Venture Capital

At a time when some technology companies are making big money by going public and selling stock in themselves, one of Maryland's most closely watched start-ups is holding off on its initial public offering -- for now.Corvis Corp., based in Columbia, is gearing up to make and sell equipment that allows telecommunications networks to carry more Internet messages and phone calls.Corvis founder David R. Huber had done similar work at his previous company, Ciena Corp. of Linthicum. However, Huber left Ciena shortly after that company's highly successful 1997 initial public offering in order to pursue his own ideas for the technology.

Venture capital continues to flow along the mid-Atlantic coast, as the economy swells and investors infuse dozens of infant and toddler companies with money and energy.Both Maryland and Virginia booked healthy increases in venture-capital placements during the first half of this year, according to a new survey by Coopers & Lybrand, an accounting and consulting firm.In Maryland, venture capitalists invested $59 million in 14 companies, up from $47 million and 12 companies during the first half of 1996.

Maryland venture-capital firms invest 90 percent of their capital out of state, making it harder for local start-up companies to gain financing, especially in the biotechnology industry, says a new University of Baltimore study."

A YEAR ago, Gov. Robert L. Ehrlich Jr.'s "Pappas Commission" delivered recommendations it described as "critical to Maryland's success" and needed "to be implemented in the near term in order to have maximum impact on the growth of the technology business in Maryland." But some of its key proposals remain unadopted, including expanding state research and development tax credits, appointing a full-time state technology czar and substantially boosting state pension investments in technology companies.

THE PARTNERS at New Enterprise Associates, Baltimore's storied $6 billion venture-capital firm, are probably not thrilled that this column will disclose their confidential results from two decades of investing in health care and technology startups. But they seem to understand that times change and that light will pierce the exclusive venture-capital club whether venture capitalists like it or not. It's hard to hide $6 billion. Venture capital, which mints companies from dreams and ignited the technology boom of the 1990s, has become too big, too lucrative and too dependent on government pension money to operate in the shadows.

At nearly $1.5 billion, the Johns Hopkins University led the nation's academic centers in funding for medical, science and engineering research for the 28th straight year in 2006, and it was tops for federally supported research and development, too, according to recent reports. The University of Maryland, Baltimore earned 35th place on the overall list, with $405.2 million, and the University of Maryland, College Park was 43rd with $354.2 million in private and public research dollars.

Sequoia Software Corp., an Internet software company based in Columbia, will announce next week that it has secured $33 million in new venture capital, the largest investment in its eight-year history and the latest step in its plans to go public in 2000.Company officials said Sequoia will use the investment to bolster its sales and marketing campaigns and to develop its primary software product, Sequoia XML Portal Server.The financing comes mostly from venture capital funds, but also from individuals, including Sequoia Chief Executive Officer Richard C. Faint Jr.Privately held Sequoia plans a public stock offering sometime next year, "market willing," said Faint.

Other than buying the pink Cadillac for Mama and fancy gates for the mansion, the average rich guy has to grapple with the same personal finance issues as everybody else.OK, not quite. But the differences are mostly a matter of degree. The fact remains that even Bill Gates needs a strategy for managing his money that takes his needs and goals into account."What's interesting is all of the basic strategies are very similar and a lot of times are the same strategies. They're just on a bigger scale," said Lyle K. Benson Jr., president of L. K. Benson & Co.Benson's firm specializes in what financial advisers call "high-end clients" -- in his case, investors with between $2 million and $50 million in assets.

To build a business, owners must make wise, timely decisions.Former executives from Ameritech Corp. left their jobs two years ago to launch Ntegrity Telecontent Services Inc., a telecommunications company in Chicago. They added an office in Detroit shortly after.Six months ago, the 20-worker company secured venture capital funding and moved to President Street in Baltimore's empowerment zone, where it has hired four residents from the neighborhood. Ntegrity is at the forefront of trends business experts said minority-and women-owned firms in Maryland should pursue to find success in 1999: It's run by executives who bailed out of corporate America and relocated to an area where they can take advantage of tax breaks.

It hasn't been that long ago that Shervin Pishevar ditched his $50,000-a-year job as an analyst with health care provider Kaiser Permanante to work nights as a security guard.His father, who fled the upheaval of the Iranian revolution in the 1970s, was stunned that his son had given up "an American dream job," recalled Pishevar.But Pishevar said the move wasn't frivolous. It was a well-thought-out leap of faith to pursue his own American dream: building his own company.By day the 25-year-old and his pal Drew Morris, 24, toiled on laptop computers at their parents' homes creating a novel operating system that would allow desktop office software programs to be accessed through the Web -- initially for free.

