May 23–KANSAS CITY, Mo. — The brutal bear market seems to have erased the classic entrepreneurial dream of quick stock-market riches.<\/p>\n
At least, that’s the conclusion you could draw after hearing 20 startup companies appeal for money Thursday at the InvestMidwest Venture Capital Forum.<\/p>\n
Most of the presenters tried to catch venture capitalists’ attention with talk of an “exit strategy” or possible “liquidity event.” With few exceptions, they said selling to a larger company was the likely way for them and their investors to cash out.<\/p>\n
David Lazenby, president of ScenarioNow in Chesterfield, told potential investors that he expects to build the maker of financial-planning software from $500,000 in sales this year to $52 million in five years — and then sell out to a larger software or publishing firm.<\/p>\n
“Our exit strategy is simple: It is acquisition,” said Victoria Gonzalez, chief operating officer of Graphic Surgery LLC in Creve Coeur.<\/p>\n
Only two of the 20 companies even mentioned the possibility of an initial public stock offering. Dan Didier, president of CytoGenomics Inc. of Maryland Heights, said his bio-informatics company would be poised for either an IPO or a buyout in two years, “depending on the market.”<\/p>\n
Daniel Flynn, chief executive of Deciphera Inc. in Lawrence, Kan., displayed a chart projecting an IPO in 2008.<\/p>\n
The IPO market has slowed from a flood in 1999 and 2000 to less than a trickle today. But buyouts also have become rare, several venture capitalists in the audience noted.<\/p>\n
“I think you’re hearing more hope than reality,” said Mark Mendel, managing director of RiverVest Venture Partners in Clayton.<\/p>\n
Venture capitalists, of course, are well aware of the possible ways to profit from an investment. But the talk of quick buyouts does send an important message.<\/p>\n
“What you’re looking for is that companies understand the nature of the deal,” Mendel said. “When money goes in, it is supposed to come back out.”<\/p>\n
Money isn’t going into early-stage companies in nearly the quantity that it was a couple of years ago. Venture capital investments have fallen by more than two-thirds over the last three years.<\/p>\n
But statistics couldn’t dampen the spirits of the entrepreneurs who took the stage Thursday, each making a 10-minute pitch to the 50 or so venture capitalists in an audience of about 240 people.<\/p>\n
The 20 companies, seven of which are from St. Louis, hope to attract investments totaling more than $80 million.<\/p>\n
After the conference, entrepreneurs were satisfied with even small victories. Lazenby said he was pleased to come away with the names of two possible investors and a banking firm that is a potential customer.<\/p>\n
He and others also came away with three words of hope from Patricia Cloherty, the conference’s luncheon speaker. Cloherty, a 34-year veteran of the venture-capital industry, recalled how tough it was to invest in the 1970s, when the stock market was in a slump and inflation was in double digits.<\/p>\n
But companies launched in those tough times tended to be survivors. Her examples were the three words of hope: Apple, Intel and FedEx.<\/p>\n
—–<\/p>\n
To see more of the St. Louis Post-Dispatch, or to subscribe to the newspaper, go to http:\/\/www.stltoday.com.<\/p>\n
(c) 2003, St. Louis Post-Dispatch. Distributed by Knight Ridder\/Tribune Business News.<\/p>\n
AAPL, INTC, FDX,<\/p>\n","protected":false},"excerpt":{"rendered":"
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