News from the Ohio Venture Association meeting on November 20, 2009

Keynote Address:

2020 Vision: Insights from New Capital -
What Investors Are Looking For

Panelists:
Mike Bunker, Early Stage Partners
Steve Haynes, Glengary Ventures
Chuck Hallberg, Medical Growth Fund
Rich Langdale, NCT Ventures
John Zak, Portal Capital

Moderator:
Chris Seper, MedCity News

Emerging ventures in Northeast Ohio should focus on more modest goals rather than grandiose dreams such as curing cancer. Hot technologies and industry sectors always emerge more slowly than first assumed. Cash is king, and startups that take the easiest, quickest paths to commercialization will draw the most interest from funders.

Those were among the themes and messages that came out of a panel discussion of VCs—representing both newer and more established funds—at the November OVA luncheon.

The consensus was that with the region's and state's venture capital ecosystem receiving so much attention and resources of late, the deal flow has improved considerably in recent years. As Glengary Venture's Steve Haynes put it: "In northeast Ohio, the deal flow has become more qualified...We're getting into companies at an earlier stage, qualifying those deals." He added that "we like to take execution risk over product risk. We don't take financial risk." Added Portal Capital's John Zak: "The acumen of the entrepreneur has been raised to a new level, in part due to all the support in the region."

Zak noted that his fund prefers to invest in deals that employ contract manufacturing and piggyback on established sales channels. "Our motto is—let's not reinvent the wheel. Let's take the easy road." Other panelists could be seen nodding in agreement.

Cash is king in the current environment, and exits will happen on their own schedule—meaning of course more slowly than in the past. "You need to understand that when you invest in a company, the only thing that buys you is the right to invest again," said Early Stage Partners' Mike Bunker.

There was considerable discussion about how each of the funds attempts to distinguish itself by focusing on different stages of the venture continuum. Chuck Hallberg of Medical Growth Fund explained that "because the fund is new, we're focusing on smaller pieces right now—$250,000. Our target is...revenue-generating companies, or companies that are revenue-ready—they've got their product and the management team is established." John Zak said Portal considers itself "early stage gap investors. We are looking at opportunities earlier than some of my colleagues up here."

NCT Ventures' Rich Langdale noted that his fund, based in central-Ohio and comprised entirely of former entrepreneurs, likes to focus on such areas as homeland security and "freakish attraction to pets." They have invested in some early stage companies when it's a good fit, but "about one in three of those go on to be early growth companies, and that's where we put the vast majority of our money and our time." The fund has made investments in the early growth stage that have ranged from $57,000 to $12 million.

But when it comes to predictions about the future, ESP's Mike Bunker urged caution. "When you look out ten years, you always think you'll achieve things quicker than you (actually) do." He noted that he previously worked for medical devices giant Medtronic, and recalled that a decade ago, there was much discussion about how minimally invasive surgery would be the widely adopted norm within ten years. It hasn't yet come to pass.

Webcasts from the Meeting:

Click on the image below to view the entire presentation as video.


Webcast produced by Mike Sutyak, The Entrepreneurial Learning Initiative.

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January 8, 2010
Richard Stuebi

Early Stage Partners
The Cleveland Foundation

February 25, 2010
Venture Capital Summit V

at Corporate College East

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