In a Florida triangle that stretches from the Gold Coast of Tampa, up to Gator-ruled Gainesville and back down through Disney country, Village Ventures plans to sit squarely in the middle. With last Thursday’s launch of a new fund-raising drive, the Williamstown, Mass.-based firm may provide a fresh source of capital to a technology-rich region where the pool of early-stage funding is especially dry.
Although 2000 was a banner year for Central Florida’s start-ups – 21 companies raised $363 million in venture financing, according to the Central Florida Innovation Corp. – most of which was invested in later-stage deals or very young spin-offs from the laboratories of the University of Central Florida, the University of South Florida and the defense and aerospace contractors that dot the region.
The missing link, said John Krug, vice president of technology industry development at the Metro-Orlando Development Corp., is in early-stage financing.
“Ventures like [Village Ventures’] will have a tremendous impact for entrepreneurs in Central Florida,” he said. “Most start-ups are okay in the very early seed stage, but even if they can get angel funding, they have a hard time getting to that next stage. Without self-funding, they can’t get angel funding. Without angel funding, they can’t get the early-stage, and without that, they can’t get all the other stuff.”
Village Ventures, an umbrella-like firm that manages a family of 13 early-stage funds in 10 states and often coinvests alongside its regional affiliates, is to partner with three local executives to lead the fund-raising effort.
Dan Rua, a former partner with Draper Atlantic, will manage the fund’s Gainesville office. Charles Resnick, a former undersecretary in the George H. Bush administration and most recently vice president for corporate development at Mimeo Inc., will manage the fund’s Tampa effort. James Boyle, an investor with Canada’s Capital Communications CDP venture fund, will work from Orlando, while Carolyn Ticknor will serve as a special managing partner. She is a former president of Hewlett-Packard Co.’s imaging and printing systems division.
If the trio is successful in tapping the local pool of high-net-worth individuals, banks, and endowments, they will close a fund upwards of $20 million within the next six to nine months, said Village Ventures Chief Executive Matt Harris. The fund is actually targeted to close with a pool of capital larger than the average $15 million to $20 million Village Ventures vehicle, and with gloom lurking over economic and political forecasts, fund-raising may prove challenging.
Not All Are So Lucky
Local efforts to raise regionally focused early-stage venture funds within the last six months have been largely unsuccessful. Orlando Venture Capital, for one, emerged in April with hopes of closing a $25 million technology fund within six months. To date, the firm has been unsuccessful in raising any capital, despite support from local industry leaders. Orlando Venture Capital President and Chairman Gerry Nolan, however, remains persistent.
“At some point, the institutionally backed capital is going to recognize a need for early-stage positions in photonics and simulation is going to have to have a presence in Orlando,” he said. “Orlando Venture Capital will be there to service that need and provide instant cash flow and instant liquidity in that area. If we have these clusters, know where the bodies are buried, and our ears to the rail here, the smart money will have to have deal flow.”
Deal flow and the backing of local partners and executives, however, may not be enough to carry a venture fund past the scrutiny of tight-fisted investors.
“Venture funds are blind pools. You’re asking investors to put up capital for seven years and trust the managing partner to raise the capital and invest it wisely,” said Richard Fox, president of the Central Florida Innovation Corp. “It’s easier to raise money if you’ve done it before, or if this is your second fund. None of the people actively raising money have done it before, and that is the prime reason why none of them have been successful yet.”
It Takes A Village
Though Village Ventures comes armed with a ready-made national network of affiliated funds, the backing of late-stage venture capitalists and close ties to technology industry giants like Lycos, it also is too young a firm to boast a history of success within a tough economic and political climate.
In this uncertain environment, Harris said, fund-raising will be a challenge. Thus, the move into a large metropolitan region like the Tampa-Gainesville-Orlando corridor represents another shift for Village Ventures.
While the firm historically has honed in on small markets anchored by liberal arts colleges in the New England and Mountain regions since its inception last year, this is its first foray into an area that is home to both large research universities and long-established technology companies.
“This represents a bit of an evolution for us,” said Village Ventures’ Matt Harris. “We really got our start in tertiary markets and partnering with liberal arts institutions. This is a much different animal – two to three times that size, a strong management team and in a secondary market with real academic research institutions. When we started, markets like this looked out of reach and already exploited by venture capitalists. But because of the retrenchment in venture capital, these are really attractive to us.”
The still-unnamed fund will target companies in the lasers, optics, simulation software and life sciences sectors. Like the rest of Village Ventures’ funds, this one is to target investments in the $1 million to $3 million range. This one, however, will reserve a larger pool for follow-on funding, and expects to take the lead in some of those rounds.
Carolina Braunschweig can be contacted at:Carolina.Braunschweig@tfn.com