- The Washington Times - Monday, November 20, 2000

Venture capitalists finance the entrepreneurs who create the gee-whiz technology. But before that, people and institutions have to fund the venture capitalists. And last week in Washington, the venture capitalists got their shot at money and people from around the world.

In a small meeting room packed with chairs, deep in the bowels of the Grand Hyatt hotel on H Street, venture capitalists from around the country but with the Washington area well-represented made their pitches. Their targets were Korean, Japanese, Turkish, Israeli, Indian and even Kuwaiti investors.

And their messages were delivered on a for-your-ears-only basis.

"It's very important that the press not go anywhere near that room," said Ken Hagerty, president of the Global Venture Investors Association, which organized the conference.

The Securities and Exchange Commission takes a dim view of silver-tongued venture capitalists who might charm unsophisticated investors out of their money, so only accredited investors that is, the certifiably wealthy get to hear the presentation. But their basic message was the raison d'etre for the conference.

"Venture capital funds in the United States are trying to figure out how they can raise money overseas," said Ed Mathias, a partner with the District's The Carlyle Group, which has used the connections of high-powered partners like former Secretary of State James A. Baker III to do business overseas.

Foreign countries have long been accustomed to financing American economic growth. In the days of huge federal deficits, they put literally trillions of dollars into Treasury notes. Now, they are being lured by the high returns that private equity offers, and the prospect of learning how the venture capital industry works.

But the Americans who want to raise money for a new venture capital fund still have to sing for their supper.

"It's not necessarily a terribly different mind-set," said George Abraham, a senior managing director with Arlington-based Friedman, Billings, Ramsey shortly before making a presentation. "It's a lot about personal relationships."

Mr. Abraham, whose own talk preceded pitches from Draper Atlantic Ventures and Mid-Atlantic Venture Funds, both based in Reston, and the Women's Growth Capital Fund in the District, said the pitch is only the first step. If he is lucky, he will swap a few business cards and eventually ink a deal. But it takes patience.

"Will we get investors from this conference?" Mr. Abraham mused. "Who knows?"

Deokjin Goh was on the other side of the equation. A senior official with KDB Capital, a Seoul-based investment firm, Mr. Goh was looking for places, especially in the Washington area, where Korean investors can put their money.

Korean companies already have taken the plunge on the West Coast, he said.

"The Korean [venture capital] market is booming, but it's also just getting going," he said. "We need to learn from the U.S. market."

The vehicle for integrating international money into U.S.-based venture capital funds is the limited partnership. It gives foreign investors a window on how this dynamic industry works, but leaves the day-to-day operations to the Americans, always rich in experience, but frequently lacking in capital.

"You're buying years of experience when you invest in an American venture capital fund," said Anthony Buzzelli, a managing partner for Deloitte & Touche in the mid-Atlantic region.

Currently, the global landscape of venture capitalism looks remarkably American. The world saw $136 billion in private equity investments, and a whopping 73 percent of it took place in North America, according to PricewaterhouseCoopers.

Evening out the capital flows will take time and work, as Europeans and Asians adapt the American model to their own economic environments. But many of them are already doing it with Americans at their side.

AOL Investments, the venture capital division of Sterling, Va.-based America Online, already has jumped into Israel, where a hot technology industry is vacuuming up money at a blistering pace. AOL Investments has put roughly $50 million into companies and other venture capital funds in Israel, according to its vice president, Ron Peele.

"We think the move into Israel was a good one," Mr. Peele said. We'll be doing more abroad."

The on-line giant's next moves will be into northern Europe where the prevalence of wireless communication is opening up new avenues for AOL service and around Munich, a center of software development in the continent, Mr. Peele said.

Other investors, such as Sean Wang, a HongKong-based venture capitalist, would like to see Americans move into Asian funds. Mr. Wang, the managing director of DragonTech Ventures, is selling his firm's presence in Hong Kong and Beijing as the potential eyes and ears for American investors.

"We're trying to offer local expertise that can give technology a local flavor," Mr. Wang said.

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