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Jan Norman on Small Business ~ News and practical tips for and by Orange County small business owners

Archive for the 'Venture capital' Tag

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O.C. company gets $2 million investment

December 19th, 2008, 12:00 pm by Jan Norman, small-business columnist

Vangard Voice Systems, Inc. in Rancho Santa Margarita, which provides voice technology for mobile devices, has received $2 million Berkshire Ventures, LLC.

It is Vangard’s second round of outside equity funding. Berkshire invested $3 million in Vangard in 2006.

The company will use the money to continue its sales and marking to large companies and to expand its network of partners.

“While the investment community has tightened its purse strings during this economic downturn, the new round of funding signifies a vote of confidence for Vangard as well as its AccuSpeech Mobile voice technology and the first Mobile Voice Platform,” according to OCTANe, the Irvine-based entrepreneurial group. Vangard has been part of OCTANe’s LaunchPad program for promising young companies.

Vangard Voice has a federal General Services Administration contract for voice capabilities for all sorts of software. A GSA contract is the gateway to purchases by all federal agencies, and many state and local governments also rely on the GSA to identify acceptable vendors.

More entrepreneur stories….

Posted in: Local companies • Top posts • Venture capital • • • • | Post a Comment »

Venture capitalists predict gloomy ‘09

December 18th, 2008, 6:05 am by Jan Norman, small-business columnist

The nation’s venture capitalists think 2009 will be dreadful for the economy, equity investing in general and and the entrepreneurs seeking money to grow.

That’s the snapshot result of the third annual Predictions Survey from the National Venture Capital Association, a trade and lobbying group.

More than nine out of 10 say venture capital investing will slow in the coming year. Here’s NVCA’s breakdown. If true, high-growth firms will suffer resulting in fewer new jobs and weaker local economy.

By comparison, venture capital funds invested $30.8 billion in 2007 and $26.7 billion in 2006. They are on a pace to invest just shy of $30 billion this year.

Other survey findings:

  • 96% say it will be harder for new companies to get funding in 2009
  • 93% says current venture-backed companies will struggle to survive
  • 56% expect the economy to get worse in 2009
  • 47% expect their own funds to decrease their investments in 2009
  • Clean tech is likely to get more funding; Internet and semiconductor companies are most likely to see cutbacks
  • 60% foresee a decrease in funding for the youngest companies (seed and early stages)
  • 72% don’t expect initial public offerings to increase until 2010
  • 57% think mergers and acquisitions will increase or remain the same, but 87% predict the value of
    Mark Heesen

    Mark Heesen

    M&A deals to drop

“The recession and shuttered IPO market will place tremendous pressure on portfolio companies to tighten

their belts and retool where necessary,” said NVCA President Mark Heesen. “That said, most venture

capitalists will say that a down market is the best time to invest when valuations and competition are lower. There is no recession on innovation.”

Other stories…

Posted in: Economy • Meltdown • Top posts • Venture capital • • | 2 Comments »

O.C. venture capital booms in third quarter

October 18th, 2008, 6:00 am by Jan Norman, small-business columnist

Young Orange County companies continued to reap big investments from venture capitalists during the third quarter, according to two reports released today.

According to the MoneyTree Report, 11 Orange County companies received $187 million in venture capital, compared to 17 deals worth $82 million in the same period a year ago. This report is from PricewaterhouseCoopers and the National Venture Capital Association using data from Thomson Reuters.

The other report, the Dow Jones VentureSource, identifies 9 local deals worth $181.7 million, compared to 12 deals worth $107.2 million last year.


This is good news for the local economy because venture-backed companies tend to grow faster and create more jobs.

Both reports say nationwide venture investing dropped 7% . MoneyTree says $7.1 billion was invested, unchanged from a year earlier. VentureSource says $7.4 billion.

