Business: Venture capital fortunes fall

Venture capital investments in Florida companies slowed to a trickle in the quarter ended June 30, with only 10 deals being reported for a total of $35.05-million.

That's a far cry from a year ago, when more than four times as many deals were completed involving nearly 10 times as much capital. And it's the worst showing since the third quarter of 1996.

"There is a time for everything, and this is not the time for venture capital," said Marty Donsky, marketing manager of the Florida technology practice for PricewaterhouseCoopers in Tampa. "My gut says this is the bottom. Will it get much better next quarter? No, but it's not going to get a whole lot lower."

According to a quarterly survey produced by PWC, Venture Economics and the National Venture Capital Association, venture investments also declined nationally, to $5.7-billion from $12-billion a year ago.

What is especially troubling for Florida entrepreneurs is that the state's share of the national total dropped precipitously, to 0.6 percent. In the late 1990s, Florida typically garnered about 3 percent of venture capital investments.

Part of the reason for the fall in Florida's fortunes, Donsky said, is that many of the state's startups were in the telecom industry, which is in tatters. The state also lacks the longstanding connection between university research centers and venture money that exists in areas such as Atlanta and Research Triangle, N.C.

Finally, all but a handful of Florida-based venture capital companies have stopped making new investments. "Of the 12 to 14 active funds, maybe three or four are on the prowl," Donsky said.

Of the three Tampa Bay area companies receiving venture money in the second quarter, two were partly funded by local firms. Gold Coast Restaurants Inc. of Tampa received $1.4-million from a group of investors led by Tampa's Lovett Miller & Co. In St. Petersburg, software developer In.Vision Research was awarded $400,000 from Stonehenge Capital of Tampa and others.

Thrucomm, a St. Petersburg software company, received $1.5-million from out-of-state investors.

Despite the rough quarter, Donsky is optimistic. Two venture deals have been signed so far in the third quarter with Tampa Bay area software companies and a third is close to completion, he said.

"I think we'll have about $30-million in venture capital in the Tampa area this quarter," he said. "I'm not disheartened. Actually, I was thinking the best thing we need is a good dose of reality. We were probably getting ahead of ourselves, believing our own BS two years ago."

-- Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.