Venture capital is out there, for the right businesses

New firms seeking funds find less competition than in ’90s

COEUR d’ALENE — Contrary to popular opinion, this
is a great time to raise venture capital, Tom Simpson
told a crowd at the Coeur d’Alene Resort on
Wednesday.

By Becky Kramer
The Spokesman-Review Staff writer

"There’s $100 billion right now waiting to be invested
and a dramatic reduction in the number of companies
looking for capital," said Simpson, managing partner
of Spokane-based Northwest Venture Associates. "…
Unlike the late 1990s, where you had to take a
number and get in line."

About 100 people attended the forum on venture
capital, which was sponsored by the Spokane
Economic Development Agency, Jobs Plus of Coeur
d’Alene and the Entrepreneurs Forum of the Great
Northwest. Speakers discussed requirements for
attracting funding.

"The fundamental part is the story," said Fred Brown,
a Spokane entrepreneur who raised $26 million to
build LineSoft, which he recently sold. "It’s the same
reason people want to buy your product or work for
your company."

Investors also want a product or service in high
demand, a large market and strong management
team. "We’re out raising money now … and it’s never
easy," said John Shovic, founder of TriGeo Network
Security in Coeur d’Alene.

Tri-Geo raised its first $3 million from family
members, friends and angel investors. Now the
company is generating revenue and talking to five
venture capital firms for the next funding round,
Shovic said.

It’s good to hear the success stories, said Bob Potter,
Jobs Plus president. "I used to say it never ventured
over here, or it never ventured over to Eastern
Washington."

Jobs Plus is involved in an angel network that
recently formed in North Idaho. A second angel
network was started by the for-profit Delta Angel
Group. Both organizations want to link qualified
entrepreneurs with accredited investors.

"If there’s a good idea, it is a shame to let it drift to
Seattle," Potter said. "I think there is a responsibility
to keep it here and growing."

Angel investors typically are "second round"
investors. They put money into a company after
entrepreneurs raise capital from their own savings,
family and friends. Venture capitalists come in later.

Potter said he frequently hears from startup
companies looking for the second round of funding.

North Idaho has a large number of wealthy
individuals looking for private investment
opportunities, Potter said. Finding qualified
entrepreneurs is the harder part.

"The business plan really has to make sense," Potter
said. "The angel investor is looking for a damn good
rate of return." He’s only come across three
companies in 15 years that were suitable for angel
investments.

Angel investors "don’t want to be part-owner of a
coffee shop," said Gary Paquin, co-founder of the
Delta Angel Group. They want a potential tenfold
return, he said.

Paquin, a former officer of Medinex Systems Inc.,
formed Delta Angel Group in Coeur d’Alene with Kim
Stearns, who owns a marketing company.

Angel investors usually have a net worth of $1 million
or more. They can afford to put money into
higher-risk investment, Paquin said. They want to
recoup their money within three years, he said,
usually when the company goes public or is
purchased by a larger firm.

•Business writer Becky Kramer can be reached at
(208) 765-7122, or at [email protected]

http://www.spokesmanreview.com/news-story.asp?date=051602&ID=s1148758&cat=section.business