Part Seven: EAST VERSUS WEST
AUDIENCE MEMBER: I'm Pat Claussen. I'm the president of TeleGraphix
Communications out in Winchester. We are an Internet software company that relocated our
company here one year ago from Southern California. We relocated here so that we could to
be a player in the Netplex. Our company has developed some rather innovative products that
allow graphics and multimedia to go over regular phone lines like lightning at modem
speeds as low as 2400 baud. We have out on the table the first product that we released
with this new technology and I encourage you all to get one.
For several years, I have had a foot on both coasts. I lived have here in Virginia,
done business here, and I have commuted to California and done business out there. I have
noticed a dramatic difference in the venture capital climate here in this region vis-a-vis
that of California. Our company has had a very difficult time raising any capital since we
have been here. We were, one year ago, the first American software company in history, to
receive venture capital financing from the government of Japan, from the Japanese Ministry
of Trade. We have found that means absolutely nothing to the venture capital community
here in the area. The reaction has been, "Gee, we don't know those guys." We are
going berserk to raise capital to get our products out to market.
I am just curious what the perspective is of you gentlemen. What can be done in here
with the venture capital community in the Northern Virginia area to increase the
availability of seed and first-stage funding for corporations? I am sick of hearing, we
are too early, okay? What can be done to get a more risk-taking venture capital community
here in the region, similar to that found in California? There seems to be a real problem
here. Most of the VCs I've met are more content to put their money into real estate and
insurance companies than they are into technology companies.
MS. SMITH: I think this is sort of a first step in that direction, and there are
some players at this level that are new to the area and early to the game, but I know some
others want to comment, so Jeff?
MR. DAVISON: There is plenty of money available for good, early stage deals in
this area. Ciena got financed, Light Speed Communications got financed, Visual Networks
got financed, NetStart got financed, NetSolve got financed. In other words, there is money
from all over the country targeted on this region and everybody in the venture community
is excited about what's going on here in terms of new company formation and
entrepreneurship. And all of the new funds that you heard about being raised tonight are
an indication of the level of interest and sincerity on our industry's part in investing
in the region.
MR. NOVAK: I think Jeff said it pretty well. I have invested in California a lot
and did a number of seed-stage deals out there, and one of the reasons we decided to
locate and focus our efforts here, is that we were beginning to see a high quality of
seed-stage and early stage deals here. The biggest difference I see between east coast and
west coast is just the quantity of seed and early-stage dollars. It's going to come as
there are more successful start-ups in this area. The biggest difference I see in terms of
who's doing seed deals on each coast is that on the west coast, a lot of the seed deals
are being done by people who have done it once before, and they have a new idea.
Entrepreneurship and commercial companies are just beginning to occur here. The change
came three years ago, and I think that one of the things that really attracted me is that
you have the AOLs, you have the UUNets, you have the PSIs, and you have a lot of people
who, for the first time, have made $100,000, $200,000 or more from those deals. Those are
the people who have been through successful start-ups, who now can take a year off to
write a business plan. I haven't seen your plan. We're happy to look at it, but I don't
think the issue is going to be lack of early stage money in the future. I think it's got
to be the quality of the deal, and if they are good deals, they're going to get funded.
AUDIENCE MEMBER: We have found it very hard to find any VCs in this area that
are interested in early-stage deals.
MS. SMITH: Okay, we'll take this up during the networking session.
Part 8: PRODUCTS VERSUS SERVICES
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