A Maryland venture capital firm has come to the Quad-state region. Armed with $4 million from the West Virginia Economic Development Authority, Walker Ventures has opened an office in the HoxtonBuilding on the outskirts of downtown Shepherdstown.
Managing the office is Eric Lewis, who has been there since January as executive director of Walker Ventures’ West Virginia operation. Lewis, who was an accountant with Yount Hyde & Barbour in Winchester, is familiar with the financing of start-up companies.
He was chief financial officer of Ultraprise Corporation, the dot.com company that developed a Web site for mortgage trading, and was CFO of Butterfly.net Inc., the Martinsburg-based developer of the Grid for allowing thousands of persons to play games together over the Internet. In his CFO capacity at both companies, Lewis raised $33 million in venture capital.
Walker Ventures was an investor in Ultraprise and is currently an investor in Butterfly.net.
To supplement the $4 million investment from West Virginia, Walker Ventures set up a Small Business Investment Corporation under the guidelines of a U.S. Small Business Administration program. Lewis said Walker received $2 from the SBA for every $1 raised, so Walker Investment Fund II SBIC, LP has $12 million to invest in West Virginia.
Lewis said that while the SBIC fund will limit its investing to West Virginia companies, Walker Ventures, a mid-level venture capital firm, has $100 million under management and will look at deals from neighboring Maryland and Virginia. “We absolutely will be looking for deals in Hagerstown and Winchester,” said Lewis. “Walker Ventures covers the whole Washington region.
“We’re starting to see some interesting stuff coming out of West Virginia. We’ll be going all over the state, so the deal flow will increase. We’ll be looking at a variety of deals, particularly in the software area. One of those areas is imaging technology, which enhances the way the human eye can view images. You can only see 16 levels of brightness, but this can interpret more levels, allowing for better interpretation of finger prints and handwriting.”
Walker Ventures is one of six certified funds that received a total of $25 million from the West Virginia Economic Development Authority under a venture capital program established last year through revisions to the West Virginia Capital Company Act.
The original act, which allowed credits against a variety of West Virginia taxes of 50% of invested capital was designed as an incentive for wealthy people to reinvest their money in businesses in need of venture capital. But it resulted in a number of companies setting up subsidiaries to invest in their own projects rather than funding startup companies.
Despite the existence of five other venture funds, Lewis said there would be cooperation, not competition among the firms when going after the most promising deals. “We meet and share information,” he said. “It’s more of a partnering.”
As for Walker Ventures’ investment in Ultraprise Corporation, Lewis said, “The assets were sold to a Philadelphia firm. While nobody made money in the venture, it was a learning experience. In the venture capital business, out of 10 deals, five die, four break even and one is a home run.
Ultraprise went through two mergers after it relocated from Shepherdstown to Frederick, Md. In June 2001, it merged with LoanTrader.com to become Ultraprise Loan Technologies, Inc. Then in January 2002, that firm was purchased by GHR Systems Inc, a Wayne, Pa., firm engaged in loan origination and processing technology that wanted to expand its offerings to cover all aspects of the mortgage life cycle.
Taking Flight
Butterfly.net in Martinsuburg has lined up a several blue chip partners as it progresses with development of a game-playing grid that can be used by millions of players simultaneously over the Internet.
“I’m very excited about the prospects for Butterfly.net, of which I was a co-founder,” said Eric Lewis, executive director of Walker Ventures’ West Virginia operation based in Shepherdstown.
“Network providers like AT&T will pay to use the infrastructure. Butterfly will receive licensing fees and part of the monthly subscription revenue. Initially, PCs and laptops will be used to play the games over the Internet. The future is with PlayStation and Xbox on the hand-helds.”
Although Butterfly.net developed the Mothman game, the Grid was the ultimate goal, said Lewis. “We needed a game to validate the technology. It turned out that people were hungry for the technology anyway.”
The company, housed on Martinsburg’s King Street in the former city hall and WMCA, has signed up IBM and Sony Computer Entertainment Inc. as non-investing partners, and has a customer base of about 20 game developers. It shares revenue with the two companies.
Employment at Butterfly.net is expected to grow from 13 to 40 persons. In a speech last fall to a group of Eastern Panhandle business people, President David Levine said he is able to hire tech people for one-half the salary they commanded during the dot.com boom.
“We have 13 people on board now, but we’re not growing,” said Monica Larson, spokesperson for Butterfly.net. “We haven’t ramped up yet because we’re holding the line and keeping focused.
“We’ve got a whole lot of new customers, people who are interested in the Grid. They are game developers and publishers working on massively, multi-player games where you have thousands of players on line playing against each other.
“The players are using any kind of edge or client device like hand held or PS [playstation].”
With $2.3 million in venture capital, Lewis said Butterfly has “plenty of money.”
Larson agreed: “We’re amply funded, but it’s still a while before we break even,” said Larson. “It’s not the [short] length of time that investors were talking about during the dot.com craze.”
Copyright News for Business, Inc. Apr 2003
