Venture Capital

NEW YORK - International Business Machines Corp. has created an advisory panel of venture capitalists to help identify startup companies that may become suppliers, customers or acquisition targets. Investors from seven firms, including Accel Partners, Hummer Winblad Venture Partners and U.S. Venture Partners, will meet with IBM executives four times a year to suggest products and companies that may be of interest, IBM said yesterday. IBM's venture unit has identified more than 850 startups around the world with the help of venture capitalists and provides the companies with sales prospects and advice, said Mark L. Hanny, an IBM vice president.

Maryland ranked 12th among the 50 states for venture-funding deals in the second quarter, with 26 companies receiving a total of $66.1 million in financing, according to an industry report released yesterday. That's about two-thirds more than the $39.9 million in venture capital funding that 14 Maryland companies received during this year's first quarter, when the state ranked 17th nationally. And it's better than the second quarter last year, when the state also ranked 17th, said the MoneyTree Survey, released jointly by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Venture Economics.

Artifact Software Inc., the Baltimore technology firm started by the entrepreneur who co-founded and later sold Sequoia Software Inc., will announce today $5 million in first-round venture financing. The two lead investors are Intersouth Partners of Durham, N.C., and the New Markets Growth Fund of College Park, confirmed Mark J. Wesker, Artifact's chairman, president and chief executive. Other investors included Draper Atlantic of Reston, Va. "You've got a very experienced CEO, with an excellent track record in building successful software companies," said Intersouth general partner Mitch Mumma.

With the 15 investments it made last year, the Maryland Technology Development Corp., a quasi-public organization that promotes technology transfer, was the most active early stage investor of the country's top 100 venture-capital funds, according to a new survey. Three other Maryland organizations also made the list, which appears in the July issue of Entrepreneur magazine. New Enterprise Associates of Baltimore and Novak Biddle Venture Partners of Bethesda each did six deals during 2004, while the Maryland Department of Business and Economic Development's venture fund was involved in four deals, according to the survey.

Doug Doerfler says his Gaithersburg company has had to bag its flu-vaccine manufacturing project. Carol A. Nacy says her Rockville business might not be able to develop treatments for tuberculosis. And in Colorado, Kirk Christoffersen says an HIV vaccine his company was developing will have to be shelved because his corporation can't afford to proceed. "It's extremely costly" to find new cures and treatments, said Doerfler, chief executive officer of MaxCyte Inc., a 22-person company developing technology to help scientists work with cells.

Mary Ann Gray, the former high-profile business executive and socialite who admitted in 2003 to stealing thousands of dollars from her venture capital group, was sentenced yesterday to serve two years in prison. "The embezzlement in this case was not one of a crime of opportunity," U.S. District Judge Benson E. Legg said. It was in fact, Legg said, a well-thought-out scheme that lasted years before Gray was criminally charged. The sentence handed down yesterday also called for Gray to spend 30 months on supervised release after her prison term and pay $402,000 in restitution.

OFFERING INCENTIVES to biotech researchers and the firms that capitalize on their work in Maryland makes sense, and four bills with that aim are wending through the legislature's hearing rooms. All deserve thoughtful debate and strong support. One bill would expand state grants for research and development; another would extend a tax credit program for R&D that expired last year. A third would offer credits to individuals and companies that invest in biotech and other high-tech businesses.

State runs hard in the race for biotech business The Sun's article "Md. slips in biotech race" (Feb. 3) gives the false impression that Maryland is not as competitive as other states in attracting or keeping biotech companies. In fact, the contrary seems to be true. The article bases its argument on a report showing that Maryland dropped from third to fourth place in the number of biotech companies completing first-round financing. Maryland has a growing bioscience industry. But many of our companies, especially in the Baltimore region, are start-up businesses looking for seed money.

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.

SAN FRANCISCO - The California Public Employees' Retirement System, the largest U.S. public pension plan, with $166 billion of assets, was sued yesterday for failing to disclose the fees it pays managers of venture capital and hedge funds. Taxpayers and state workers who depend on CalPERS for their retirement have a right to a breakdown of costs that amount to about $500 million a year, according to the suit filed by the California First Amendment Coalition in a state court in San Francisco.