Add the Government to Your Client List
Corrections or additions?
This article by Bart Jackson was prepared for the November 28,
2001 edition of U.S. 1 Newspaper. All rights reserved.
Venturing Forth For Capital
One year ago Cross One Venture Partners finally said
it: “The emperor has no clothes.” This huge venture fund had
raised over $1 billion for a new high tech project. Then, after
analyzing
the market, Cross One abruptly announced “No.” It stated the
blatantly obvious secret, which was that growth mania had pumped up
the stock markets so high, so quickly without any solid foundation,
that further ventures were risky to the point of foolishness.
Cross One walked away and almost overnight venture capital shops
boarded
up.
That was the death knell and the funding picture remains bleak indeed.
Yet for those seeking seed money, there is still some hope. Venture
capitalist Fred Beste will discuss “Surviving Venture
Capital’s
Nuclear Winter” on Wednesday, December 5, at noon at a meeting
of the New Jersey Entrepreneurial Network (NJEN) at the Forrestal
Hotel. Cost: $45. Call 609-279-0010.
Managing partner of North Philadelphia’s Mid-Atlantic Venture Fund,
Beste will seek to show entrepreneurs where to find and how to court
those few and skittish investors still willing to fund all levels
of development.
The non-profit New Jersey Entrepreneurial Network offers an excellent
avenue of advice and contacts for new business folk. In addition to
providing mentoring guides for all size companies, it hosts
informational
seminars the first Wednesday of each month at the Forrestal Hotel.
As for their networking abilities, they claim that more than 11
percent
of their members have obtained funds through NJEN Angels. To view
the Angels list, browse www.njen.com/njen_angels.htm. To learn more about
NJEN, phone Robert Frawley at the above number or visit them
at www.NJEN.com.
“I have been in this business since l968,” says Beste,
“and
I have never seen the funding market this grim. A `nuclear winter’
is no hyperbole.” Frightening words from a man so immersed in
the business of capitalizing.
After a boyhood in Baltimore, Beste moved south to Florida’s Stetson
University. While Beste was obtaining his liberal arts degree, the
booming businesses of the 1960s were finding their funding needs met
by a new vehicle: the venture investment firm. Upon graduation, Best
joined on with a venture company and has never left the industry.
After seven years with investment firms in Washington D.C., then nine
in Kentucky, Beste came to Philadelphia and founded Mid-Atlantic
Venture
Funds, which he has run for the last 17 years.
Beste points out three major factors contributing to the “nuclear
winter” of venture capital opportunities. First, as Cross One
Funds so poignantly pointed out, the market climbed too swiftly,
setting
itself up for a fall, which came with an undeniable thud in the spring
of 2000. Then the telecommunications industry ran into serious
problems.
“No telecommunications company,” says Beste, “has sought
capital for anything more than building heating oil in the past
year.”
The final withered lily was the information technology business.
“Info
tech, well, frankly, the business stinks,” says Beste with a shake
of the head, “and we all know it. We all thought the tree was
going to grow through the sky. In retrospect, what is amazing is that
the Internet mania got as high and lasted a long as it did.” The
problem is that the entrepreneurs must still scour the desert in
search
of an oasis. Businesses still need to expand to fulfill customers’
needs. And while investors may have gone underground, business demand
remains. So how does today’s business person ferret out capital for
tomorrow?
