N.C. start-ups get wider attention

Young N.C. tech companies are starting to draw more attention from investors nationwide, as venture capital firms begin to look for
new deals in a sluggish economy.

STAN CHOE
Staff Writer

This week, VC firm executives from as far away as California, Massachusetts and Canada sat in a Chapel Hill auditorium to hear 29
N.C. start-ups make investment pitches.

The annual Venture conference, hosted by the Raleigh-area nonprofit Council for Entrepreneurial Development, drew about 300
venture capitalists, roughly the same as last year.

But the event attracted more out-of-state venture capitalists — more than 100, compared with about 80 in past years, CED officials
said.

Organizers gave some credit for this new attention to a recent increase in the amount of the state’s $60 billion pension fund that can
invested venture capital firms.

"North Carolina really sells itself once you get the right people to look at it," said N.C. Treasurer Richard Moore, who controls the fund
and spoke at the conference’s final day Wednesday. "Getting them here takes a lot of work."

Moore can now invest up to 5 percent of the state’s pension fund, or $3 billion, in VC firms, up from the $70 million currently invested.

Moore said he and his staff have yet to make a large, new investment since the increase took effect, but the treasurer personally
asked some out-of-state VC firms to attend this week’s conference to see what the state’s tech firms offer.

State leaders hope the increased national exposure will erase the perception that North Carolina is merely a mine for acquisitions or a
tech wannabe, chasing the Silicon Valley. Better access to national funding would help both N.C.-based start-ups, which need the
money to expand, and the state’s VC firms, which need co-investors on their deals. The state slipped in national rankings for VC
investment last year, to 15th from 12th in 2000.

Michael Guthrie, with TPG Ventures in Palo Alto, Calif., said Moore’s presence was "certainly a draw," but he also wanted to meet
representatives of many of the state’s software, biotech and wireless companies.

Charlotte’s lone tech representative at the conference was Convey Systems Inc., which develops software that allows people to
chat, videoconference and control one another’s computers.

Jane Dietze, a partner with Columbia Capital in Alexandria, Va., said she wouldn’t have come to the Venture conference if she
weren’t in the area already scouting a potential investment.

This is good news for firms hoping to see an uptick in VC investments, which have dropped nationally in five consecutive quarters.

The $5.1 billion that venture capitalists invested during the three months ended March 31 represented a 53 percent drop from the
same time last year, according to statistics released by Ernst & Young and VentureOne this week.

The first-quarter volume marked the lowest quarterly amount since the final three months of 1998. The venture sector isn’t expected
to recover as long as corporate spending on information technology remains sluggish and a mercurial stock market offers so few
opportunities to take promising young companies public.

In a sign of their diminished expectations, venture capitalists during the first quarter raised $2.25 billion from their limited partners, an
88 percent drop from the $18.4 billion raised at the same time last year, the report said. The industry’s first-quarter fund-raising
represented the lowest quarter total since mid-1996.

"I think right now we’re at a holding pattern," said Jesse Reyes, a vice president at Venture Economics, a research firm.

Associated Press and Knight Ridder/Tribune contributed to this article.

http://www.charlotte.com/mld/observer/business/3177116.htm