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
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
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
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
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
seminars the first Wednesday of each month at the Forrestal Hotel.
As for their networking abilities, they claim that more than 11
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
"I have been in this business since l968," says Beste,
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
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,
itself up for a fall, which came with an undeniable thud in the spring
of 2000. Then the telecommunications industry ran into serious
"No telecommunications company," says Beste, "has sought
capital for anything more than building heating oil in the past
The final withered lily was the information technology business.
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
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
two "good times" decades, the entrepreneur sought seed money
from a "Round A" source. Then several months later, after
clients were in place, the new business would turn to a "Round
B," and then a "Round C" firm for expansion investment.
Beste advises that, since all these later-end venture capitalists
have hidden away in caves, your best bet is to make a permanent friend
and agent of any investor you have. Keep your seed-money funder and
strive to get him to invest more money as you expand. It will be much
easier than trying to convince a stranger later on.
business owner quit his $80,000 a year job at Acme Hi-Tech and hope
to draw a $120,000 salary from his newly launched brainchild. Expect
to 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," says
Beste, "look a lot better to me than some fool who has moved his
start up business into the best suite in town. That sort of
of precious capital does not come from a person in whom I’d like to
Beste. "Venture capitalists are willing to put up the lion’s share
of the cash for a lamb’s share of the profits. But we are no longer
willing to put it all up." Investors want to see a commitment
of more than ideas and time. A second mortgage makes a lovely business
most attractive business profile is one where a few partners have
pooled resources, and begun the business on their own. As they start
up, they contact a funding firm not for investment, but merely with
an invitation to watch them grow. Then, after a few months of struggle
and some success, the entrepreneurs look infinitely more solid and
attractive to the men with the purse strings.
technology fields barren, investors are definitely looking to rotate
crops. Beste points to the example of health care; an industry that
was throttled down from 25 per cent of the nation’s investment venture
funds, to near nothing in the past two years. Here is an industry
still holding 14 percent of the nation’s cash flow. Now, with
technology out of the way, its potential shines a little brighter.
The sharp entrepreneur might do well to seek a similarly
gone 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. Investors
may be stunned by this final frost of the investment nuclear winter,
but they will emerge from this temporary hibernation. Our money will
not lie idle for long.
— Bart Jackson
Technological change pauses for no man — or company.
Despite tragedy and recession, the pace of change just keeps
Companies that don’t keep up may cease to exist, yet many are too
busy with day-to-day survival to step back and look at the big
Mercer County Community College is sponsoring a series of Technology
Breakfasts to provide a forum for assessing important trends. Next
up is XML. "XML is going to change everything. It’s going to bring
the web alive," says Jay Gandy, assessment specialist with
MCCC’s IT Centers.
Gandy is organizing a Technology Breakfast, "XML: Business Impact
and Opportunity," on Wednesday, December 5, at 7:30 a.m. in MCCC’s
administration 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 system
for defining other languages," says Gandy. The current profusion
of computer languages means many devices cannot "talk" to
one another, or exchange information with databases, limiting the
usefulness of the Internet. With XML, these barriers are erased.
Gandy points to CNET (cnet.com) as a good source of basic
information on XML, also known as eXtensible Markup Language. The
site explains that XML solves the Internet communication problem
"rather than specifying where to display something, Web builders
will be able to specify the structure of the document. For example,
you can specify the document’s title, its author, a list of related
links and so on. Then any device with an XML browser — a palm
top computer, a set-top box, or workstation, for example — will
be able to render a version of the document specifically tailored
to that device."
Going beyond the Internet, XML, says CNET, has a role in "serving
the publishing industry at large, for example, and especially people
who produce documents intended to appear across multiple media."
Another useful website for XML information is
MCCC’s Technology Breakfast gives area companies a chance to figure
out just where XML fits into their own operations. Gandy says decision
makers "get to sit down and hear someone say `you’re going to
get hit with a tremendous opportunity’." This opportunity, he
says, turns into requirements. Companies may say "this is great,
but what do we need to do to get up to speed?" The answer, says
Gandy, often is training.
The dot-com crowd missed the boat, in his view, because "the
is not a new business. It enhances whatever business you’re in."
XML adds further enhancements, and expands opportunities to capture
market share and better serve customers and constituents of all kinds.
Grabbing the advantage the Internet provides means companies need
lots of trained IT professionals.