The Orange County companies receiving venture capital and the amount received in the third quarter are:

  • Fisker Automotive, Irvine $65 million
  • Glaukos Corp, Laguna Hills, $35 million
  • GluMetrics Inc., Irvine, $20.1 million
  • Aktino, Irvine, $14.2 million
  • Aristos Logic Corp, Lake Forest, $13.4 million
  • Symwave Inc., Laguna Niguel,$10.2 million
  • Seventh Shield Inc., Irvine, $8.2 million
  • RF Nano Corp., Newport Beach, $8 million
  • NeoMend Inc., Irvine,$6.3 million
  • Ivantis Inc., Irvine, $4.5 million
  • Southern Impants Inc., $2 million

“Orange County is doing very well,” said Michael Schoenfeld in the Southern California office of Ernst & Young. “In three quarters Orange County companies are just $15 million shy of what was raised in all of 2007. Venture capitalists continue to fund in a big way in Southern California.”

Both reports also agree that local and national investments were lower than the second quarter.

Here’s The MoneyTree Report’s map of venture capital investments by region:

“The third quarter is often the softest quarter of the year,” said John Taylor of the National Venture Capital Association on a teleconference call with reporters.

However, experts are waiting to see if that downturn will continue because of the extraordinary economic and stock market turmoil of recent weeks, said Mark Heesen, president of the National Venture Capital Association.

“The exit market (initial public offerings) is essentially closed; mergers and acquisitions are much more squishy than they were a few months ago,” he said. “Some don’t see that turning around soon. We continue to see a lot of venture backed companies that ought to be out of the nest by now. The major commodity of a venture capitalist is time. There are only so many companies a venture capitalist can work with.

“If entrepreneurs are seeing a lot of their traditional avenues of (venture capital) money drying up, it has very serious implications for the venture industy,” he added.

Randy Churchill in the Southern California venture capital practice at PricewaterhouseCoopers added, “While overall venture investing hasn’t yet been impacted by the turmoil in the financial markets, we do expect to see a dip in investing over the next several quarters.”

More venture capital news…

Posted in: Top posts • Venture capital • • • • | 2 Comments »

Is this prizewinner a remedy for fat kids?

September 26th, 2008, 12:23 pm by Jan Norman, small-business columnist

Wanzo, an Irvine startup that promises to make kids more physically active, has won $75,000 worth of services and prizes in the Tech Coast Venture Network Survivor 4.

The annual “let anyone come make a pitch to investors” event is named after one TV show, but runs more like American Idol. This year’s event attracted a standing-room-only crowd of about 200 at Irvine law firm Knobbe Martens .

Rania Nasis, Wanzo

Rania Nasis, Wanzo

Rania Nasis, a medical doctor and co-founder of Wanzo, bested about three dozen pitchers. Anyone could make a 30-second pitch. Then 10 “sub-finalists” (TCVN President Bart Greenburg’s term) made three minute pitches. Judges grilled three finalists for 10 minutes each before selecting Wanzo.

Wanzo is part Webkinz, part Wii, part social networking for the junior set. The more kids move, the more points they earn to “buy” stuff for their customized critter on the social networking web site where they can also compete against other kids.

Because of health concerns about too many youngsters becoming obese before they’re teens, the company has been causing quite a stir in the local venture investment community. It won second place in the UCI business plan competition in May.

We featured a brief video of Nasis’ Wanzo pitch for the UCI competition. It’s not exactly Nasis’ pitch at Survivor 4 but Click here and you’ll get a good idea of her message.

She also was one of the hot new Orange County ventures invited to make their pitch at the recent VC in the OC conference in Newport Beach.

Wanzo’s web site is just a placeholder right now to protect the concept from copycats as long as possible, Nasis says, but the first product, software to carry the cute Wanzo avatars on an iPhone, should be ready by December. Handheld devices, accessories and clothing will follow soon.

Runners-up in Survivor 4 are:

  • 2nd place - Evantix, computer security assessments for companies that face stiff penalties if customer data are stolen
  • 3rd place - Fonevia, cell phone applications with a purpose such as invitations and user-generated alerts.

Events like Survivor 4 provide entrepreneurs a fun, safe environment to try out their pitches and ideas on a sympathetic crowd before facing tough investors, Greenburg explained.