Follow through on seed funders. Typically in the pasttwo “good times” decades, the entrepreneur sought seed moneyfrom a “Round A” source. Then several months later, afterclients were in place, the new business would turn to a “RoundB,” and then a “Round C” firm for expansion investment.Beste advises that, since all these later-end venture capitalistshave hidden away in caves, your best bet is to make a permanent friendand agent of any investor you have. Keep your seed-money funder andstrive to get him to invest more money as you expand. It will be mucheasier than trying to convince a stranger later on.Starve yourself to success. No longer can the would-bebusiness owner quit his $80,000 a year job at Acme Hi-Tech and hopeto draw a $120,000 salary from his newly launched brainchild. Expectto pull in your financial horns and scrape by on $30,000 for awhile.Also, glitzy is gone. Venture firms now love low overhead.”Five guys working like hell in the back of a garage,” saysBeste, “look a lot better to me than some fool who has moved hisstart up business into the best suite in town. That sort ofsquanderingof precious capital does not come from a person in whom I’d like toinvest.”Invest your own cash. “It’s back to basics,” saysBeste. “Venture capitalists are willing to put up the lion’s shareof the cash for a lamb’s share of the profits. But we are no longerwilling to put it all up.” Investors want to see a commitmentof more than ideas and time. A second mortgage makes a lovely businesspresentation.First launch the ship, then invite investors aboard. Themost attractive business profile is one where a few partners havepooled resources, and begun the business on their own. As they startup, they contact a funding firm not for investment, but merely withan invitation to watch them grow. Then, after a few months of struggleand some success, the entrepreneurs look infinitely more solid andattractive to the men with the purse strings.Explore new fields. With the telecommunications andinformationtechnology fields barren, investors are definitely looking to rotatecrops. Beste points to the example of health care; an industry thatwas throttled down from 25 per cent of the nation’s investment venturefunds, to near nothing in the past two years. Here is an industrystill holding 14 percent of the nation’s cash flow. Now, withinformationtechnology out of the way, its potential shines a little brighter.The sharp entrepreneur might do well to seek a similarlyunder-investedfield.Beste does not deny that America and many other nations havegone into decision paralysis following the events of September 11.Yet consumers are still buying, workers are still drawing salaries,and business niches remain to be filled by clever souls. Investorsmay be stunned by this final frost of the investment nuclear winter,but they will emerge from this temporary hibernation. Our money willnot lie idle for long.— Bart JacksonTop Of PageXML Changes EverythingTechnological change pauses for no man — or company.Despite tragedy and recession, the pace of change just keepsaccelerating.Companies that don’t keep up may cease to exist, yet many are toobusy with day-to-day survival to step back and look at the bigpicture.Mercer County Community College is sponsoring a series of TechnologyBreakfasts to provide a forum for assessing important trends. Nextup is XML. “XML is going to change everything. It’s going to bringthe web alive,” says Jay Gandy, assessment specialist withMCCC’s IT Centers.Gandy is organizing a Technology Breakfast, “XML: Business Impactand Opportunity,” on Wednesday, December 5, at 7:30 a.m. in MCCC’sadministration building. The free event is designed for CIOs, CTOs,COOs, technology managers, and planners. Call 609-586-4800 ext. 3634.”A lot of people see XML as a language, but really it is a systemfor defining other languages,” says Gandy. The current profusionof computer languages means many devices cannot “talk” toone another, or exchange information with databases, limiting theusefulness of the Internet. With XML, these barriers are erased.Gandy points to CNET (cnet.com) as a good source of basicinformation on XML, also known as eXtensible Markup Language. Thesite explains that XML solves the Internet communication problembecause”rather than specifying where to display something, Web builderswill be able to specify the structure of the document. For example,you can specify the document’s title, its author, a list of relatedlinks and so on. Then any device with an XML browser — a palmtop computer, a set-top box, or workstation, for example — willbe able to render a version of the document specifically tailoredto that device.”Going beyond the Internet, XML, says CNET, has a role in “servingthe publishing industry at large, for example, and especially peoplewho produce documents intended to appear across multiple media.”Another useful website for XML information iswww.gca.org/whats_xml.MCCC’s Technology Breakfast gives area companies a chance to figureout just where XML fits into their own operations. Gandy says decisionmakers “get to sit down and hear someone say `you’re going toget hit with a tremendous opportunity’.” This opportunity, hesays, turns into requirements. Companies may say “this is great,but what do we need to do to get up to speed?” The answer, saysGandy, often is training.The dot-com crowd missed the boat, in his view, because “theInternetis not a new business. It enhances whatever business you’re in.”XML adds further enhancements, and expands opportunities to capturemarket share and better serve customers and constituents of all kinds.Grabbing the advantage the Internet provides means companies needlots of trained IT professionals.There will be a whole new white collar workforce made up of all thepeople needed to keep company websites up to date and working, saysGandy. These web developers and networkers will need training, butdo not need a college degree.While Gandy is at pains to stress that the Technology Breakfasts existto explore big picture issues, and are not directly tied to anytrainingoffered at MCCC, the college does provide IT training. It is partof the Central New Jersey Centers for Workforce Excellence inInformationProcessing, which