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Angels can help make great tech ideas fly

My professional career began in research, as I moved from Berkeley, Calif., to the medical school at the University of Washington. My goal was to bring exciting technology to the world in the area of reproductive biology. After a stint there and a year at the Seattle-based nonprofit Program for Appropriate Technology in Health, I came to the following conclusion: money counts.

Patrick Tam
Special to The Spokesman-Review

Since then, whether I’ve worked in the public or private sector, I’ve followed that maxim. No good technology will see the light of day without significant and sustaining financial underpinnings.

This lesson has resurfaced repeatedly in the few months I’ve been at SIRTI. http://www.sirti.org/ As I’ve written, the Inland Northwest is rich with exciting technologies. It has been a thrill to get to know some of the research and the companies spun out of research in our region. SIRTI has featured a few of them at our Technology Showcase events. But the absence of financial support for these dedicated inventors and entrepreneurs has been sobering.

Most technology centers in the U.S. claim they face inadequate funding to commercialize their discoveries. The Inland Northwest faces an acute case of this problem, however.

As a consequence, I have spent a good deal of my time working on financial issues for technology companies. SIRTI has brought onto its staff an ex-banker and former finance expert from the Washington state Department of Community Trade and Economic Development (CTED). David Wingate has more than 30 years of experience and prides himself in thinking outside the usual box of debt finance. In the 10 years David worked as a financial specialist for CTED, he helped broker 158 deals worth more than $130 million.

I have also begun to put together a fund that should help technology entrepreneurs with opportunity but without means to realize sales opportunities. It will not be a venture fund in the classical sense — securing equity in startups via a long-term infusion of cash. Rather, the fund will focus on purchase order financing. Too often, a big order to a little startup creates huge problems. How can the firm finance that work behind the sale? To commercial banks, technology startups pose too large a credit risk. With the SIRTI Technology Growth Fund, SIRTI-assisted companies that can show our foundation an order from a legitimate, credit-worthy company can likely find money.

The community leaders to whom I have pitched this concept have, to a person, been very enthusiastic. I expect the SIRTI Technology Growth Fund to be operational by July.

I have also continued SIRTI support for Small Business Innovation Research (SBIR) grants. Very often, these grants represent the best funding path for our region’s technology businesses. As a cash infusion from the federal government, an SBIR award does not ask for equity in the firm nor for one’s house as collateral. What can be better money than this? Last fiscal year, SIRTI supported the grant application process for seven technology startups in Eastern Washington.

What is still missing in the Inland Northwest, however, is a community of "angels." These are investors who come after friends and families of entrepreneurs but precede venture capitalist. They invest at a corresponding level in between the two sources of finance. And they are almost always local. Without support from local angels, entrepreneurs cannot expect much help from venture capitalists, often located far outside the region.

How can we build a community of angels? A good start is to provide some education about the process, its benefits and its risks. To that end, SIRTI, along with the Washington Technology Center, Pacific Northwest National Laboratory and the Idaho Small Business Development Centers, is hosting a visit this coming week by the National Association of Seed and Venture Funds. The D.C.-based group leads daylong workshops all over the U.S. for qualified investors. These sessions cover a variety of topics, from business valuation, to due diligence processes, to the term sheet that accompanies private equity investment.

If you are interested and you are a qualified investor, there are still a few slots remaining for the Seed Investing as a Team Sport workshop. It takes place this Thursday at the WestCoast Grand Hotel, from 8:30 a.m. to 4:30 p.m. To register, either call SIRTI at 358-2000 or access the online site at http://www.watechcenter.org/events/seedconf.html. The fee of $195 includes a continental breakfast and reception. This visit marks the first time that such a high-powered team of experts have come to the Inland Northwest to share their skills.

It is my strong hope that this session can serve as a spark to those would-be angels of the Inland Northwest to form their own alliance — however loosely structured at the outset. The Puget Sound area, after all, enjoyed a strong network for several years. Angels, as we know, help all of us rise to higher levels. Our region’s technology entrepreneurs deserve a visit from angels.

# Patrick Tam is executive director of the Spokane Intercollegiate Research and Technology Institute.

http://www.spokesmanreview.com/news-story.asp?date=011903&ID=s1289730&cat=section.business

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