Jeff Grass stands in front of 100 potential investors, pitching his Alexandria-based company, BuySafe, a bonding service for people buying products through online retailers or auctions. He has eight minutes to wow the full house as most of those in the audience balance lunchboxes of turkey sandwiches, peaches and brownies from Balducci's on their laps.
Grass, who founded and sold California online bill-paying company PayMyBills.com, recently moved back to his hometown of Fairfax to launch his latest company, which offers a financial guarantee to wary online buyers.
"The idea is to give us a little exposure," says Grass. That's why he came to the Reston office of law firm Cooley Godward LLP last week for Capital Call, a matchmaking lunch for technologists and financiers.
At first glance, the gathering brings back memories of the late 1990s, when such beauty-contest events were far more numerous. Back then, start-ups without so much as a business plan were showered with money by financiers eager to bet on the next big thing. These days, the money flows much less freely and the mood is far more restrained, and pragmatic.
But after a few years when many investors kept their checkbooks in their pockets, things are starting to pick up. The environment for "deal flow" is definitely improving, says Carl Grant, the creator of Capital Call.
Grant, who is Cooley Godward's vice president of business development, had organized a similar event in 2001 at a start-up he was working for. He brought the concept with him to Cooley in 2002.
Auditing firms PricewaterhouseCoopers and Ernst & Young and banks Comerica and Silicon Valley Bank co-sponsor the talent-show gatherings.
About a third of the companies that present at Capital Call eventually receive funding, either as a result of the sessions or on their own, says Grant. Along the way, the mood at Capital Call has become an unscientific measure of how well, or how badly, the technology community is feeling.
For the first time, the group had to scramble at the last minute to find another firm to present when UltraBridge of Owings Mills, which builds technology systems for health care organizations, received a commitment for funding between the time it was invited to this quarter's Capital Call and the day of the event. Grant also says he has seen many more early-stage investments lately, meaning venture capitalists are putting out more money and start-ups are finding it a bit easier to win funding. (Not all of the deals are publicly announced.)
Grant is also seeing more competition from out-of-state venture firms for local deals, especially from Boston investors. Several out-of-town funds were represented at the event, including Aurora Funds of Durham, N.C.; Southern Capitol Ventures of Raleigh, N.C.; and Alpha Omega Capital Partners and Harbert Management Corp., both of Richmond.
"It seems to be picking up again," Mark Esposito of PricewaterhouseCoopers, who does early-stage deal development for his firm, says of the market. Esposito says he's seeing more entrepreneurs who are starting their second or third companies this time around, like Jeff Grass. While the past few Capital Call events have featured companies already producing revenue, this gathering showcased companies at an even earlier stage. "Now, entrepreneurs are back," says Grant.
Rusty Griffith, principal with Walker Ventures in Glenwood, which gained a local reputation for funding the earliest of ideas, says his firm has not done a new deal yet this year, but he has begun to look around. His criterion for backing a start-up: "Can you really make a business out of this?"
Familiar faces in the audience at this quarter's Capital Call include banker to start-ups April Young of Comerica and Thomas L. Kohn, chief executive of online billing company Transactis in Bethesda. Kohn, who also founded and was chief executive of Bid4Assets.com, an online auctioneer for distressed companies, is hoping to present his new idea at an upcoming Capital Call.
Each of the day's five presenters gets to make an eight-minute spiel. The company representatives are all male, and they're among the few in the Cooley Godward conference room wearing ties. David Austin, president of Contextware of Annandale, talks about getting its first paying customer, the National Institutes of Health, for software that streamlines corporate intranets. The chief executive of software firm JackBe, Luis Derechin explains that he moved his company to McLean from Mexico City earlier this year. "I don't know if I'll ever face an audience like this again," he says during his pitch.
Next up is U.S. General Fuel Cell Corp. of Springfield, which claims to have a new hydrogen fuel cell technology. While this company says it has its patents lined up, it's still searching for a permanent president, doesn't yet have a Web site and employs only three people full time.
BuySafe's Grass presents next, explaining why people need to feel safer when buying online and why his new company's guarantee can help businesses increase sales. He makes a few passing mentions of his previous venture, PayMyBills.com, for which he raised $35 million and which sold in 2001 for $67 million. Last to present is Robert Abraham, chief executive of imForwards of Herndon, a forwarding service for instant messages and text messages that sends communication to computers, phones and handheld devices. Like many start-ups, imForwards is "pre-revenue," according to its description in the Capital Call handout.
Then, the five presenters are dispatched to separate conference rooms to take individual questions from potential investors. By the end of the day there's much buzz about BuySafe, in particular.
Of course, the venture capitalists won't talk openly about which companies they are really interested in. "It's all browsing," says Harry Weller of New Enterprise Associates in Reston. "We don't come with a particular target." Jonathan Silver of Core Capital Partners in Washington is not about to signal to rivals if he's interested in a company. Asked for his take on the presenters, he jokes politely about finding everything interesting, but not too interesting.
So how does a presenter rate his inquisitors? Grass says most investors ask similar questions, but he has found East Coast venture capitalists "nicer" than those on the West Coast.
"He hasn't met all of them yet," counters PricewaterhouseCoopers' Esposito.
Still, between deals already in the works and some added interest from Capital Call, Grass seems to have lined up a $5 million to $10 million infusion of cash. Grass says he's now negotiating with several investment firms, but won't say which companies. He expects to have deals finalized by the end of October.
Shannon Henry writes about Washington's technology culture every other Thursday. Her e-mail address is firstname.lastname@example.org.