It’s not a bad place to network with people who regularly provide services to entrepreneurial startups and potential financial backers either.

It’s also fascinating to learn what the region’s entrepreneurs are dreaming up. Some of the “not winners”:

  • Nutrition and drug treatment to help cancer victims recover faster from chemotherepy treatments
  • Customized covers for all sorts of consumer electronics , from UCLA logo on your laptop to Homer Simpson on you cell phone cover
  • Automatic solution for under-inflated tires
  • Program that picks investments based on the psychological meaning of words used in a company’s prospectus
  • Highway reflectors that aren’t crushed by snow-clearing road equipment
  • Product placement in videos
  • Web site with fast results of elections anywhere

OTHER STORIES:

Posted in: Awards • Local companies • • • | 3 Comments »

Venture capital event nears sellout

September 12th, 2008, 12:00 pm by Jan Norman, small-business columnist

The topic of venture capital in Orange County is so hot that the VC in the OC event has been a sellout since its inception in 2004. This year is no exception with almost every seat taken even though the event is still five days away — Sept. 17.

Click here to register online or get more information.

“This year, we’re turning the program on its proverbial head, exploring what it’s like to be a successful, serial, local entrepreneur from an all-star panel of such folks rather than the usual ‘VC talking heads’ to get the secrets of success straight from the source,” promises Marc Averitt, president of the sponsoring Orange County Venture Group and a venture capitalist himself (Okapi Venture Capital).

These successful entrepreneurs, from Southern California but not necessarily OC, include:

  • Sherman Atkinson, ATCOR Holdings Inc., a social media company that recently raised $50 million from Austin Ventures
  • Alex Dickenson, Helixis, a Carlsbad firm developing faster, cheaper medical diagnostic tools
  • Michael Hajeck, SiliconSystems Inc., Aliso Viejo, data storage
  • Will Poovey, Arbitech, Irvine distributor of computer products

This is a good time to discuss local success in attracting venture capital. Orange County companies reeled in $234.8 million in investments during the second quarter, up 17.7% from the same quarter in 2007 at a time when venture investing nationwide declined 12%.

Mark Heesen, president of the National Venture Capital Association, will give his take on the local and national investing trends.

The 7 — 11:30 a.m. event will conclude with a showcase of some of the  hot vc-backed local companies. Even though venture capitalists aren’t on the panel this year, they’re likely to be in the sellout crowd. OCVG has been among the most successful in bringing these folks out of hiding for its events.

OTHER STORIES:

Posted in: Events • Top posts • Venture capital • • • • • • • • • | Post a Comment »

Irvine firm breaks drought of IPOs

September 5th, 2008, 2:42 pm by Jan Norman, small-business columnist

TherOx Inc., an Irvine developer of treatments for severe heart attack patients, is seeking to go public to raise $100 million.

therox-logo.jpgThis is great news for the venture capital community. Not a single venture-backed company went public in the second quarter and only five went public in the first quarter. Mergers and acquisitions also hit a 10-year low of just 56 transactions in the second quarter.

The National Venture Capital Association called this lack of exit for investors “a capital markets crisis for the start-up community” that accounts for most new jobs and much of the nation’s recent economic growth.

If investors cannot get their money out of companies in which they invest — through an initial public offering, a merger or acquisition — they don’t have as much money to invest in new companies.

TherOx said it will trade on the Nasdaq under ticker symbol THER. Underwriters are Citi and UBS.

The company has raised more than $120 million in 10 rounds of venture capital funding since 1995, making it one of Orange County’s best-backed firms. Its most recent funding was in March when it received $30 million in a group led by DAG Ventures. Click here to read more about that transaction.

Its major VC partners are Kleiner Perkins Caufield & Byers, Integral Capital Partners, New Science Ventures and Aperture Venture Partners.

TherOx is developing what it calls SuperSaturated Oxygen Therapy as a treatment option following successful balloon angioplasty surgery, which Chief Executive Kevin Larkin says “salvages the heart muscle in heart attack patients.”

