- The Washington Times - Wednesday, May 31, 2006

Eight minutes.

The digital clocks outside the meeting room doors count down the time in square red numbers for the passers-by or those bouncing from one room to the next to hear the company executives make their pitches.

On stage, presenters are reminded of the time limit by another clock whose fiery numbers tick down at them from the back of the room as they explain what their company does, its current and potential customers, and why a few million dollars in venture funding would be a wise investment.

The Mid-Atlantic Venture Association, which represents private equity and venture capitalists in the region, chose 36 technology companies from among 150 applicants to vie for the attention and, more important, the checkbooks of its members attending yesterday’s Capital Connection venture fair at the Mandarin Oriental hotel in Southwest.

This year’s 36 presenters, most of which were from the Washington area although companies from Ohio, Georgia and elsewhere also made the cut, can be optimistic that the right combination of revenue, customers and some pleading can result in financial support.

A little Sterling, Va., company named America Online presented before hitting the big time, and last year 46 percent of those on the clock received a total of $138.8 million in venture funding within a year of the show. Since the association began tracking that information in 1996, an average of 40 percent of presenters had raised a total of more than $2.6 billion within a year.

Among this year’s crop that investors appeared high on were: McLean’s Parature Inc., a customer service support software firm, and Freewebs Corp. in Silver Spring, which provides Web site building and advertising services.

But while the percentage of companies receiving funding is rising, the total amounts received are decreasing, a result of lower infrastructure costs as businesses increasingly use the Internet as their backbone and investors demand efficiency, according to venture capitalists who helped select this year’s presenters.

Telecommunications equipment or communications service providers were receiving millions of dollars between 1999 and 2001, but now similar functions can be done for one-tenth of the price or less. For example, equipment providing wireless connectivity cost $5,000 per building a few years ago, but now can be done for about $250 per unit, said Karl Khoury, a partner at Columbia Capital LLC in Alexandria.

“Financing is better thought out on what can be achieved on a modest amount of capital [compared with] 1999 and the ‘Get big fast’ mentality,” said Scott M. Frederick, a general partner at Valhalla Partners in Vienna, Va. “I think we all learned that’s not the best way to fund entrepreneurial companies.”

“Now, it’s ‘Get big efficiently,’” said Jonathan Perl, a general partner at Boulder Ventures in Owings Mills, Md.

Venture capitalists want to see real customers, real revenue, and positive cash flow from a technology start-up, and a company that can make the most money for their shareholders by going public or via a merger or acquisition.

“What would turn off a venture investor is a company that said, ‘We have to go public,’” Mr. Frederick said.

A line to be avoided in those critical eight minutes.

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