Tech Coast Venture Network is aiming to push more investment funds to the smallest of companies: early stage startups.
The Orange County technology group is looking to draw local wealthy folks into a network of investors that could hand out $250,000 to $500,000 to companies each quarter next year, said Bart Greenberg, chairman of Tech Coast Venture Network.
Greenberg is a partner at law firm Manatt, Phelps & Phillips LLP in Costa Mesa.
The investing group traditionally focused on networking,providing a place for startups to pitch their companies and meet venture investors.
Now it’s looking to build a network of “unafilliated investors” who are willing to drive more local investment but don’t want to join a formal angel group.
Tech Coast Venture Network doesn’t plan to raise money under the plan. Instead, it is matching investors with startups.
Technology companies are expected to get most of the funding, with medical device and other healthcare-related startups also getting a share.
Greenberg said he’s seen plenty of interest from investors.
“I have no concern about deal flow,” he said.
The group has focused on OC but is looking at the rest of the Southland as well, Greenberg said.
The effort aims to fill the “funding gap” in Southern California for companies that have no revenue or prototype product but do have a business plan and potential.
A lack of funding for early stage companies is common across the country, said Randy Churchill, director of business development for PricewaterhouseCoopers International LLP’s technology practice in Los Angeles.
During the past few years, angel investors that once anted up for these young companies have focused on more mature companies in OC and Southern California.
Observers say OC trails other regions in Southern California in early stage investments.
Churchill said 4.6% of venture funding in the U.S. went to early stage companies in 2005. Los Angeles and San Diego saw 4.8% targeted for early stage companies.
OC had just 1.3% of venture funding going to early stage startups.
Tech Coast’s new initiative comes as Laguna Beach-based Okapi Venture Capital LLC’s roughly $30 million fund gets off the ground.
Okapi’s fund, which closed last month, also targets early stage companies. It’s backed by Dwight Decker, chief executive of Newport Beach-based chipmaker Conexant Systems Inc. and founder of the Orange County Technology Action Network, or Octane,a group of local venture investors and companies.
The relative shortage of early stage investment in OC isn’t because there’s a lack of wealth, said Greg Roche, a Rossmoor management consultant who is working with the Tech Coast Venture Network.
The county has 113,000 millionaires, the third-most of any county in the U.S., according to Roche, who cited a study by London-based Taylor Nelson Sofres PLC.
The venture network group plans to tap doctors, dentists, lawyers, real estate brokers and technology executives who haven’t been angel investors in the past.
Greenberg said it’s a way for investors to put money in young companies without the commitment,including time and dollars,that some angel investing groups require.
Angel investing isn’t for everyone, Greenberg said.
“It’s an alternative,” he said. “It’s not for the faint of heart.”
Drumming up Interest
Tech Coast Venture Network has launched some marketing efforts on its early stage investing plan. It’s also making contact with people who have connections to the wealthy, such as lawyers and money managers.
Once potential investors show interest, the group sponsors workshops that help the angels understand more about early stage investing. The group also has started another set of programs that helps companies prepare their pitches.
One program lets startups get advice on their business plans for about $100. Four startups have signed up for the program.
Once companies’ business plans are finalized, they go into a database, which investors can search.
Greenberg is confident he’ll find new investors.
“I think there’s a lot of people,” he said.