OTHER STORIES:

Posted in: Top posts • Venture capital • • • • | 4 Comments »

RF Nano raises $8 million venture capital

August 12th, 2008, 12:30 pm by Jan Norman, small-business columnist

RF Nano Corp. a Newport Beach developer of radio frequency electronics has raised $8 million in its second round of outside venture capital funding.rfnano_logo-resize.gif

Oxantium Ventures in Washington D.C. led the round and Oxantium founder Richard Wirt will join the RF Nano board of directors. Existing investor Okapi Venture Capital LLC of Laguna Beach also participated in this round.

RF Nano will use the money to accelerate the development of its breakthrough technology. The company has developed low-cost manufacturing applying carbon nanotubes to high-performance analog electronics, said Steffen McKernan, chief executive and co-founder of RF Nano.

“We are very pleased that Dr. Richard Wirt and Oxantium are joining RF Nano,” McKernan added. ”Their deepening engagement will accelerate delivery of our products and help us drive the creation of a future of analog and mixed-signal systems uniquely enabled by RF Nano’s technology.”

Marc Averitt of Okapi Ventures said, “Initial feedback from major players in the RF marketplace confirms our belief in the game changing nature of RF Nano’s product pipeline.”

OTHER STORIES:

Posted in: Local companies • Top posts • Venture capital • • | 4 Comments »

Money raised for future VC investing rises

July 14th, 2008, 4:00 pm by Jan Norman, small-business columnist

More venture capital was raised in the second quarter but fewer firms were beating the bushes to find it, according to a new report from the National Venture Capital Association and Thomson Reuters.

This result is good news for young, high-growth companies trying to attract investors. The money pool is not so dry as recent investing trends suggest.

Here are the numbers for money raised in recent quarters and years:

vc-fundraising.jpg

“Despite the significant challenges that the venture capital industry is facing in the exit market (public offerings plus mergers/acquisitions), this quarter demonstrates the long-term perspective of our institutional investors,” said Mark Heesen, president of the National Venture Capital Association.

This is the guy who recently proclaimed a crisis in venture capital because of the dearth of IPOs and M&As.

“Venture firms and general partners with proven track records will continue to be successful raising new funds as promising investment opportunities remain strong across a diverse set of industries including life sciences, clean technology and information technology,” Heesan said. “These are 10-year funds which often have lives that stretch to 15 years or more.”

Among the top fund-raisers in the second quarter:

  • Lightspeed Venture Partners VIII LP, $800 million
  • Foundation Capital VI LP, $750 million
  • Kleiner Perkins Caufield & Byers XIII, $700 million.

OTHER STORIES:

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Local angel investing drops 36% in the first half

July 11th, 2008, 5:00 am by Jan Norman, small-business columnist

In another sign of tough times for entrepreneurs trying to raise money, Laguna Hills-based Tech Coast Angels put less money into fewer deals during the first six months of 2008.tca_logo.gif

The 270-plus members who invest in high-growth, start-up companies put just $2 million into five deals January through June, said Vice Chairman Warren Hanselman. He lives in San Juan Capistrano but is a member of the San Diego branch rather than the Orange County group.

That’s a third less money in one fewer deal.

The trend affects the broader Orange County economy because the types of companies that attract angel investment have potential to grow big very fast adding more high-paying jobs and revenues than average business startups.

Here’s the group’s investments during the first half of the past three years:

tca-chart.gif
Members invest individually rather than pooling their funds so there can be as many reasons for shying away from investments as there are members.

“We don’t know for sure but I can speculate,” Hanselman said. Among his guesses:

  • Most members have seen a decline in their net worth in five or six figures, so they’re not upbeat about any investments.
  • The economic slowdown has everyone more conservative about their investments.
    Angels typically allocate just a slice of their investments for high-rish investments in early-stage companies. Many Tech Coast Angels have been members long enough to meet or exceed their allocation.
  • It doesn’t help that getting money out of such investments, such as by mergers or acquisitions, is taking longer than it used to, often seven or eight years.
  • Many members complain that the quality of the deals is not worth their risk.

