Archive for May, 2009

Florida Venture Forum Early Stage Venture Capital Conference - where’s the beef?

Tuesday, May 19th, 2009

On May 15, the Florida Venture Forum hosted its second annual Early Stage Venture Capital Conference at the Omni Orlando Resort in ChampionsGate, Florida. About 200 people attended, down from the previous year. The conference agenda included morning seminars for entrepreneurs and afternoon company presentations for potential investors.

I attended two of the morning seminars - The Business Plan and Angel and VC Funding. Both were informative for the neophyte entrepreneur.

16 seed/early-stage Florida companies were selected by the Forum to present in the afternoon. Here are the companies that presented (while 16 were selected only 14 presented - no word on what happened to the other two - Advanced Aero and eCycling):

Airgonomix, LLC - low cost, easy to install “Personal Air System” that controls temperature at the individual room level in commercial or residential buildings.

bioTRAiTS Inc. - a biometric technology company providing hardware, I. T. solutions, and customized software solutions to meet time and attendance and access control needs via recognition and verification of unique human characteristics.

CliQuality - has developed a Google AdWords campaign optimization engine, driven by data mining that automatically manages and optimizes online campaigns and their ROI.

Consult A Doctor - offers 24/7 access to its proprietary nationwide 24/7 access to doctors via phone and secure email.

Digiport, Inc. - professionally managed Tier II/Tier III colocation facilities delivered within commercial office properties provide 24 hour redundant cooling, redundant power and non water based fire suppression to tenants of the property. .

Eginity - operates in the Wireless Sensor Networks (WSN) market.

HybridNRG Inc. - provides wireless integrated renewable energy solutions (WIRES) at facilities within the telecommunications industry. .

Milliken Environmental, LLC - builds and then leases its sewer and storm water cleaning equipment to contractors and municipalities.

My Therapy - therapy-oriented online journaling tool.

Physical Health Insights, LLC - provides a low cost (<$10), first of its kind, web and medically based, health assessment of the human musculoskeletal system.

Quasar Bio-Tech, Inc. - manufactures professional and consumer light therapy devices.

Quiescence Technologies LLC - develops healthcare products powered by safe novel technology to reduce the $30B costs of Healthcare Associated Infections (HAIs) such as MRSA.

Proton Data Security, LLC - products for declassifying and destroying electronic data.

Voalte, Inc. - innovative healthcare solutions for the emerging class of highly mobile computing devices.

I attended all of these presentations and, with a few exceptions, I think this session left a lot to be desired for potential investors. One speaker stated that over 250 applicants had been evaluated and 16 selected to present. Another speaker said that over 100 applicants had been evaluated. Whichever number is accurate, most would find it hard to believe that these are the best 1614 early-stage deals in Florida at this time. More importantly, however, was the lack of a compelling story conveyed by the majority of these companies.

For too many of these companies investors didn’t hear about:

1. A compelling business model that scales
2. Intellectual property or “secret sauce” that differentiates and provides barriers to entry
3. Revenue in year 5 that is sufficient to warrant the investment the company is seeking
4. An addressable market that is sufficient to warrant the investment the company is seeking

This begs the question of whether there was no compelling story to be told or whether the presentations just fell short. After talking to some of the companies afterwards in the exhibit area I learned that, at least for some, the latter was the case.

I look forward to seeing more beef from Florida’s early-stage venture community next year!

Green smokestack chasing

Monday, May 11th, 2009

Smokestack chasing is the economic development policy of attracting existing firms from somewhere else, either to relocate to a particular area or to build new facilities there, using financial inducements and tax incentives.

There is little to no evidence that it works.

Despite this, economic development agencies continue to pursue this policy.  With the current emphasis on green jobs, some cities are  now green smokestack chasing -  the latest example being Orlando - as reported in today’s Orlando Sentinel “Incentives to lure jobs to Central Florida could hit $31M“.

What does work?  Entrepreneurship!  As the authors of the Kauffman Foundation report Entrepreneurship and Urban Success: Toward a Policy Consensus write

Likewise, policymakers at local and state levels increasingly recognize that entrepreneurship is the key to building and sustaining their economies’ growth. Although this is a seemingly obvious proposition, it represents something of a departure from past thinking about how local, state, or regional economies grow. Historically, state and local policymakers have put their energies into trying to attract existing firms from somewhere else, either to relocate to a particular area or to build new facilities there. Such “smokestack chasing”—or, in this cleaner era, simply “firm chasing”—often has degenerated into what is essentially a zero-sum game for the national economy. When one city or state offers tax breaks or other financial inducements to encourage firms to locate new plants or headquarters, and succeeds, some other city or state loses out in the process.

Local, state, and regional economic development centered on entrepreneurship, however, is a fundamentally different phenomenon. The formation and growth of new firms, especially those built around new products or ways of doing things, wherever this occurs, is clearly a positive sum game, not just for the locality, but for the nation as a whole. A brief look at the various “high-tech” or innovative clusters that have grown up around the country—from Silicon Valley to Austin, Research Triangle Park (N.C.), San Diego, Boise, Denver, Madison, Route 128 around Boston, and northern Virginia, to name just a few—demonstrates this. The U.S. economy as a whole clearly has benefited enormously from the innovative products and services the major companies from these various “hubs” or “clusters” have introduced to the country.

We can only hope that someday we might see this headline in the Orlando Sentinel: Incentives to form and grow new firms in Central Florida could hit $31M.