Nothing Ventured, Nothing Gained

The Third Annual Connecticut Venture Fair

Commercial Record, July 19, 1996

Ralph levy

Imagine walking into a room and telling your story to a hundred attentive venture capitalists: "Boy, is this a great business. Gee, could we make a fortune by Tuesday if only we had a few million dollars today."

Now imagine such a, thing happening here in Connecticut. Kinda makes your head hurt. But it actually happened like that for about 20 companies in early May at the Connecticut Venture Fair.

The Venture Fair is put together by the Connecticut Venture Group and Connecticut Innovations, Inc. And it's sponsored by a serious group of companies: Advest, Alex. Brown, Arthur Andersen, Decision Strategies, Fleet Financial, Price Waterhouse, Shipman & Goodwin, and Testa Hurwitz & Thibeault, with a lot of volunteer effort from the business community. Co-chairs of the event were Katherine Vick of Katherine Vick, Ltd. And Victor Budnick, president of Connecticut Innovations Inc.

The selection process started back in March on the 11th floor of the Gold Budding in downtown Hartford. A dozen business people sat around the table as John Zembron of Price Waterhouse assigned a few companies to each person. Their job was to evaluate each company and return with a detailed evaluation and recommendation for participation in the Venture Fair. Companies had to be serious businesses with the potential of returning five or 10 dollars for every dollar invested. The list included start- ups as well as more mature companies that were entering a growth phase.

In the right circumstances, a timely investment of a few million dollars can thrust a company into a dominant position in its market. In early April the selection committee sat around a big table at Connecticut Innovations in Rocky Hill to evaluate nearly 50 companies for 20 available spots. What a strange collection of stories they each brought to the table. Some companies that appeared interesting on paper apparently did not actually exist or at least not that you could tell. Some companies that filled out the original application forms never returned repeated phone calls. Other companies had internal issues to deal with - the vice-president says "Yes," but Ns dad, the president, calls back later to say "No."

When it comes down to it, 24 companies are selected. Naturally, a few will not meet the short timetable required and, sure enough, 20 end up at the Fair. In the last weeks before the Venture Fair, the presentations are crafted and revised. Why do we all want to tell each and every detail about our business to a room full of (rich) strangers? Why can't we tell them. Enough to get them interested but not enough to put them to sleep? Well, eventually the number of slides gets cut back and the display booths are all set.

A Day At The Fair

Come the big day, people are nervous. The Stamford Marriott is buzzing. 1-95 was crawling because of an earlier accident and people are rushing in hoping that they didn't miss much. One guy tries his slides and finds that the details are unreadable across the room. A hurried phone call and cleaned up slides are made that morning and rushed over in time for his afternoon presentation. The company presentations are diverse. Some talk about millions and even billions of dollars. Some talk about saving lives, or at least making tasks easier. They talk about the money they will make in hard- ware, software, medicine and manufacturing. You can share this wonderful and rewarding adventure with the right investment now.

Perhaps each presentation honestly shows what it might be like working with the company. Some presentations are so inwardly focused that they are obscure. One was so disconnected from the audience that they showed their standard "Gee, it's going to be great' movie rather d= talk to the audience. Perhaps they are also not attuned to the marketplace.

Others make gross generalizations and present huge numbers in hopes of attracting interest Some- times it seems that everyone in the world who ever wore clothes or who ever saw a car is counted as a potential customer for thousand- dollar goods or services. Maybe the lack of hard reality in the presentation is an indication of a lack of reality in the business.

And how can presenters be surprised when their time is up? Why do they their important conclusions to be cut off when the have known for a month exactly how much time they have? Perhaps they plan and execute their business plan with the same care.

But many of the presentations are good and believable.

Two Companies

IQ Systems of Newtown is a harbinger of change. Jeff Robinson, president talks about the changes he has seen in software in the last decade. In the old days, code was developed for each application. Problems that were common to many applications were solved over and over. The advent of object-oriented programming has produced reusable modules, RAD, (rapid application development) environments and client/server architectures

Jeff observes that these changes in software development can be translated into hardware development. IQ Systems has created a RAD environment for hardware prototypes. Their chips become part of silicon objects that can be strung together by established protocols like Lego blocks. A chip in a modem, in a voice synthesizer, in a CRT, in a printer, in a motor controller. Prototypes can be developed faster. Even better, when the prototype is accepted by the customer, the IQ modules are available in ASIC- libraries so that very inexpensive production units can be fabricated.

IQ's product line includes chips, software development kits and protocols. By being the first in the field to put it all together, they are trying to set the standards for the industry. They hope dominate their market á la Microsoft and Netscape. The good news for Connecticut is that IQ Systems' product is intellectual property, not high-volume, low-profit hardware. They have no plans to move to Arizona or to Silicon Valley. Jeff Robinson's last company tried that. Yes, there were a lot of talented semiconductor engineers, but they were likely to work for the competition at any time. Here, Mr. Robinson believes that they can attract the key semiconductor people and retain them.

Jeff Robinson and IQ Systems generated quite a lot of interest at the Venture Fair. They are presently negotiating with several- groups individuals and hope to close this round of funding in August.

As a bonus, IQ Systems got as new lawyer out of the Venture Fair. Rick Borden of Shipman & Goodwin was the venture fair coordinator for IQ Systems. They found him knowledgeable about their business and helpful in getting in touch with the venture community. Instead of going to Boston, IQ Systems has come to Hartford.

