Sites
(11% of regional deals went to B2C sites, 9% to B2B).
That's good because it's what many VCs are
looking for especially. Novak wants, "defensible, proprietary
technology." Both he and Khoury prefer those spaces, and B2B
E-commerce, over content and consumer operations. Those are more
Silicon Valley and New York type deals, according to Khoury, who said
that at Columbia Capital they ask, "Are we putting money into
branding, or are we putting money into a management team or underlying
What are the hottest areas for the three
investors? All six eyes light up with the subject of wireless
applications, plus online learning, knowledge management and security,
especially authentication. And B2B E-commerce still has a long way to
run, according to Novak.
According to PwC's Bishop, "It's a great
time to be an entrepreneur because there is more money available than
ever before." How do you get your share? Introductions count. Of
Lazard's 19 deals, 18 were referred by someone they knew. Burns said
that about 80% of their portfolio comes from a limited partner network
made up of technology experts, and Khoury said that of Columbia
Capital's 29 deals, four were created from in-house ideas; about a
third were referred by service providers (such as lawyers or
accounting firms); another third from limited partners and the rest
involve executives they had worked with before.
There's a reason, of course. VCs have to do a
lot less work with vetted deals. While your chances are better with an
introduction, all of the panelists said they look at almost everything
that comes in over the transom and try to get back with meaningful
input. You can improve your chances by doing your homework—find out
what market and stages the fund is interested in and only apply if you
meet the criteria. Also, send business plans to a personal email
address rather than info@ addresses. PwC's Grant gave an even better
clue. According to tracking they have begun with the