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Venture capital funding stream slows to a trickle
By KRIS HUNDLEY, Times Staff Writer Investors, burned on once-hot dot-coms and telecom companies, have become tight-fisted and conservative in the past year. For the three months ended March 31, venture capital investments in Florida companies dropped 60 percent from year-ago levels. And the biggest deal done in the Tampa Bay area was for a distinctly low-tech business that provides medical supplies to diabetics. During the first quarter of 2002, venture capital companies invested $81.4-million into 13 Florida companies. Deal flow for the quarter was the lowest it has been since the fourth quarter of 1998. Though investments are down just 11 percent from the end of 2001 and the number of deals is about the same, no one seems eager to call it a bottom. "I think we've actually taken some steps backward," said Marty Donsky, marketing manager of PricewaterhouseCoopers' Florida technology practice. "There's a lack of seed capital in Florida and when you don't have early stage funding, the first part of the process gets nipped in the bud. If you don't have minnow investors, no big fish come along." Nationwide, a total of $6.2-billion was invested by venture capital companies, down 50 percent from a year ago. Nearly 800 deals received funding, with California companies garnering nearly half of the funds. Florida ranked 13th among the states, attracting 1.3 percent of the total invested. The data on recent private equity investing is contained in the quarterly MoneyTree Survey compiled by PricewaterhouseCoopers, Venture Economics and the National Venture Capital Association. Diabetic Supply USA received the largest local investment and was the second-largest deal in the state. Venture capital companies in Denver and Chicago invested $18.6-million in the company, which was started in 1994. Diabetic Supply has 160 employees in Clearwater. It provides medical supplies to about 30,000 patients. Two other Tampa Bay area companies received follow-on investments from venture capital companies that had backed them in the past. Gold Coast Restaurants, a chain of seafood restaurants in Tampa, got $400,000. Purilens of Tampa, which makes contact lens cleaning systems, received $417,000. The biggest deal in Florida was a $30-million investment in online marketer Naviant Inc. in Boca Raton. With fewer initial public offerings, companies have been forced to return to the private market far more often than in the past few years. It was Naviant's seventh round of private financing. The discouraging news on venture capital investing didn't keep a handful of college students in the bay area from participating in the second annual business plan competition. The contest is sponsored by several local businesses as well as TechVillage Tampa Bay, the local business incubator. Winner of the contest, which attracted seven plans, was a proposal by two University of Tampa graduate business students to create an online broker for the ocean container shipping industry. Byron Bravo, who graduates from UT this month, had worked in an import-export business in his native Ecuador before entering grad school. His partner, Anika Laracker, had worked for a steel mill in her native Netherlands. One feature of their Web site would be an online auction of unused container capacity. "Our idea is to partner with a shipping company like Lykes Line in Tampa so we can access their system and when we see extra capacity, we can contact customers and try to sell it," Bravo said. He's already running up against money issues. Bravo estimates it would cost about $300,000 to develop his company's software. First prize in the business plan competition is $2,500. "After I graduate, I want to get in the import-export business here as a broker," Bravo said. "After I get some contacts, I'll work on this idea." PWC's Donsky, who served as a contest judge, said that even if none of the plans come to fruition, they at least forced students to think about starting a business. "The contest is meant to stimulate interest and enthusiasm among students," he said. "I think it accomplishes that." -- Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.
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From the Times Business report Robert Trigaux
From the AP
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