One bright spot is that co-investments in Tech Coast Angel companies just passed the $1 billion mark, Hanselman said.

Tech Coast Angels have invested more than $96 million in 145 companies over the past 10 years. That money has gotten portfolio companies to a point that other investors, such as venture capital funds, step up with more money to get these companies to the next stage.

Two recent examples are Trius Therapeutics, formerly RX Pharma, in San Diego received $30 million and H2Scan in Valencia received $4 million.

“What a milestone. I’m glad it happened on my watch,” said Frank Peters, chairman of TCA’s board of governors overseeing all four branches in Southern California

The angels aren’t alone in their investment doldrums. I’ve reported in recent days that not a single venture-backed company went public in the second quarter, prompting the National Venture Capital Association to proclaim a “crisis” in venture investing. Also, the private equity funds couldn’t match their torrid 2007 fund raising in the first half.

So many elements of the economy have shown weakness - higher food and fuel prices, falling real estate values, tighter lending standards, a bear stock market - equity investment isn’t likely to turn around until some of these other numbers improve.

OTHER STORIES:

Posted in: Angel investing • Tech Coast Angels • Top posts • • • • | 1 Comment »

Private equity fund raising suffers

July 8th, 2008, 11:00 am by Jan Norman, small-business columnist

Possibly more bad news for businesses in search of equity money for buyouts or growth: U.S. private equity firms raised $132.7 billion in the first half of the year, down 3% from dow-jones-crop.jpgthe same period a year ago according to industry newsletter Dow Jones Private Equity Analyst.

In addition, fewer funds were able to raise money: 185 funds this year vs. 199 in the first half of 2007.

“For first time since 2003, we’ve seen year-over-year fund-raising actually decline as some of the bigger firms - Blackstone Group, Carlyle Group and Madison Dearborn Partners - ran into delays raising capital for their latest buyout funds,” said Jennifer Rossa, managing editor of Dow Jones Private Equity Analyst.

Because private equity funds raise 10 times the capital that venture capitalists do, many Orange County companies have tapped private equity capital including in recent months:

  • VXI Technology Inc., in Irvine, maker of test equipment in industrial, military and commercial sectors
  • Motive Eyeware in Fullerton, which designs eyewear under such brand names as Dockers and ESPN, was sold to StyleMark Inc., which used private equity backing
  • Universal Space Network in Newport Beach, service provider for the satellite industry
  • Spectrum Bank in Irvine was sold to Belvadere private equity firm
  • DisplayWorks, an Irvine builder of trade show exhibits and other modular displays, was sold to private equity firm JPB Enterprises.

The news about a decline in private equity fundraising comes on top of the National Venture Capital Association pronouncement that equity funding for high-growth firms is in crisis because of the dirth of initial public offerings by venture-backed companies in the second quarter and mergers and acquisitions at a 10-year low.

The reasoning is that if venture capitalists cannot get their money out of current investments they won’t have cash for new investments.

Piling on, Luis Villalobos, founder of Laguna Hills-based Tech Coast Angels, reported recently that the early-stage investment group is on a pace to make the fewest start-up investments since 1997.

“I think the first quarter is predictive of all of 2008,” Villalobos said. “The economy looks questionable. It’s an election year, which creates uncertainty. We’re not going to catch up. It’s going to be a down year for angel and venture investments relative to recent trends.”

Maybe the private equity fund-raising pace was unsustainable. In 2007 it set a record with $313 billion raised.

The decline hit hardest at leveraged buyout fund-raising, down 20% as 75 funds raised $85.5 billion in the first half of 2008 compared to 91 funds raising $107.6 billion in the same period of 2007. Here’s is Dow Jones Equity Advisors’ breakdown of fund raising by type of fund:

private-equity-chart.jpg
RELATED STORIES:

Posted in: Angel investing • Private equity • Venture capital • • • | 3 Comments »

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