Venturing Into Forums

When the Boston chapter of The Indus Entrepreneurs (TIE) held its first venture forum last fall, organizers expected perhaps one of the four presenting companies would attract interest from the venture capital general partners — the ones who make the decisions and write the checks — from eight firms who were in the audience at that first forum.

By:
Tom Witkowski
The Business Journal of Boston

http://www.nasvf.org/web/allpress.nsf/pages/8471

"I was fully expecting three of the four to be duds and one to be interesting," said Gautam Prakash, president of TIE.

The result was just the opposite: Enthusiasm ran high among the entrepreneurs and the venture capitalists, organizers said.

"Multiple groups of venture capitalists have interest in three of the four companies," said Rahul Kher, a member of the TIE venture forum team and product manager for Predictive Networks Inc. of Cambridge.

Venture forums are increasing in number and variety as the economy is picking up and as venture capital investors step back into the game looking for deals.

Once overwhelmingly hard-to-get-into affairs run by angel investors, a variety of venture forums today appeal to different market niches — seed funding, early-stage companies and even too-early-to-fund ideas — as well as different demographic segments.

The Indus Entrepreneurs, a professional organization for entrepreneurs from Southeast Asia, held its first forum in November and plans its second next month. Just as the venture capital industry has evolved and matured during the recent business cycle, so too have venture forums.

"It makes sense for there to be, particularly in Boston, at least half a dozen vibrant venture forums," said Prakash, himself a venture capitalist.

For venture capitalists, the forums can serve the important purpose of, if not actually giving them deal flow, exposing them to research and innovation in its earliest stages.

The forums that began less than two years ago by the Deshpande Center for Technological Innovation at Massachusetts Institute of Technology are not to be used for deal flow, executive director Krisztina Holly tells investors. The ideas are too early-stage to be receiving millions of dollars in venture capital. Instead, the event helps academics and researchers find ways to turn their discoveries into businesses.

And it brings venture capitalists into the loop while the idea is still being shaped. The venture capitalists, for all the distraction they have had in recent years from earlier investments in their portfolios, are eager to see new technologies.

"It’s really in response to requests from the venture capitalists and the entrepreneur constituents saying, ‘We want to see more stuff coming out of MIT,’ " said Holly.

Venture capitalists use the center’s events to stay on top of their technology game.

"If you’re not learning continually as a venture capitalist, you’re just done. You might as well pack it up and build a castle in Europe," said Jeff Fagnan, a principal with Seed Capital Partners of Cambridge.

In April, the center will be hosting its third Ideastream Symposium, a meeting the center began within the past year to bring together investors and researchers.

"I have to hold people at bay," Holly said. "They’re just champing at the bit."

The Deshpande Center’s event is akin to the traditional investor forums, in which entrepreneurs will come before groups of angel investors with their ideas, seeking smaller amounts of money, to flesh out a plan and see if they do, in fact, have a workable business model. MIT also sponsors other events to bring technology entrepreneurs and venture capitalists together, the best-known being the 50K Competition, also aimed at early-stage companies.

TIE venture forums and Springboard New England — which is designed to help women entrepreneurs — are geared to much more polished companies. Both groups have volunteers who spend time with the entrepreneurs, helping them improve their presentations, before putting them in front of potential investors.

"Venture forums, what they really (offer), are a sanitized, scrubbed deal," said Prakash.

For TIE’s first forum, 30 entrepreneurs applied; four were chosen to present. For the second forum, to be held March 3, TIE has had slower deal flow, but 12 venture capitalists will attend, and so far, 15 have entrepreneurs applied to present. If TIE cannot guarantee a sufficient number of quality presentations, the group would prefer to cancel or postpone the forum, Prakash said.

"The value to (investors) is high-quality deal flow. The value to the entrepreneur is access to general partners or managing general partners at firms they would normally, unless they know someone in the firm, have no access to," said Prakash.

Springboard New England has run an annual forum for the past four years to help women entrepreneurs raise money.

At the last Springboard forum, run in partnership with the Boston-based Center for Women and Enterprise, 16 companies presented ideas, with the majority being in information technology or life sciences. Springboard also helps presenters hone their pitches before putting them in front of the check writers, said Mary Pat Hinckley, manager of fast-growth programs.

"We’re really going for quality," she said.

In the four years since Springboard’s forums began, 70 entrepreneurs have presented in Boston. Venture capitalists have invested more than $200 million in some of those companies, said Hinckley. Aside from money, the forums also provide mentoring and networking possibilities, she said.

"Our presenters and investors, they’re still in touch from four years ago," said Hinckley.

For venture capitalists and entrepreneurs, venture forums are becoming more common and more useful.

"I think of these venture forums as kind of the great equalizer. It really has nothing to do with whom you know," said Prakash. "It’s a very democratic process. It’s not about whom you know, but about your ideas."

At TIE’s first forum, none of the four entrepreneurs were well-connected in the Boston-area venture capital circles, said organizers. Of the four, one company, Simpler Networks Inc., a telecommunications company based in Canada and seeking to set up U.S. operations locally, has since received an undisclosed amount of funding.

"They raised very significant money, a double-digit round, from the folks at the venture forum," said Alok Prasad, one of the organizers of the TIE forum, and president of Beacon Technology Ventures of Boston.

Two of the other companies are undergoing due diligence, with organizers believing both have a good chance at being funded.