Pity the poor startup. Scores of technology startup companies in the Mid-Atlantic region have pitched their ideas to investors over the past year, only to come away with little or no funding. By many accounts, the recession and stock market losses have turned swashbuckling early-stage investors into penny-counting worrywarts. As a result, more entrepreneurs have relied on so-called bootstrapping - launching a business by funding it themselves along with help from friends and family, and keeping it as lean as possible until they can attract venture capital investment.

Bill Anderson calls it his "aha" moment - that sudden flash of insight when he drew a career-altering connection between decades-old research and his job as a computer security expert. At that time, nearly two years ago, Anderson had a comfortable job as vice president at an established computer security firm in Maryland. But while sitting on his couch one day reading Consciousness Explained, a book by American philosopher Daniel Dennett, Anderson learned about one scientist's research into variations in the way the human eye reads and processes text and images.

At nearly $1.5 billion, the Johns Hopkins University led the nation's academic centers in funding for medical, science and engineering research for the 28th straight year in 2006, and it was tops for federally supported research and development, too, according to recent reports. The University of Maryland, Baltimore earned 35th place on the overall list, with $405.2 million, and the University of Maryland, College Park was 43rd with $354.2 million in private and public research dollars.

While U.S. venture capital investment in overseas companies has been rising for the past several years, the predicted rush to forsake American entrepreneurs for those abroad has yet to happen, according to a survey released yesterday. The results suggest that investors still have faith in domestic innovation and that the so-called "brain drain" of talent leaving the United States for less regulated countries may not be as strong as thought. "U.S.-based [venture capitalists] are essentially dabbling in global markets," said Mark Jensen, a managing partner with financial firm Deloitte & Touche LLP. His organization, along with the National Venture Capital Association, of Arlington, Va., surveyed 528 venture capitalists on several continents to gauge their global investment activity, hoping to assess which regions are considered hotbeds of innovation.

A Germantown company that transfers high-speed data over power lines drew one of the country's biggest venture-capital investments last year, tying an Arizona business for third place, according to year-end information being released today. The $130 million that Current Communications Group raked in last spring from investors including General Electric Co., Goldman Sachs & Co. and Earthlink Inc. was more than twice the next largest deal for a Maryland company. "That's cool," Jay L. Birnbaum, Current's vice president, said upon hearing the news.

With bangs in his eyes, the requisite goatee and an ill-fitting suit - still awkwardly hip - Haroon Mokhtarzada seemed a decade out of place, looking more like a dot-commer than a Harvard Law School graduate with an economics degree and a baby on the way. He paced before the audience of venture investors at the spring conference, waiting to make his first formal pitch for cash. With any luck, it would help net $5 million for his Silver Spring Internet publishing business, Freewebs Inc. Mokhtarzada checked a last detail or two, sent someone to find a wireless microphone and, when his turn came, took the stage.

When four executives from Human Genome Sciences came up with a plan to buy a new division they'd created within the Rockville biotech and spin it out on its own, there was one, deal-breaking condition put on the table. They had to find their own financing within six months, or the project, a company called CoGenesys Inc., was dead. They found it and the $55 million deal helped fuel a tripling of venture-capital investment in Maryland in the second quarter. The CoGenesys investment was the seventh highest deal in the nation in the second quarter, according to data being released today in the MoneyTree Report, which chronicles venture capital spending in the United States.

President Bush yesterday vetoed a bill that would have provided federal funding for research on new lines of stem cells. The debate leading up to Mr. Bush's first veto was divisive, emotional, replete with misinformation from both sides - and totally unnecessary. Despite the impression left by some of its supporters, stem cell research is not banned. In fact, not only is it legal, it is thriving in the private sector. There are at least 11 private stem cell research centers at universities and medical centers across the country.

Investors are offering money to venture capitalists in a fashion not seen since the dot-com craze, though most firms are turning much of it away. But for the second quarter of 2006, which ended June 30, there were two exceptions: Oak Investment Partners of Connecticut, and New Enterprise Associates, or NEA, which was founded in Baltimore 28 years ago. Those firms raised record amounts, bringing in the bulk of the quarter's nationwide $11.2 billion raised...

Osiris Therapeutics could raise more than $50 million from its initial stock offering, the company said yesterday. The Fells Point stem-cell technology company expects to sell 3.5 million shares at $11 to $13 each, according to an amended registration filed with the Securities and Exchange Commission. The underwriters would be able to obtain an additional 525,000 shares to cover over-allotments. After the offering, the company will have 27 million shares outstanding. Over the last two years, Osiris has raised $70 million in venture capital funding.