Vista's Merigold Takes Long View
Venture capitalist wins SBA's matching funds
Denver PostApril 16, 2003
Colorado tech entrepreneurs need cash. Venture capital investors are slow to dole it out - let alone get it themselves. Enter Catharine Merigold.
Merigold's 3-year-old Broomfield firm, Vista Ventures, will inject $60 million into 18 to 20 tech startups statewide over the next few years. The brutal tech economy does not discourage her.
"The timing is great to be an investor in a technology company," said Merigold, 46. "If you look over 30 years, the best time to be an investor is in a recession."
As the economy put the lid on public stock offerings, most venture capital investment firms struggle to get new funds rolling: Nationwide, they raised just $2 billion from institutional investors last year, compared with $106 billion in 2000.
And most venture capitalists focus only on keeping their existing portfolio of companies afloat rather than looking at new investments.
Merigold and her team at Vista initially received $30 million from institutional investors. But they needed to raise more money, and the economy was terrible.
So they went to the government.
Vista Ventures recently received a small business investment license from the U.S. Small Business Administration, which matches 2-for-1 the existing dollars in Vista's fund.
It's not a loan, as the SBA is known for, but an investment. SBA-backed firms such as Vista invested $2.7 billion in 1,979 small companies nationwide last year.
The small-business investment program has become more popular in the past year. Vista joins a handful of other Colorado funds that have the small business investment licenses, including Wolf Ventures, Cornerstone Ventures and Roser Ventures.
"This (license) is critical to the success of this first fund," Merigold said. "There's some great opportunity here."
The SBA will dole out just 50 of these licenses nationwide this year, and recently it tightened its criteria for the firms that receive them.
"Vista obviously had to demonstrate some real promise to get the license," said John Taylor, spokesman for the National Venture Capital Association.
Taylor said $60 million is the perfect-sized fund to seek out new first-round investments in tech companies.
"Her fund can look not only at today's technologies but those that are further upstream that haven't hit anybody's radar screen," Taylor said. "A lot of the angst and a lot of the challenge is spent taking care of existing portfolio companies."
Merigold plans to immediately invest about $4 million in three to four startups. She said she has her eye on one company, for instance, that has invented an air filter that could protect against biological weapons.
"We're seeing things that are revolutionary," she said. "I have this passion for building businesses. I still believe technology can do good things in people's lives. If you build a good product, there is going to be a market for it."
That kind of unflappable optimism is typical of Merigold, say people who know her.
"She is small and petite, yet the energy that emanates is much bigger," said Gretchen Jahn, CEO of Aegis Analytical, who has known Merigold for several years.
Growing up in Chicago in a family of plumbers and garbage collectors, Merigold was the first of her family to go to college. She paid her way by donning steel-toed boots and a hard hat, working each day at a steel mill east of Chicago.
After graduation, she spent 10 years in international sales and engineering with Hewlett-Packard and then received her MBA from Stanford. Later she wound up working for Denver-based Centennial Ventures, after she called looking for leads on tech jobs in Colorado.
Merigold spent several years as a vice president at Qwest Wireless and as CEO of a management consulting business before starting Vista Ventures.
With Vista, she joined an elite group of women. In 2001, just 70 of the 5,000 venture capitalists nationwide were women, according to the Diana Project, a survey conducted by the Kauffman Center for Entrepreneurial Leadership.
"I found it very helpful to have a female role model, because there ain't that many around," Jahn said.
Jahn's Lafayette software company hired Merigold several years ago as a consultant to rework their business plan and jump-start the floundering company.
Merigold hunkered down with Jahn and her team. She taught them to tell the company's story in a less technical way so they could sell customers and investors on Aegis' software for pharmaceutical manufacturing.
"She took us under her wing and helped us grow up," Jahn said.
Merigold and her partners, Dave Dwyer, Kirk Holland and Craig Hanson, still operate on the philosophy of partnering with entrepreneurs.
"You hear lots of stories where investors take a more adversarial approach," said Bill Chambers, CEO of LeftHand Networks, a Boulder storage company and the first to get an investment from Vista Ventures.
"Catharine's vision is one that partners with CEOs. She'll drop what she's doing for you, regardless of her schedule," Chambers said. "She'll meet with you late or on weekends."
That philosophy - and the new investment dollars - should serve Colorado tech entrepreneurs well, said fellow venture capitalist Bob Ulrich, partner at Vanguard Ventures in Houston.
"She is a person I would not hesitate to co-invest with," he said. "It's even more of an accomplishment that she (raised more money) in this environment."