There will be a whole new white collar workforce made up of all the
people needed to keep company websites up to date and working, says
Gandy. These web developers and networkers will need training, but
do not need a college degree.
While Gandy is at pains to stress that the Technology Breakfasts exist
to explore big picture issues, and are not directly tied to any
offered at MCCC, the college does provide IT training. It is part
of the Central New Jersey Centers for Workforce Excellence in
Processing, which provides a series of training programs designed
to expand and enhance the pool of IT professionals in Mercer and
The catalyst for the establishment of the IT Centers was a $3 million
workforce development grant from the Department of Labor to the Mercer
County Workforce Investment Board, and is being administered through
a joint effort of Mercer and Middlesex community colleges and the
Workforce Investment Boards in each county. MCCC is the lead
servicing the grant through its Division of Corporate and Community
Ray Ingram, director of the Division of Corporate and Community
Programs, says that despite a slowing economy there is a growing
for IT professionals, particularly those new white collar workers
who develop and maintain communications within companies.
Gandy, who works under Ingram, says most of the individuals training
at MCCC to fill these jobs are in their 30s and 40s. Some have been
downsized. Others are looking for new careers. "We even have one
Ph.D.," says Gandy.
Gandy came to MCCC when it received the workforce development grant.
He describes his career as "eclectic." He watched the Internet
develop when he worked in communications for the military beginning
in the late-1970s. He then obtained a degree in information technology
from Bellevue University (Class of 1991). Along the way, Gandy, a
minister in the Assembly of God, took time out to work with
Gandy came to New Jersey as pastor of a church in Voorhees, and, after
traveling around a lot, has decided to stay in the state. His wife,
Rene, is a stock room manager; they have four children. Luckily, he
says, he doesn’t have to turn to burger flipping for extra income.
Rather, using his technology background, he moves from project to
project. Prior to accepting this fulltime position at Mercer, Gandy
worked under a grant that trained individuals with disabilities for
high tech jobs.
"I’ve always been a project manager," Gandy says. "I
went to a place where people needed help, and then moved on."
The two-year grant under which he is working now is nearing the end
of its first year. He describes his mission as "making sure we’re
hearing the employers. Making sure we’re hearing the students."
The Department of Defense is looking for a whole lot
of good landscapers, psychologists, building contractors, and even
teddy bear manufacturers — as are other government agencies. The
Procurement Assistance Center at the New Jersey Institute of
teaches entrepreneurs to fill the need of government at all levels
for outsourcing, a cost-efficient way to obtain the thousands of
of goods and services it needs.
Now in its 14th year, the Procurement Assistance Center helps
especially those owned by women or minorities, win government
It operates under a cost-sharing cooperative agreement between the
Department of Defense and the New Jersey Institute of Technology,
under the auspices of NJIT’s Office of Economic Development. The
purpose is to provide marketing, contractual, and technical assistance
to small New Jersey companies that are interested in selling their
goods and services to the Department of Defense and other government
NJIT holds a free seminar on "How to Do Business with the State
and Federal Government" on Thursday, December 6, at 10 a.m. at
the Mary G. Roebling Building in Trenton. Call 973-596-3105.
The center has grown from a one-person program with a budget of less
than $200,000 to a state-wide organization operating with a staff
of 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 outreach
workshops and seminars, implementation of government market research
in the form of bid information opportunities, and one-on-one
on all aspects of government procurement. Clients are trained in
and educated on the bidding process that leads to government
The federal procurement process for small, women-owned, and
businesses was complicated by the enactment of the Federal Acquisition
Streamlining Act of 1994. This act requires the government to procure
its goods and services electronically via computer rather than through
paper proposal submittals. This change will be integrated within the
next few years, and does away with over 200 federal acquisition laws
as they apply to the purchase of goods. The center is educating new
bidders and veterans alike on the new procedures.
Since 1986 the center has helped New Jersey businesses secure more
than $435 million in government contracts.
Anyone with a small business should consider bidding on government
contracts. The Department of Defense and other government departments
buy for their bases, their projects, their employees, and for the
employees’ families. That’s where the teddy bears come in. One of
the 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 more
types of professionals and businesses. The government buys anything
a 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 following
the center provides, including information pertaining to
opportunities, one-to-one technical assistance in completing bid
and other paperwork, and help in resolving federal government contract
The most important step for small businesses looking for new clients
is to get in there and bid.
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