Mid-Atlantic Venture Fair opens today Little guys already growing and needing capital

3 days in Philadelphia

Venture capitalists looking to make their money multiply

Emerging companies

November 16, 1998|By Mark Guidera | Mark Guidera,SUN STAFF

Emerging companies looking for a financial boost to help them with product, marketing and other expansion plans convene in Philadelphia today to make pitches to the mid-Atlantic region's venture capitalists.

The annual Mid-Atlantic Venture Fair, which rotates between Baltimore and Philadelphia, is expected to draw dozens of venture capital and investment firms looking to strike equity financing deals that offer the potential for handsome returns.

About 25 percent of the 48 companies chosen to give presentations on their business plans during the three-day event hail from the Baltimore-Washington-Northern Virginia region.

This group of companies is dominated by Internet and telecommunications-related ventures and software development outfits.

Area companies making presentations over the next three days include HT Medical Systems Inc., a Rockville developer of virtual medical training software; Spaceworks Inc., a Rockville seller of electronic commerce software; and Fax2Net Inc., a Rockville company that sends facsimile documents around the globe via the Internet.

But the majority of the firms selected for the prized presentations list are located in the Philadelphia area or New Jersey's high-tech corridor near Princeton.

Both areas have emerged as hotbeds of a diversified array of entrepreneurial activity.

These companies range from an operator of skating rinks in the mid-Atlantic to a semiconductor manufacturer, and a private 911 emergency telephone service provider.

Michael J. Mufson, chairman of the event and co-director of investment banking at Janney Montgomery Scott in Philadelphia, said venture capitalists are flush with money this year and hungry to find maturing companies with strong potential in which to invest.

He expects deals struck as a result of the venture fair to range between $3 million and $7 million. In the past five years, financing deals have ranged between $500,000 and $32 million, according to the Mid-Atlantic Venture Association.

The venture capital community this year generally isn't looking to invest in start-up companies hoping for "seed" money to get them off the ground, Mufson noted.

As a result, the association's screening committee focused on selecting companies that are well past the start-up stage and have a track record of success.

In general, these companies are looking for either a second or third round of financing to help catapult them into established, profitable concerns, Mufson said.

"We made a concerted effort to get a diversified selection of companies that represented a good cross-section of the economy," Mufson said.

Still, growth trends in certain industries, namely the Internet, information technology and telecommunications, came into play.

"The Internet and what that portends for business is so pervasive that it's inevitable that we'd have quite a number of companies in that field," Mufson said.

As a result, Mufson estimates, almost half of the companies selected either to give presentations or to set up exhibits are in those industries.

Zona Financiera

Among them is Zona Financiera, the company launched this year by Greg Keough and his two brothers.

The company, which is housed for now in the basement of Keough's home in Potomac, operates an Internet Web site, www.zonafinanciera.com, that provides mortgage, investment and other financial information and services in Spanish and Portuguese.

The Web site is what's known as a "portal," meaning that users can access advertisers' sites to get financial services, such as applying for a mortgage or buying investments online.

The company's target market: Latin America, which Keough estimates will have 37 million Internet users -- slightly less than the current 44 million U.S. Internet uses -- in two years.

"It's a very under-served market right now," says Keough. "We wanted to be one of the first ones." He estimates that less than 3 percent of Internet sites are available in Spanish or Portuguese.

Keough, formerly based in Latin America as a distribution company executive, says he and brothers Jonathan and Timothy decided to launch the venture about a year ago after selling an Internet-based loan-locater service.

What they wanted was another Internet venture that would address a growing market with a widely needed service.

The company, he said, has already lined up a number of advertisers for the site and has forged several major alliances with financial services companies that it hopes to announce soon.

Keough said the company hopes to hook financing deals totaling $6 million at the fair so it can hire more key managers and staff and build a strong identity for its service.

Keough said he's confident that Zona can sign on investors, and he pointed to Internet-content provider StarMedia Inc., which raised an unprecedented $80 million in venture financing in its launching last month and expanded its Latin America-oriented clone of America Online.

A tough crowd

But Mufson cautioned that venture capitalists are a tough crowd, and tend to take the measure of a company's potential from its founders and management team rather than its high-flying market potential or a zingy business idea.

"There are a lot of great ideas which have gone nowhere because their managers just didn't have what it takes to make it," Mufson said.

"VCs want people running the company to have a relentless energy level, commitment and drive that may border on dysfunctional. But that's when the VCs feel a certain comfort level with management."

Pub Date: 11/16/98

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