It’s hard for an Oklahoma entrepreneur to get noticed by venture capitalists who fund early-stage companies in hopes of a payoff when the company sells or goes public. "Absolutely,” said Mark Heesen, president of the National Venture Capital Association. "There’s no question that geo-graphy counts.” Heesen, in Oklahoma City last week, said Oklahoma has virtually no standing among major venture capitalist firms. Heesen’s organization represents hundreds of such firms, which control about $200 billion in assets. In recent years, Oklahoma has received just a small fraction of 1 percent of the nation’s venture capital funding, according to the National Venture Capital Association. Those kind of numbers support the state’s reputation as a "fly-over” state when it comes to attracting outside financing, much of which goes to high-profile regions such as California’s Silicon Valley, Seattle, North Carolina’s Research Triangle Park and Cambridge, Mass., Heesen said. To attract investors, Oklahoma needs to focus on a niche, Heesen said. Minneapolis, Minn., chose to focus on medical devices and has become a hotbed of companies, executives and attorneys with ties to and knowledge of the growing industry, Heesen said. "There are flyover states, but there are also areas that have been able to say, like Minneapolis, that we’re going to become very proficient in one area,” Heesen said. "If you’re a venture capitalist from the coast, you’re in Minneapolis if you’re a medical device investor. They will go to those regions of the country when there is an area of expertise that’s not found in other parts of the country.” For Oklahoma, emerging areas like clean tech, which includes solar and wind power and battery technology, or new agricultural products could be opportunities to make a mark, Heesen said. William Paiva, who works with the Tulsa-based Oklahoma Life Sciences Fund, said he thinks Oklahoma’s strong energy sector positions the state well to succeed in the clean tech area.
Starting smallTom Walker, chief executive officer of i2E Inc., the not-for-profit company that mentors many of the state’s technology-based startup companies, said Oklahoma must continue nurturing existing seed funds and angel investor funds that provide very early stage financing for companies. That funding precedes the investments from venture capital funds. "You have to have a robust mechanism to build opportunities so they can come through that pipeline and then be attractive to venture capital,” Walker said. Helping those early stage companies also could produce more homegrown venture capital, Walker said. He hopes a new $25 million to $50 million Oklahoma-based venture capital fund eventually will be established. Outside venture capitalists want to know if local money also is being invested in the local business, Walker said. "By having a fund here, that can help attract outside capital,” he said. Walker concedes that Oklahoma has a lot of catching up to do in the area of attracting venture capital, but he gives high marks to local efforts toward building an entrepreneurial infrastructure and targeting areas of local expertise. "We can’t just say we need more venture capital,” he said. "There’s a lot more to it than that.”
Times are toughHeesen said the brutal economy has hit the venture capital sector hard, essentially shutting down the public offering market and limiting acquisitions that are the profit centers for the enterprise. But Heesen said many venture capitalists believe the worst is past. "We’re scratching ourselves out of a hole; we’re not leaping out,” he said. The good news is that entrepreneurs operating in this tough environment tend to be more realistic than many who pop up in the good times, he said. Paiva said many of the world’s greatest companies were created during tough economic times. "The industry is counter-cyclical,” Paiva said. "Although it’s a tough thing to do, when the economy is at its worst, it’s the best time to be investing. If you have the stomach for it and believe historical data, these are the times when great companies and wealth are created.”
Venture capital investments by regionFIRST QUARTER 2009 Silicon Valley…$1.2 billion New England…$376 million New York metro area…$323 million Los Angeles/ Orange County…$207 million Texas…$156 million Northwest U.S.…$130 million Midwest U.S.…$122 million Southeast U.S.…$113 million San Diego…$87 million Colorado…$77 million SOURCE: PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report