Messengers of Capital Deliver on Entrepreneurs' Dreams
Dan Eldridge |
Thursday, March 25, 2010
It’s just a few moments past 10 a.m. on a sharply brisk Philadelphia morning, and yet way up on the eighteenth floor of
Morgan Lewis, the Philly-founded law firm that now boasts 22 offices worldwide, the halls are literally buzzing with the sounds of executive-level entrepreneurial activity. About a half-dozen of the boardrooms up here are faintly buzzing as well, and it’s easy enough to see why: Each one is packed tight--a few, in fact, are standing-room only--with dozens of the brightest, the wealthiest, probably the most ambitious, and certainly some of the most influential business minds in the entire Mid-Atlantic region.
Lining the four walls of each boardroom--some standing, some sitting in chairs, and most of them appearing much less anxious on the outside than they probably feel on the inside--are the entrepreneurs. These are the talented and disciplined self-starters who’ve arrived at the offices of Morgan Lewis this morning to participate in the crucial Selection Day--also known informally as the semifinals--of an annual event known as the
Angel Venture Fair. And sitting contentedly around each boardroom’s table is a collection of judges, all of whom happen to have been recruited from the region’s community of active angel investors--wealthy individuals who invest with their own money as opposed to venture capital investment, which invests the funds of others. This is a marked difference from the organizational structure of many other similar entrepreneurial contests, where the judging team is often comprised of service providers who understandably know much less about the angel investment process than the angel investors themselves.
And yet still, the judge’s jobs today are deceptively simple: First, they watch and listen as 49 different early-stage companies--some of them high-tech, some low-tech, and some no-tech--attempt to explain the unique benefits and probable market valuation of their products by way of a 10-minute elevator speech and a PowerPoint presentation. Next, they collectively choose those companies that appear to have a realistic chance of actually succeeding in the marketplace, and they then allow those companies to proceed onto the main event, a mere 32 days away.
MORE THAN AN EVENT,
A PROCESSHosted each April by the Bala Cynwyd-based
Private Investors Forum, and held within the genteel halls of the
Union League in Center City Philadelphia, the Angel Venture Fair is known by both entrepreneurs and the so-called “angels” who invest in their early-stage companies as one of the most valuable and results-driven convergences of the two groups in all of Pennsylvania. One major factor of the event’s long-lasting success and popularity, in fact, is the months-long grooming and educational component that all participating entrepreneurs are encouraged to take advantage of, and of which this morning’s Selection Day is just one small part.
This year, for instance, the Fair’s programming kicked off as early in the year as January 19. The Navy Yard branch of
Ben Franklin Technology Partners sponsored that first event, which featured lecture topics ranging from executive compensation to alternative sources of financing to the legal intricacies of intellectual property. And later this very afternoon, a series of workshops will be held covering issues as varied as business plan presentation and valuation techniques for early-stage companies. And as far as many of the small-business pioneers participating in the months-long process are ultimately concerned, it’s those very workshops and classes--and especially the networking opportunities those events provide--that make the AVF application fee ($1,250 for finalist companies, and $250 for everyone else) worth every hard-earned cent.
A LEGACY OF SUCCESSValerie Gaydos is the woman responsible for making the Angel Venture Fair run. And as an active angel investor with an impressive entrepreneurial background herself, it’s perhaps not surprising to notice a certain sort of pride in her voice when she talks about what it is, exactly, that makes the AVF so different from other events at which start-up entrepreneurs pitch their companies to groups of investors.
“Raising money from angel investors is not just simply going into the store and picking up a carton of milk,” Gaydos explains, without a hint of sarcasm. “You have to get to know these people. And what we try to do is compress that process by saying (that) over a six month time, we're going to provide (entrepreneurs) the platform--which is the networking, the education---to not only meet angel investors, but also to meet potential customers, and to meet service providers who can help you in your business. So we're all about building the businesses--not betting on them.”
If the history of the AVF itself is anything to judge by, that’s a statement that actually holds quite a bit of weight. According to
Richard Levin, the Chairman of the Private Investors Forum, roughly 75 percent of the companies that have pitched at the AVF in years past have gone on to raise capital. To put that estimate into even sharper focus, it’s worth mentioning that AVF-participant companies have managed to raise more than $16 million since the event first took place in 1998. Companies specifically affiliated with the 2009 Fair have collectively raised $4.4 million to date, with approximately $2 million more to follow in promised financing.
