|
Slow but steady progress in state’s venture market
By Jessica Johnson
Contributing Writer
Seeds that will one day sprout venture capitalism are taking root in the Lowcountry.
Robert Pearce Jr., a partner in Nelson Mullins Riley & Scarborough LLP, said all the necessary components are here to grow technology-based economic development.
Looking back, venture capital investment has been nonexistent in the Lowcountry, and minimal in the rest of the state. In 2005, South Carolina received a reported $5 million in venture capital investments, compared to California’s $11.5 billion.
South Carolina ranks among the lowest states in venture capital dollars, but Pearce said South Carolina is coming out of the dark ages.
“So many pieces of the puzzle are coming together, you can start to see the picture on the puzzle, you begin to see the future,” he said.
Pieces of the puzzle
The Trelys Funds, an early-stage venture capital fund in Columbia, formed in 2002. Though Trelys investors include Lowcountry residents, none of its nine investments to date have been in the tri-county area.
The fund has worked closely with Charleston Angel Partners, and showed by its work with Ometric Corp. that it can draw venture capital dollars from out of state.
Ometric developed a process technology that measures chemicals during production in industries such as pharmaceuticals.
In Ometric’s latest stage of funding, Trelys was able to attract Sequoia Capital of Menlo Park, Calif. The firm is known for backing projects such as Google, Apple and Cisco in their early stages.
Without Trelys, Pearce said, Ometric would have likely gone to Atlanta, Miami or North Carolina’s Research Triangle. Now, Ometric calls Columbia home.
Venture capital funds such as Trelys are important to the state, Pearce said.
“If South Carolina didn’t have Trelys, venture capitalist would be ignoring South Carolina even more than they were in the past, which is hard to imagine,” he said.
As late as 2000, entrepreneurs and companies left the state with their ideas, he said.
“Now we are keeping companies and helping them grow,” Pearce said. “So many things didn’t exist even five years ago.”
Early investors
Most major venture capital expenditures come later in the company development. In the early stages, a budding company may attract a seed investor such as an angel partner.
The Charleston Angel Partners, for example, came into the picture three years ago.
“Nobody had been investing in pre-venture capitalist stage,” said Ken Roozen of Charleston Angel Partners. “We are nurturing the seed corn, so to speak.”
Since its formation, Charleston Angel Partners has made 12 investments in eight companies, but none have been in the Lowcountry. It’s currently working with three Charleston companies, however.
The group has about 60 investors from the Charleston area, and each member can choose whether to participate in a deal. To date, they have invested $2.6 million.
“One of the things the angel group brings to the table is a collective wisdom,” Roozen said.
The investors represent a diversity of backgrounds such as information technology, biomedicine and chemical materials.
The partners might take a position on the company’s board of directors or informally shape the business plan.
Teaching business
South Carolina isn’t lacking good ideas, Roozen said.
“The entrepreneurs tend to be passionate and technology-oriented, but they are not people with a good business background,” he said.
Many first-time entrepreneurs have strong ideas, but lack the expertise necessary to formulate a good business plan and present investment-grade opportunities to angels and venture capitalists, Roozen said.
To keep ideas going, there is a growing collaboration among the state’s universities.
“There is a lot of research taking place, and that is where ideas for venture capital opportunities spawn from,” said Ian Forbes-Jones, venture capital development manager for the South Carolina Department of Commerce.
South Carolina Research Authority’s Launch! program is yet another piece of the puzzle. The program connects university research in the state with global companies and offers $200,000 of seed money for company startups.
|
E-Mail This Article
Printer-Friendly Version