Venture fair matches idea people, money people Entrepreneurs seek investors at event

November 12, 1995|By Mark Guidera | Mark Guidera,SUN STAFF

Victor Norris is looking for a few good angels to get his dream off the ground.

Well-heeled angels.

Mr. Norris, the developer of "FogEye," an electronic system that he says improves navigation for airplanes, ships and helicopters in foggy conditions, estimates he needs $6.5 million to get the device into the marketplace. The payoff? A $7 billion world market out there for FogEye, says the Ellicott City resident. But so far the financial muscle needed to get it airborne has eluded him.

"I just need two or three angels to unite and get behind me and I can make this thing work," says Mr. Norris, who received a $50,000 state loan to help launch his company. "This is no dream. My idea is well grounded."

Tomorrow an opportune moment arrives for the former Westinghouse Electric avionics expert and a small, select group of entrepreneurs like him to find that elusive angel.

Baltimore will be filled with more than 300 investors, mostly venture capitalists -- the risk takers who make it their livelihood to bet on ideas that could reap a handsome profit. These venture capitalists will converge on the city over two days for the Mid-Atlantic Venture Fair, an anticipated annual event that organizers tout as a way to give idea people a chance to mingle with the money people.

It's one of just eight such regional events that the venture-capital community organizes nationwide each year. "Venture capitalists

see on average 400 to 500 proposals come in the mail from companies and get 25 to 30 calls a day -- most of which are from people looking for money, so you can imagine just how time-pressured they are," said Frank Adams, the event's chairman and president of GroTech Capital Group, a Timonium-based venture firm. "This kind of event allows them the chance to get to know a lot of strong companies in a very short period of time and get right down to working on a deal if they see an opportunity."

By invitation

Mr. Norris, an Ellicott City resident who left Westinghouse to start Norris Electro-Optical Systems, is among just 50 entrepreneurs who have been invited to the annual event to pitch their ventures. While a majority of the companies hail from the mid-Atlantic region, some do not, though those firms invariably have a venture partner in the region.

"The presenting companies are a very select group," says J.C. Weiss III, a member of the the committee that selected the companies and managing general partner for Anthem Capital, a Baltimore-based venture company.

Mr. Weiss estimates that between 300 and 350 companies applied for consideration to showcase their ideas at the event. Most of those that made the grade either have some professional investment or were strongly recommended from other venture firms, investment houses or other entrepreneurial backers.

If history is any guide, only 16 of the companies, or about 30 percent, will eventually find their first or additional venture capital partners as a result of their pitch at the event, according to the Mid-Atlantic Venture Association, based in Baltimore.

For those companies that are able to find investors through the contacts they make at the event at the Hyatt Regency, new venture funding will average between $3 million and $5 million, said Mr. Adams, the chairman.

Those that do get funded through contacts they make at the event are more likely to succeed than the industry norm, he said. The failure rate for companies that received venture funding as a result of contacts at the event has been about 10 percent, said Mr. Adams. The industry norm is much higher -- 40 percent.

The reason for the difference?

"These are well qualified leads that have been through a strict screening process already. They know these are companies that have their act together and are polished," said Mr. Adams. "They are not in that frantic mode where they can't even tell you where their desk is."

Still, those like Mr. Norris will face a tough sell -- they get just eight minutes each to sell their business plan and its market potential. There is tough competition aplenty this year.

Hot categories

For one, health care and communications seem the preferred investments of the day; health care oriented companies -- 25 of them -- dominate the field at this week's event. Fast-paced changes occurring in that industry have led to an explosion of new companies looking to profit from it. Communications -- which the fair's chairman, Mr. Adams, calls "the hottest emerging field" for investors -- also will have a strong presence with 13 companies.

The darlings of yesteryear -- bio-tech and other high-tech -- have fallen out of favor. Venture capitalists are finding those investments, particularly bio-tech, taking too long to generate a return. In general, investors look for investments that return a profit in three to nine years.

Another hurdle: competition for venture backing won't be limited to aspiring start-ups like Norris Electro-Optical, headquartered for now in the Norris home.

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