Especially for those who’ve been involved with the AVF in recent years, it probably goes without saying that a healthy portion of that success is the result of Gaydos’ dynamic managerial style (Gaydos took over the AVF in 2004), which is certainly accented by her own wide network of angel investors. There’s also her willingness to simply pick up the phone and introduce a lesser-known AVF company to an investor who might potentially be interested. “It takes a huge ecosystem to be successful in economic development,” she offers. “And I'd like to think that we at the AVF and the Private Investors Forum are that consortium: We bring all these people together. We put them in a blender, so to speak. And we try to match them up, and pair them up, and team them up, so that what comes out the other side are successful companies which then build the economy.”
FOLLOWING THE TRAJECTORYAs an active investor who also currently teaches entrepreneurship at
Villanova University,
Ken Schwenke is someone who has had the fairly unusual experience of participating in the AVF process from both sides of the proverbial fence. Schwenke first entered the AVF’s orbit during the fundraising stage of his food services company, the
Off Campus Dining Network, which offers flexible meal plans for college students. This year, he’s acting as a semifinalist judge. And how does he describe the process now? Not unlike the rising tide that raises all boats, he says.
“I think having one venue where people can get exposed to a whole variety of potential investors,” adds Schwenke, “and at the same time get feedback that makes them better and therefore more attractive to those investors--I think that argues very well for why the AVF was well worth the time and effort that my team put into it.”
Interestingly enough, Schwenke’s AVF story doesn’t end there. Not only has he since turned on a number of fellow investors to companies he first learned of at the Fair. But he also claims to have discovered two or three companies this year that may someday soon become new additions to his investment portfolio. And after raising a significant amount of investment through the AVF for his Off Campus Dining Network--thanks in part to Gaydos, by the way, who actually introduced his company to members of her own personal network--Schwenke eventually managed an impressive exit with the French-based food-services giant
Sodexo.
Understandably of course, not every company that chooses to enter the AVF’s orbit comes out the other end with a success story to share. Take Scott Herr, for instance, the CEO of
Sinewave Energy Technologies, a company that produces technically complicated lighting dimmers for applications such as warehouses and large parking garages. “The Venture Fair was a little disappointing,” he suggests. “I don't think there was enough time given to properly present what the company is capable of doing. They’re trying to do too many people, too fast.”
History shows, however, that Herr is among the exceptions, as the AVF’s historic rule shows a track record of successes..
One of Valerie Gaydos’ favorite success stories, for instance, is that of Jeffrey White, an angel investor who discovered a truly bootstrap-style technology company by the name of FingerWorks at the AVF in 2004. White went on to become that company’s CEO before eventually selling it to Apple, and making its two principles--one of whom was a college student of very limited means--an astronomical fee in the process. The FingerWorks technology, by the way, is something iPhone owners use every day--it’s the so-called “pinch” technology that expands and shrinks the iPhone’s display (as well as that of the iPad) with the touch of a finger.
It may very well be Jeff Snellenburg, however--an active angel investor, a member of the Private Investors Forum, and an AVF Selection Day judge--who best explains the Fair’s enduring appeal when he describes it as an ongoing process that participating companies need to be fully invested in. That is, assuming they intend to take full advantage of everything the AVF has to offer. “It's not just showing up and presenting for 15 minutes and having a booth,” he insists. “You really can get educated in the process.”
As for the next and final step in that process--the actual Fair Itself--it’ll be taking place this year on April 6 at the Union League. A total of 26 finalist companies will be giving full presentations, while another 17 semifinalists will be offering quick and concise elevator pitches. Here’s a complete list of the finalist companies:
Apeliotus Vision Science;
Applied Computation Technologies;
Chi Sage Systems; CircleBuilder Software; The Club Card;
Compliance Assurance Corp;
DFR Solutions;
Edge Therapeutics;
Engaged Minds;
ESP Digital Media;
EyeIC; Freya Energy;
Halfpenny Technologies;
ICVN Inc.;
Lap Belt Cinch;
LifeCare Gateway;
MedCPU; Ocular Proteomics, LLC;
OxiCool, Inc; Plasmonix, Inc.;
Scorelogix, LLC; Stealth Marketing, Inc.;
Store Eyes, Inc.; Transcription Diagnostics, Inc.;
ZSX Medical;
Zukay Live Foods.
Dan Eldridge covers the creative entrepreneurial community from his base in
Philadelphia. See more of his work at mediabistro.com/ypmedia, or read his
entrepreneurship blog at laborparty.wordpress.com. To receive Keystone Edge free every week, click
here.
Photos:
Ken Schwenke, founder and managing partner of Gravitas with his Cirrus Airplane at Wings Airfield in Blue Bell (Jeff Fusco)
Jeff Snellenburg, member of the Private Investors Forum (Jeff Fusco)
Valerie Gaydos (Mike Bupp)
Ken Schwenke (Jeff Fusco)