Software also has its communication and networking opportunities. Back in the old days at the end of the twentieth century, people thought that computers would make their lives easier. Then it turned out that computers each spoke a different dialect of the universal language of bits and bytes. Each computerized operation could do stuff at. amazing speed, as long as it didn't have to talk to other computers. Each company built up its own protocols and standards for electronic data exchange. Or at least each department within each company had protocols and standards. But the standards and protocols were all different. It was as if the Tower of Babel had been recreated in cyber space. If only a universal translator could be found.

So, TSI International Software Ltd. of Wilton developed a universal data translator. They call it Mercator since it maps any data set into any other data format. It actually does even more since it can combine data from several data sets into other data sets, mix and match. And like any good software company, TSI also has client/server-type software called Trading Partner to connect large companies with their small suppliers and even large companies with each other. And when the data forms are not compatible, Mercator translates them, on the fly.

TSI CEO Connie Galley spoke at the venture fair. TSI was a spin-off of Dunn & Bradstreet in 1985. They have grown to a $20- million business and are on a tremendous growth curve. This electronic commerce is very hot, and TSI is at the right place at the right time. Since many big companies are using Mercator software, selling is getting easier. Ain't it great!

Ira Gerard, CFO, came to the Venture Fair looking for business contacts. He is preparing for an IPO, and networking is always important. TSI is a savvy company, and they know that the Venture Fair is also a source for sales contacts. More contacts mean more leads and more business. More business translates into a better valuation for their IPO.

As business grows, TSI will open more sales offices around the world. Since corporate headquarters is in Wilton and all the executives live in Connecticut, they expect to stay right here where the quality of life is good.

The Times They Are A-Changin'

Some people talk about their technology. Some talk about utility. Some talk about their company. Everyone talks about predictions of the next five to 10 years with assurance. It is as if it were a divine revelation. Each is selling his own Vision. How it's going to be, how it's going to happen. So many units sold in 1998, so much gross income in 2000, this bottom line in 2002 and an IPO at this price in 2004. No surprises. A sure thing.

Listening to the visions of a new world is like a quick trip into the future. We know that the world is changing in ways we haven't even thought about. These presenters and their hoped-for financial partners are agents of the change. They present ideas that challenge our comfortable understanding of our world - gallstone removal without surgery, auto radiator coolant that can't boil over, industrial products with the defects re- moved at the beginning of the production process.

These people are also appealing to our greed. They claim that they are going to be incredibly rich very soon. If you are smart enough to join them, i.e., invest your hard-earned. money or even someone else's hard earned money, you will also be so rich that you won't know how to spend it all.

Not all stories are simple. Some of the companies have a history. Scan-Code of Rocky Hill is a restart. with 'a new management team of Robert Geckle, president, and Gerald Fenerty, CFO. Scan- Code makes automated mail sorting machines. Outgoing mail can be bar-coded to get the best Post Office discounts. Incoming and interoffice mail can be routed to reduce delivery times and keep mailroom costs in line. Also, the Post Office is changing the rules this. summer. Properly bar-coded bulk mail gets even bigger discounts but improperly bar-coded or unbar-coded mail looses discounts. Their market is starting to grow rapidly. Past problems have been cleaned up. They now have some patented components in their system and are ready to capture the mid-sized mail sorting market. It is a nice clean story. Any takers?

MicroGeneSys has a very public history. They spent $100 million or so developing an AIDS drug that doesn't work. Well, so now there's a new CEO, Daniel Adams. He sees this company as the low-cost manufacturer of pharmaceutical proteins. They can make very pure drugs at very low prices in very large quantities. And their technology is patented and proprietary. Well, they have a big load of debt to carry but, reborn, they can be successful. Listening to the stories, it is sometimes difficult to shift gears from one area to another every ten minutes. Medicine and pharmaceutics, information technology, home shopping and electronics. Everything is going to change. It is very exciting with many opportunities. The science and technology development of the '80s is being seen in the products of the '90s. The scientific breakthroughs of the '90s are providing the enabling technology for the next generation of products and business opportunities.

Each presenting company has a display booth where they can show their wares. It is also where they can have semi-private chats with interested parties. At least to set up a real meeting with potential investors.

The exhibit booths look like a singles bar. Hey, baby, what's your sign? Some are a little bashful, not wanting to look too eager. Others work the room. After all, the buyers don't want to miss a bargain. And the sellers have hopes and dreams to sell. Some of, the presenters say they met the very people that they hoped to meet. There are also exhibitors who did not make presentations to the group. Some will not really be ready until next year and just came to learn what it is all about. Dr. Bernie Weinberg, Ph.D. and Dr. Jerold Spitz, M.D., of West Hartford have a software company, Pen Medica Systems. Their product makes a doctor's work easier by automating all the paperwork for record keeping, reporting, ac- counting, billing and referral. Bernie Weinberg says that they are testing their product now. Dr. Spitz uses it in his office regularly. Nothing like trying to use it yourself to find out how friendly it re- ally is'. Next year they hope. to be a growing and viable business

At The End of The Day

At the end of the day the earlier talk about "cool technology" and 'market opportunities" melts away. The fortunate ones hear "How much do you need?", "I think I have a friend who may be interested," or "Send me a business plan:" The others have a drink and talk to each other. "Well, maybe next time", "All you need is one," and "They may be interested,"

And then they go out at the end of the day loaded. down like pa6k animals. Presidents of compares looking like your worst airport nightmare: wheeled carts precariously balanced and overloaded. Doorways and uneven floors to negotiate. Picking up the fallen box and stuffing it under the bungee cord. There must be a better way.

Some came to buy into a dream. Some came to sell a dream. Some of these dreams will probably come true.