 |
||||||||
 |
||||||||
|
||||||||
|
An assist for small start-ups
By KRIS HUNDLEY © St. Petersburg Times, published October 3, 2000 John Rogers needed a quarter-million dollars for his biotech company in Alachua. Tim Cockshutt, principal in Advantage Capital Florida Partners of Tampa, was on a mission to invest $16-million by the end of the year.
Perfect match? Not necessarily. Recently, Advantage announced it would invest $275,000 in Rogers' company, AquaGene LLC. But the deal probably wouldn't have happened without a unique program started by Advantage to funnel seed money to promising Florida technology start-ups that otherwise would be too small to attract venture capital. Advantage is using scouts around the state to seek out, prescreen and prepare the management teams and business plans of such tiny companies for institutional investors. Currently Advantage has contracted with two submanagers: Caerus FirstRound Partners LLC in Gainesville and Atlantic FirstRound Partners in Melbourne. Both submanagers have the same mission: identify high-potential, well-managed tech start-ups that can make clear progress with relatively small infusions of cash. In return, the scouts get half of Advantage's management fee and half of any profit from the investment. Shelly Schuster, director of the Sid Martin Biotechnology Development Institute in Alachua and biochemistry professor at the University of Florida, is the principal at Caerus who put together the AquaGene deal. He is donating his pay as submanager to a University of Florida foundation that will benefit the biotechnology program. "The transaction cost for venture capitalists is about as big for a small investment as it is for a multimillion-dollar investment," said Schuster, who helped prepare AquaGene for Advantage's review. "But Tim had this idea that if he could avoid the transaction cost, he'd be willing to invest in $250,000 dollops, especially if the money would allow the companies to make a quantum leap in their value." Cockshutt, whose venture capital portfolio is funded under the state's CAPCO program with $82-million from Florida insurance companies, said small investments are generally far too time-consuming and risky. He has focused on making investments in the $1-million to $3-million range, doing 11 deals totaling $20-million. "There are more unknowns in little companies," he said. "More blind leaps of faith." But Cockshutt, who has been running Advantage since April 1999, also knows that Florida start-ups suffer from the shortage of seed capital. These companies have tapped out family and friends but are not ready for institutional investors. While wealthy angel investors sometimes step in, demand for seed money is always greater than supply. Desperate for capital, entrepreneurs often give up too much control over their company, pay high finder's fees or go under. Said AquaGene's Rogers, "We had two plans: shut 'er down or get funded." AquaGene had survived for three years on about $600,000 from angels. But wealthy individuals were deserting biotechs for flashy dot-com investments. At the same time, traditional venture capitalists were flush with cash but were raising their minimum investment level. "That means I got a lot of polite no's, particularly from out of the area," said Rogers, a non-scientist who had experience as chief financial officer of a publicly traded electronics company. Some of the offers AquaGene did get were from questionable sources. "I had one shyster who straight-out lied to me about how he could get the money," Rogers said. "The fact is that most people who are willing to work on financing less than $1-million aren't very good at it." Even going through Advantage's scout system was a long and difficult process for AquaGene. "You've still got all the legal documents and analysis," said Rogers, who handled $100-million deals at his old job. Now that AquaGene has its $275,000 as well as another $140,000 from angels, the four-person company hopes to prove its concept: that it is possible to grow proteins in the livers of genetically engineered fish that can be used as the basis for new blood-clotting drugs. Rogers fully expects AquaGene will reach this benchmark, then receive additional funding from Advantage. "Their valuation of AquaGene was breath-taking," Rogers said, referring to the equity stake Advantage Capital took in his company in return for its investment. "But we've gotten good support and ideas from Tim. Now he's sitting in the cauldron with us."
 © 2006 • All Rights Reserved • St. Petersburg Times
490 First Avenue South • St. Petersburg, FL 33701 • 727-893-8111 
|
From the Times Business report
From the AP
|
