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In the world of venture capital, there was a time when a $10 million fund was considered small. Today, less than $50 million is considered miniscule.
This resizing has been driven by a dramatic increase in start-up financing needs, says John Huntz, managing director of Fuqua Ventures in Atlanta. "In the past, $3 million to $5 million would take the company through its first year. Now it's $20 million," he says. "Smaller funds have greater difficulty participating in big rounds of financing. They have to be much more collaborative. [The marketplace] is also forcing smaller funds to participate at an earlier stage."
For entrepreneurs, this means raising $10 million to $20 million can take an experienced, already venture-backed management team, says Andrew Robbins, managing director of Sparkventures, a $20 million fund in Watertown, Massachusetts, that makes regional, early-stage investments.
"We initially invest $250,000 to $1 million, and up to $1.5 million over the life of the relationship," says Robbins of the fund targeting Net companies. "The companies we invest in must have a strong team that has either developed strong technology or that knows the vertical market well but lacks the Internet expertise."
Fuqua Ventures also seeks companies with strong management. "We use other people's intellectual capital and minds to help us sort through deals," says Huntz, who targets early-stage tech firms in the business-to-business and wireless markets. Fuqua starts with $1 million to $4 million investments.
To find small venture funds, look locally and ask your professional service providers. Here are two for you to start with:
Prism Opportunity Fund
Type: a $46 million SBIC fund based in Chicago
Invests in: privately held technology, specialty manufacturing, publishing and outsourcing-services companies in Chicago, Wisconsin, Iowa, Missouri and other parts of the Midwest
Send executive summary to: 10 S. Wacker Dr., #3500, Chicago, IL 60606
For more information: Call (312) 715-4514 or visit www.prismfund.com
Able Venture Fund
Type: a $25 million fund based in Baltimore
Invests in: businesses based in Baltimore or willing to relocate that are led by a strong management team, capable of reaching $30 million to $50 million in sales within 5 years and with either a significant competiive advantage or the benefit fo being the first in a large industry
Send business plan to: 111 S. Calvert St., #2300, Baltimore, Maryland 21202
For more information: Call (410) 547-1300 or visit
Behind The Deals
While recent megadeals inked between name-brand venture capitalists and budding Internet tycoons receive much of the media spotlight, there remains a community of private investors who quietly serve as the industry's workhorses-Small Business Investment Companies (SBICs).
According to the SBA, these government-leveraged, privately owned venture capital funds invested $4.2 billion in 3,100 deals in fiscal year 1999 and executed 53 percent of the transactions made in the venture capital industry. The average deal size totaled $1.35 million.