Venture Capital

The $100 million venture capital fund at the center of Gov. Martin O'Malley's legislative agenda faced tough questions Wednesday from state lawmakers, who worried about the risk to taxpayer money. The Democratic governor took the unusual step of testifying personally before Senate and House committees in support of Invest Maryland, a fund that he says would help Maryland entrepreneurs across the so-called Valley of Death they face when trying to find seed money to start a business.

The idea behind Gov. Martin O'Malley's plan to promote high-tech startup companies in Maryland is absolutely the right one. Maryland's greatest economic development potential doesn't lie in attracting big companies to move here, or in resurrecting huge industrial facilities like Sparrows Point, but in leveraging its assets in medical and scientific research to spark hundreds or thousands of new businesses with the potential to compete globally....

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.