provides a series of training programs designedto expand and enhance the pool of IT professionals in Mercer andMiddlesex.The catalyst for the establishment of the IT Centers was a $3 millionworkforce development grant from the Department of Labor to the MercerCounty Workforce Investment Board, and is being administered througha joint effort of Mercer and Middlesex community colleges and theWorkforce Investment Boards in each county. MCCC is the leadcontractorservicing the grant through its Division of Corporate and CommunityPrograms.Ray Ingram, director of the Division of Corporate and CommunityPrograms, says that despite a slowing economy there is a growingmarketfor IT professionals, particularly those new white collar workerswho develop and maintain communications within companies.Gandy, who works under Ingram, says most of the individuals trainingat MCCC to fill these jobs are in their 30s and 40s. Some have beendownsized. Others are looking for new careers. “We even have onePh.D.,” says Gandy.Gandy came to MCCC when it received the workforce development grant.He describes his career as “eclectic.” He watched the Internetdevelop when he worked in communications for the military beginningin the late-1970s. He then obtained a degree in information technologyfrom Bellevue University (Class of 1991). Along the way, Gandy, aminister in the Assembly of God, took time out to work with”strugglingparishes.”Gandy came to New Jersey as pastor of a church in Voorhees, and, aftertraveling around a lot, has decided to stay in the state. His wife,Rene, is a stock room manager; they have four children. Luckily, hesays, he doesn’t have to turn to burger flipping for extra income.Rather, using his technology background, he moves from project toproject. Prior to accepting this fulltime position at Mercer, Gandyworked under a grant that trained individuals with disabilities forhigh tech jobs.”I’ve always been a project manager,” Gandy says. “Ialwayswent to a place where people needed help, and then moved on.”The two-year grant under which he is working now is nearing the endof its first year. He describes his mission as “making sure we’rehearing the employers. Making sure we’re hearing the students.”Top Of PageAdd the Government to Your Client ListThe Department of Defense is looking for a whole lotof good landscapers, psychologists, building contractors, and eventeddy bear manufacturers — as are other government agencies. TheProcurement Assistance Center at the New Jersey Institute ofTechnologyteaches entrepreneurs to fill the need of government at all levelsfor outsourcing, a cost-efficient way to obtain the thousands ofcategoriesof goods and services it needs.Now in its 14th year, the Procurement Assistance Center helpscompanies,especially those owned by women or minorities, win governmentcontracts.It operates under a cost-sharing cooperative agreement between theDepartment of Defense and the New Jersey Institute of Technology,under the auspices of NJIT’s Office of Economic Development. Thecenter’spurpose is to provide marketing, contractual, and technical assistanceto small New Jersey companies that are interested in selling theirgoods and services to the Department of Defense and other governmentagencies.NJIT holds a free seminar on “How to Do Business with the Stateand Federal Government” on Thursday, December 6, at 10 a.m. atthe Mary G. Roebling Building in Trenton. Call 973-596-3105.The center has grown from a one-person program with a budget of lessthan $200,000 to a state-wide organization operating with a staffof four and a budget of $500,000. It maintains offices in Newark,Trenton, Mt. Holly, and Atlantic City.Assistance is provided to firms through the sponsorship of outreachworkshops and seminars, implementation of government market researchin the form of bid information opportunities, and one-on-onecounselingon all aspects of government procurement. Clients are trained inE-commerceand educated on the bidding process that leads to governmentcontracts.The federal procurement process for small, women-owned, andminority-ownedbusinesses was complicated by the enactment of the Federal AcquisitionStreamlining Act of 1994. This act requires the government to procureits goods and services electronically via computer rather than throughpaper proposal submittals. This change will be integrated within thenext few years, and does away with over 200 federal acquisition lawsas they apply to the purchase of goods. The center is educating newbidders and veterans alike on the new procedures.Since 1986 the center has helped New Jersey businesses secure morethan $435 million in government contracts.Anyone with a small business should consider bidding on governmentcontracts. The Department of Defense and other government departmentsbuy for their bases, their projects, their employees, and for theemployees’ families. That’s where the teddy bears come in. One ofthe center’s clients sells the stuffed animals, and, through its help,won a contract to place them in PXs.The center’s clients include doctors, lawn maintenance companies,attorneys, builders, testing laboratories, office supply companies,computer instructors, psychologists, landscapers, and many, many moretypes of professionals and businesses. The government buys anythinga business — or a family — would buy. Toilet paper to liquor,some government agency needs it.In its upcoming seminar, the center will go over the followinginformation:How purchases over $2,500 are advertised.How to find purchases under $100,000.How to apply for Central Contractor Registration (CCR).Certification training for federal and state agencies andlarge companies.An overview of the bidding process.A review of applicable regulations.Introduction to electronic commerce.Seminar participants will also be informed of the free servicesthe center provides, including information pertaining tosubcontractingopportunities, one-to-one technical assistance in completing bidpackagesand other paperwork, and help in resolving federal government contractproblemsThe most important step for small businesses looking for new clientsis to get in there and bid.Previous StoryNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
