License Gets Vista Access to Funds
The Daily Times-Call (Longmont)
By Tony Kindelspire
Thursday, March 27, 2003
BROOMFIELD — A Colorado
company will be better equipped to help other new and fledgling Colorado
companies, thanks to the granting of a license recently from the U.S.
Small Business Administration.
Broomfield-based Vista
Ventures has received a Small Business Investment Company license from
the SBA. The granting of the license means Vista will have access to more
than $60 million in funds through the SBIC program, which allows private
organizations to expand their own investment capital with money obtained
through the SBA. The SBA will invest equity capital equal to twice the
amount of a private fund’s capital.
“I think it’s very good news for the Colorado entrepreneurial environment overall,” said Catharine Merigold, one of Vista’s founders and a general partner in the firm. “We’re going to be in-vesting that money here, primarily, in 15 to 20 companies over the next couple of years.”
Vista specializes in early- and mid-stage investments in IT and communications companies. Merigold said that there are fewer than 10 venture capital groups in Colorado that have received SBIC licenses.
“The last time a
private firm received this type of license was [1999],” she said. “In 2002
and 2003, there is not a whole lot of money going into investment funds,
and that is why this license is so significant.”
Venture capital
investments in Colorado — and nationwide — have taken a dramatic dip
since the peak of 2002. According to PricewaterhouseCoopers, VC
investments for Colorado were $4.34 billion in 2000. The following year,
the amount was $1.4 billion, and by 2002 that number was down to $547
million.
Nationally, last year’s
venture capital funding amount of $21.2 billion was nearly half of what it
was in 2001, and very close to the 1998 figure of $21.6 billion.
Also last year, venture
capital funds cut back sharply on the amount of money they raised for
future investments. According to the Associated Press, taking into account
the money they returned to investors, 108 VC funds raised a net total of
$1.9 billion for future investments in 2002, the smallest inflow into the
venture capital community since 1981.
“I don’t think you are going to see much money coming into the industry for three or four years,” Martin Pichinson, the chief executive officer for Sherwood Partners, told the AP last month.
Colorado companies that
are looking for early-stage funding don’t simply try to tap the VC market
here — they look all over the country to find investors. But it’s not
always easy for these entrepreneurs to make the contacts or generate the
interest that they need to out of state.
“Companies in Colorado
are at somewhat of a disadvantage because roughly 90 percent of the money
that comes into Colorado companies comes from out of state,” Craig Hanson,
a principle at Vista Ventures.
The $40 million that this license grants Vista access to means it will
have more money to invest in companies here, which will in turn lead to
interest from VCs located in other parts of the country.
“It turns out that for
early-stage investors, it really helps to have investors nearby,” Merigold
said. “Early stage, it’s really helpful to have local feet on the street.”
Paraphrasing an out-of-state investor, “I’m interested in investing, but I want somebody there on the ground. I may be interested, but I don’t want to be on a plane every two weeks,” Merigold said.
Hanson added that Vista’s receiving the SBIC license, and the additional funding that will go along with it, runs counter to trends affecting venture capital firms around the country. “Sixty million dollars is a significant addition to Colorado’s capital base,” he said.
Tony Kindeispire can be reached at
303-776-2244
Ext. 291, or by e-mail at tkindelspire@timeS~aII .com.