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... by Matt Noah Published: Friday, September
22, 2000
SHERYL JEAN STAFF WRITER
SANTA CLARA, CALIF.
The glitz of high tech doesn't always shine so brightly. Just ask some of this group of Minnesota entrepreneurs who traveled here this week.
While they focus on trying to attract big-time money from influential Silicon Valley venture capitalists at a conference that began Thursday, many are stretching their own dollars to keep their ideas and businesses afloat.
Many of the entrepreneurs have delved deep into their pockets to finance their ventures. Some have racked up considerable credit card debt. In the juggling, some companies have had to cut back on expenses or staff to make ends meet.
``It's a balancing act,'' said Gary Anderson, chairman of netbriefings.com, a St. Paul-based start-up that broadcasts conferences and conventions on the Web.
His company raised $1 million from private investors in January and has enough cash on hand to last four to five months, Anderson said. Netbriefings is arranging a couple of million dollars of bridge financing to help meet expenses while it tries to raise $10 million or more in venture capital to launch its service nationally.
Anderson has joined a delegation of two dozen other Minnesota entrepreneurs at the two-day conference, organized by Minnesota entrepreneur Matt Noah of the Twin Cities-based NetSuds. Here, they pitch their ideas to venture capital firms in the heart of Silicon Valley, home to many of the world's largest high-tech ventures such as Cisco Systems, Oracle and Yahoo. One-third of the nation's deals are financed by venture capitalists based here.
The group trek also is meant to bring attention to Minnesota's high-tech community, which many believe has fallen behind in attracting its share of venture capital money in the past few years.
Despite the mystique and glamor surrounding Silicon Valley, raising money and making yourself stand out from the crowd is hard work. Many of the entrepreneurs Thursday were busy nonstop from 6:30 a.m. to 9 p.m., polishing and delivering 60-second pitches -- called elevator speeches -- and longer presentations aimed at making their businesses stand out from a sea of next big things.
Abraham Nemitz and Jeremy Lizakowski, the 23-year-old founders of HotIM of Eagan, have big ideas and high hopes but little cash. So they drove three days straight to the California conference instead of flying to save money.
``We're used to not sleeping much; we're a start-up,'' chief technology officer Lizakowski said. He and Nemitz have worked on the business nights and weekends while still keeping well-paying day jobs, which help finance HotIM. They have invested a few thousand dollars of savings and have racked up more than $10,000 in credit card debt to develop an encrypted instant messaging system.
``If we don't get financing in the next three months, we'll be in trouble,'' Nemitz admits.
Starting a company is a hard road to travel, and keeping it going can be an even bumpier ride. It's often a juggling act of cobbling together cash and trying to develop or market a product. The stakes are high.
If HotIM can raise $500,000, it can ship a product in three months. If not, it must wait until next summer.
FireSummit, a St. Paul-based start-up that is developing a data traffic management system, raised $1 million from private investors this week but still seeks $10 million in venture capital to build a sales team, hire more engineers and offset the $300,000 it spends each month, said founder and chief executive Toby Velte. Also this week, the 18-month-old company gained another reason to raise venture capital: to complete a proposed merger with Envoda of Eden Prairie.
Raising money these days is even more challenging because the flow of venture capital has tightened a bit and investors are choosier in the companies they'll finance. Faced with budget constraints, some companies have had to learn to slow down or make adjustments so they don't drop any balls.
``For companies like us, it's been a struggle (to raise money) since April,'' said Steve Friswold, chief executive of EBody, a Minneapolis-based health portal that has raised less than $5 million since 1995. ``That's part of the reason why we are here.''
As a result of its tighter budget, EBody has tightened its belt, cutting expenses by about 75 percent in the past six months, laying off 15 to 20 people -- two-thirds of its work force -- and reducing marketing.
To attend the conference, each company paid $5,000 to send two people, not an insignificant fee for a small company that may not even have an office.
Sheryl Jean can be reached at sjean@pioneerpress.com or (651) 228-5576.
