April 3: The 9th Annual Venture Forum
 Knowledge @ Technology's Edge
The Venture Forum... New Technologies... Industry Trends...
The Venture Forum 2003 will continue this tradition by addressing new opportunities, current trends, market realities, and an outlook of the future of emerging technologies. In addition to presenting companies who define technical excellence, world-class experts will address the state of the science and share their knowledge about meaningful investment opportunities amidst the current marketplace.
more information >

 

The New Deals

February 24 , 2003

By Wendy Hall, Larta Staff Writer
Ketaki Sood, Larta Research Economist

In 2002, venture investments in early stage companies declined over 56 percent*. Even though the amount of deal flow saw a similar drop in activity last year, it is no secret that early-stage financing is the most challenging type of funding to acquire. Most of the venture community is focusing on companies they have already funded, or those with proven track records. Yet this ongoing tech shakeout is what makes this year's Venture Forum companies not only some of the most promising in technology, but illustrative of the next wave of venture capital funding.

Although the Forum has traditionally been a showcase for emerging companies, this year's crop represents a variety of stages: early-stage technology-centered companies that are pre-revenue; others that have a promising new product; and later-stage businesses that are looking for expansion capital. The common attribute with all of these businesses is strong, identifiable opportunity.

"The companies that were chosen were most likely to separate themselves from the pack," says Todd Springer of Trident Capital who was a chair of the Venture Forum's Investment Committee. "We chose the companies basically on their ability to get funding. But we also thought most investors were looking for a combination of solid management teams, companies that were actually solving problems, or had products or services that actually saw real promise."

April 3, 2003 Regent Beverly Wilshire The Venture Forum 2003The Committee, made up of veterans from the VC industry, reviews the company applications before deciding upon a select group that will present to the investor audience. After being selected, each presenting company then goes through a six-week process to rehearse and refine their business plan and pitch, otherwise known as the mentoring process, which has now become a distinguishing trademark of the conference. Although the mentoring process has the potential to make or break a company's chance at financing, the process doesn't mask a company's fundamental business flaws.

"If the company at its core doesn't have proprietary technology or a competitive edge, you can't turn nothing into something," says Mission Ventures' Jeffrey Starr, who mentored in previous Venture Forums. "If the issue is about positioning the business model presentations, then it can be fixed. If it's flawed at core, there's a limit to what we can do."

The companies in this year's Forum also represent a range of sectors that will be the focus of discussion for the keynote sessions: telecom and IT, security and defense, and life sciences. (In 2002, venture investing in the life sciences sector was particularly strong, accounting for 22 per cent of total venture capital investments in the nation, up from 13 per cent in 2001*.) Although these sectors are undergoing turbulence and change, and with that, promise for a new market landscape, the ability to attract funding is not the only make or break issue. As venture financing becomes more scarce, the importance of generating revenue during a company's earlier stages has become a survival tactic to stay afloat, as well as a necessary asset to have to compete for financing.

"The most difficult task facing companies right now is ramping revenue, just because of the difficulty of the economic climate," says Randy Lunn of Palomar Ventures, who was also a chair on the Committee. "Last year, we thought we were going to see a recovery. It was just a little bit of inventory restocking, and then things went relatively flat. This year there does not appear to be any major technology drivers that are going to lead a revenue ramp, and this is why companies with products that offer quick payback have the best chances to do well."

*Source: PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree Survey data, 2002.

Coming Soon From Larta: The Sand Dollar Report 2003
To be launched on the day of Larta's Venture Forum conference, this report is most comprehensive research analysis about venture capital investing in Southern California. More info TBA.