Small firms generally lack access to capital for two fundamental reasons. First, they lack the knowledge and experience to position themselves to attract investment. Second, capital sources are scarce.
While banks are helpful, many young companies do not have the assets to qualify for loans. Most high-tech companies require a substantial investment up front to complete their product and get it to market. They cannot afford to tie up their funds for monthly loan payments. This is where an equity investment can be helpful.An equity investment may come in the form of individual investors, venture capitalists, corporate alliances, a public stock offering or just an additional partner or founder to move the business forward. Perhaps more valuable than the money itself, investors bring seasoned advice and a network of new resources.
Even though the majority of venture capital firms are in California or on the East Coast, many Utah companies have attracted significant investment from the venture capital industry. According to a 1992 survey of Utah technology-based companies conducted by the MountainWest Venture Group, small technology firms raised more than $22 million in venture capital.
They also raised more than $83 million through initial public offerings of stock (IPOs). For small technology-based companies in Utah, 1992 equity funding matched debt financing (including loans by the Small Business Administration).
A major player in helping early-stage companies raise equity capital has been the Wayne Brown Institute. Organized in 1983 as a not-for-profit 501-C-3 educational organization, the institute is named in memory of its founder, Wayne Brown, a leading authority in technical entrepreneurship and innovation.
Sponsor of more than 50 programs for entrepreneurs, the institute provides much needed investment in the entrepreneur's education. Most early-stage firms suffer from inadequate market analysis and inexperienced management. To combat this, the institute uses teams of local legal, accounting and marketing experts to develop management skills and strategy.
This mentor-based approach has earned the institute a reputation of organizing one of the finest venture capital conferences in the country. (The Institute has been hired to create or improve venture capital conferences in Arizona, Los Angeles, Sacramento and Texas). In 10 years, more than 1,000 firms have sought advice from the Institute on raising capital.
The 1994 Utah Venture Capital Conference:
If you have an early-stage company with expectations of doing at least $20 million in sales within 5 to 7 years, the conference will give you a chance to have your business presented before the national financial community. Past conferences have helped 30 Utah companies raise more than $40 million in capital and create almost 1,000 new jobs,
The Ninth Annual Utah Venture Capital Conference, organized by the Wayne Brown Institute, will be Feb. 3. Companies interested in presenting their business opportunity at the conference should submit an executive summary to the Institute by Nov. 26, 1993.
All executive summaries will be initially screened by a panel of investors. The executive summary should be no more than 5-8 pages in length, and should highlight the most important points of your business that will help an investor understand why your business will succeed. While the company's product/service and financial strategy are important, preference will be given to summaries that show a solid marketing strategy and an experienced management team.
Those companies that pass initial investor screening are invited to present at the conference in February. To help resolve any critical marketing, management and mentoring issues, each company isassigned a team of mentors. These mentors are professionals from local legal, accounting and marketing firms.
Mentors will meet with the company consistently during the two months preceding the conference to develop an equity funding plan and 15-minute conference presentation. Countless hours of time from local experts and investors are provided at virtually no cost.
What results can participating companies expect?
While some companies will receive some type of financing, every company gains a clear understanding of its marketing and management obstacles. Each company will also receive the professional mentoring necessary to address and solve these problems. The substantive investor review and evaluation also help early-stage businesses mature more quickly.
For more information on the Wayne Brown Institute, contact Bradley B. Bertoch, executive director at 595-1141.
Michael W. Davis works for the State Office of Technology Development. He specializes in transferring university technology to the private sector and in helping high-tech companies obtain financing.