Bernard Gray, one of the more active early-stage technology investors in both Atlanta and the Research Triangle area in recent years, is scaling back his venture capital operation and plans to make no new investments for the foreseeable future.

Gray blames the move on the lousy run he’s seen in the stock market lately. He says he now has to redistribute his assets for better returns and can’t risk as much in venture deals through Gray Ventures.

“The meltdown I’ve experienced in the public markets has forced me to alter my allocation scheme,” he says. “It prohibits me from operating the way I wanted. I wanted to scale the platform to the point where I could be a better investor, but since my assets are smaller, I can’t build the platform as fast or as large as I had planned.”

Gray Ventures still has money in its $30 million fund to support existing portfolio companies, such as networking equipment maker Overture Networks, automated customer service solutions developer LiveWire Logic, network security firm NetOctave, interior design software developer BlueBolt Networks, dynamic e-mail provider Silverpop Systems and wireless software developer Synchrologic, he says.

But with no new deals in the offing, Gray is letting go the three partners he added to Gray Ventures over the past two years as he expanded his personal angel investment fund. Don Nutt and Ron Reuss both joined the firm from BellSouth.net, while Chris Rossie had previously been with Internet Security Systems. All three will continue to work with Gray over the next few months while looking for new jobs in Atlanta’s tech industry.

Ties to two markets

After a decade and a half of business development and finance work for Summit Communications Group of Winston-Salem, his family’s broadcast and cable holding company, Gray took his personal fortune and created Gray Ventures in 1991 to invest in and advise fledgling tech companies.

Although based in Atlanta, Gray had close ties with the Triangle. He graduated from the University of North Carolina in Chapel Hill, and his father, Gordon Gray, was chairman of the Research Triangle Park Foundation in the early 1960s when RTP was just getting off the ground. Given those connections, he quickly began doing deals in both markets.

Calling Gray Ventures the “largest independent individually controlled” venture fund in the region, he spotted his niche in investing in entrepreneurs who remained passionate about their ideas despite being turned down for funding elsewhere because they weren’t developed enough.

“With early-stage investing, you need someone who can make all of the decisions,” he says. “A lot of limited partners like to debate where to invest and don’t like too much early-stage exposure.”

Early successes for Gray included investments in software developers Accipiter and Ganymede, semiconductor maker Orologic and e-commerce firm SciQuest. The first three were sold for hefty profits in the late 1990s, while SciQuest went public during the dot-com boom.

Through his dealings in the Triangle, Gray became heavily involved in the Council for Entrepreneurial Development and now sits on the organization’s board. He was the first individual to contribute to CED’s Innovation to Impact endowment fund, putting in $108,000 in early 2000. Gray won CED’s annual award for angel investing in May.

Shifting focus

Gray isn’t sure whether he’ll remain active in CED, but he plans to slowly fade from the scene as his portfolio companies mature and he relinquishes his seats on various boards of directors. His seat on Overture’s board, for example, was recently transferred to a larger investor after the company closed on a $15 million funding round in September, although he retains board observation rights.

And despite his losses in the stock market, he’s hardly impoverished. He has “plenty of capital” not invested in Gray Ventures, and notes he still has about $15 million in the venture pot, some of which won’t be needed by the portfolio companies as other investors are brought in through future funding rounds.
Gray now will spend more time shepherding those assets, although he regrets having to abandon tech investing.

“It’s sad for the industry to lose a lot of veteran investors,” he says. “I wish I could blow my nose and make the Nasdaq go to 3,000, but I can’t.”

Gray Ventures: www.grayventures.com