Foreign Power Seeking investors? Looking overseas could be your company's best bet.

Growth companies seeking investment capital should turn theirattention overseas, according to Joe Huard, a founding principalwith investment banking and brokerage firm Shamrock Partners Ltd.in Media, Pennsylvania. "Investors in Europe and Asia areanxious to cash in on American companies," says Huard. Thereare several reasons for this, some financial, some strategic.

First, Huard says, while in the United States everybody and hisbrother has a business plan and a deal, it's not the same inmany foreign countries. "There simply isn't the samevolume of investment opportunities in many foreign countries,"he explains.

Not that there's a total dearth of opportunities. The manybourses and stock exchanges around the globe traffic in establishedmultibillion-dollar enterprises that most North Americans havenever even heard of. But these are established companies. To findexciting young companies, ones with new technologies or productsthat can open vast markets virtually overnight, foreign investorshave to hunt further afield. "And their hunting frequentlybrings them to U.S. shores," says Huard.

But there's another, strategic factor that can bring foreigninvestments rushing in, according to Huard: licensing and jointventure opportunities. "Many foreign investors want theopportunity to capitalize on new technology, products and businessconcepts in their immediate [vicinity]," he says. "Oneway for them to do this is to make an investment in a U.S. company,with licensing rights in their territory as part of the deal."Promoting this concept gives fledgling companies an edge whenseeking foreign investors.

A Case In Point

Consider Larry E. Fondren, founder and CEO of InterVestFinancial Services Inc. in Berwyn, Pennsylvania, and a client ofHuard's. After years of operating proprietary computer networksso insurance companies could exchange blocks of business betweenthemselves, Fondren turned his attention to the bond market.

Little known to many businesspeople, even intelligent andwell-informed ones, the trading market for most corporate andmunicipal bonds has not kept pace with the technologicaldevelopments that have driven equity trading. "Rather thanleading-edge technology, bond [traders] rely on the simpletechnology of phones and faxes," says Fondren.

In fact, he says, for most bonds, there is very littlecentralized trading information that lets investors understandtrading history, recent prices and bids from other buyers--all ofwhich are standard for even the humblest of equities trading on theBulletin Board, the lowest rung of the Nasdaq stock market. As aresult, the bond market can be terribly inefficient, with hiddencosts that can seriously cut into the profits of bondinvestors.

Enter Fondren's InterVest, which has developed an electronicexchange for fixed-income securities (i.e., bonds) through whichinstitutional investors, brokers and dealers could trade directlywith each other without third-party intermediation. (Fondren isquick to point out that, for many reasons, while his system lookslike an exchange, acts like an exchange and is even regulated likeone, it is not an exchange, as defined by the Securities andExchange Act of 1934.) The system was officially launched inDecember.

Of course, developing a system like this takes capital, andplenty of it. After plowing in $3.5 million of his own money, plusanother $1.5 million borrowed from friends, family and creditcards, Fondren went looking for more. Working with Huard, Fondrenquickly closed a deal with his first outside investor, Britishmerchant banking and trading firm Dawnay, Day & Co.

Though merchant bankers are always looking for investments, theInterVest deal demonstrates the synergies that can occur betweenU.S. firms and their counterparts overseas. According to Fondren,Dawnay, Day, which is based in London and trades government bondsthroughout Europe, invested "not only to get a return but alsoto get the ability to license and import technology that would givethem a competitive edge in their marketplace." Indeed, theInterVest technology was just the kind of system Dawnay, Day wouldsoon find itself competing against, so having it in thecompany's arsenal was a powerful strategic advantage.

Naturally, Fondren wanted capital, but he also wanted somethingmore. "Our business has global potential," he says."But trading bonds in the United States is tricky enough. Totake our system into, say, Europe, we needed a local partner thatknew the subtleties, conventions and regulations in the manydifferent markets there."

In fact, so committed were both parties to the joint ventureopportunities that the final deal resulted in two investments.Dawnay, Day invested in InterVest, the U.S. company, but also inInterVest Ltd., a new, jointly owned company that was formed todeliver bond trading services to the European community.

Charting A Road Map

According to Huard, interest in American companies is highest inthe United Kingdom, Germany and the advanced economies of thePacific Rim, such as Japan and Malaysia. "These countries havemany large businesses that are well-established andforward-looking," says Huard, "but they do notnecessarily have the infrastructure to support the growing[entrepreneurial] companies that are so commonplace [in the UnitedStates]."

Moreover, Huard adds that in many of these countries, consensusand the status quo rule, not the inventor or engineer withunconventional ideas that lead to new products and services.Accordingly, he says, it's unlikely a surge in entrepreneurshipwill occur any time soon to detract from the interest in Americanentrepreneurial companies.

What do you need to raise capital overseas? Key requirements,says Huard, are products or services that are universal in appealbut for which, at least initially, there is a specific target orclientele. For instance, while InterVest has the potential toaffect every investor on the face of the earth, Fondren was able tocommunicate to Huard highly specific organizations that would beable to use the technology--namely, bond trading organizationsthroughout continental Europe.

Huard counsels entrepreneurs to avoid the temptation of tryingto locate and close a deal with overseas investors yourself."Time and expense aside--both of which are significant--if youdon't know your way around," he cautions, "you couldfind yourself closing doors that would otherwise be open to you hadthey been approached correctly."

Fondren is even more emphatic on this point, saying, in effect,don't try this at home without the assistance of a qualifiedprofessional. "It's still a wild world out there," hesays. "Without a professional who knows the ropes, you couldquickly find yourself lost and in trouble."

Contact Sources

InterVest Financial Services Inc., 200 Berwyn Park, #111,Berwyn, PA 19312, (800) 682-2749, (610) 647-9500;

Shamrock Partners Ltd., 111 Veterans Sq., Media, PA19063, (610) 566-4900.