The NCEITA conference, “Banking on the Future of Technology” at UNC-Charlotte’s Barnhardt Center, mixed a little optimism with skepticism regarding the state of the Southeastern technology market.
The most intensely watched panel discussion, moderated by Bill Neal of Piedmont Venture Partners, centered on the future of venture capital investments in the Southeast, and featured Southeast Interactive Technology Funds partner Chris Austen, RBC Capital Partners managing partner Peter Diedrich, Pearl Street Group managing partner Glenn Howard, and Noro-Moseley Partners partner Charles Johnson.
“We’re still experiencing indigestion from the dot-com bubble, but I’m optimistic about the overall technology industry,” Neal said. “The biggest challenge right now for companies looking for money is that (the venture capital firms) are not quite resourced right. Once personnel become available to us, people will start seeing some investments.”
The panelists’ concerns came on the heals of the most recent PricewaterhouseCoopers’ MoneyTree report also released this week that showed VC investing continues to drop in North Carolina. (See story at: www.localtechwire.com/article.cfm?u=896 )
Johnson also cautioned the entrepreneurial crowd, and the panel concurred, that VC firms are expecting companies now seeking funding to have a plan that shows them maturing in four to six years rather than one to two years as was the case in the late 1990s when just about anyone with an idea related to the Internet or to the telecommunications industry could get funded. And all agreed that future investments are likely to be in the $20 million to $30 million range.
“If you invest $150 million in a company, in order for it to provide a return that is 10 times your original investment that company would have to generate revenue of $1 billion,” Austen said. “We’re interested in investing in companies that can grow to $200 million to $300 million in revenue.”
Added Johnson: “We want to see companies with lean cost structures and long-term exit strategies. The evaluation environment is returning to where the VC firms are controlling it rather than the company’s that are seeking funding. That way there will be no triple digit evaluations on companies that have no revenue.”
Austen also said many VC firms are having trouble raising money for new funds right now, with Johnson adding that he believes many of the investors with available funds are going to “sit on the sidelines a little longer.”
“I’m concerned about the amount of money being raised in the Southeast right now,” Johnson said. “It’s hard to get an investment syndicate together to make additional investments following the first round, which makes it impossible to carry a company full term.”
Neal said he believes companies on the hunt for a cash infusion should begin looking for regional money rather than prodding investment firms from other parts of the country.
“Most of us are still focusing on trying to recover from the hangover of the last two years,” Neal said.