Gregg Patterson, chairman and CEO of PV Powered, a solar power equipment maker that won the audience vote for the best company at the 2004 Bend Venture Conference, makes a presentation Friday at the 2007 conference at the Tower Theatre in Bend.

Acollection of transplanted entrepreneurs set out to attract some clouds when they launched version 1.0 of the Bend Venture Conference in 2004. The hope back then was the conference would attract clouds of entrepreneurs, clouds of local investors and clouds of people with executive experience to find the connections they need to rain new businesses over Central Oregon.

Today, three years and four conferences later, it appears that the clouds have discovered Central Oregon. The question is whether the synergies they spark here will also take root in the desert soil.

As with most of the West’s newest small-town entrepreneurial pockets, that question is still an open one, said Erik Benson, managing director of Voyager Capital, one of the venture capital firms that helps invest some of the state’s pension fund money into small Oregon-based businesses.

The Pacific Northwest, in general, tends to spin off a fair number of entrepreneurs from its giant technology firms, like Intel Corp. and Microsoft Corp., Benson said.

If their projects grow to a certain stage — say $5 million or $6 million in revenue a year — they also have fairly good access to regional investment capital, Benson said. But, unlike California’s Silicon Valley, where the startup culture has been ingrained for three decades, the region tends to lack readily available investment sources and good sources of help and advice for the smallest startups, he said. And its university systems lack the effective channels to get startups’ research ideas to market that have become a hallmark of California universities like Stanford.

That said, though, the smaller entrepreneurial pockets of the Northwest and California have some advantages for investors over the San Francisco Bay Area’s more developed economies, Benson said. Chief among them: It’s generally cheaper to finance a good startup business in the outlying towns than it is in Silicon Valley’s high-priced, highly competitive environment.

“There’s more money to be made in Modesto than there is in Tokyo,” Benson told the 400 investors and entrepreneurs who crowded into the Tower Theatre for last Friday’s fourth annual venture conference.

A prime example

The winner of the conference investment pool’s $150,000 stake this year, Portland-based Elemental Technologies Inc., is perhaps a prime example of Benson’s profile of a typical Pacific Northwest startup.

The company started with a group of three engineers who met at Pixelworks, a Portland-based maker of digital video chips with offices worldwide, CEO Sam Blackman said. They say they have designed a software system that can, in effect, prime a common desktop PC to do sophisticated video production that up to now could only be done on expensive, specially designed processors.

ETI picked up $200,000 early on from license revenue and from an investment from Pixelworks, Blackman said. The Oregon Angel Fund chipped in $500,000. Now, the Bend Venture Conference’s pool of 29 investors, known as the Bend Venture Conference 2007 fund, is committed to chip in their own $150,000, pending due diligence and negotiations.

ETI has no plans to open business operations in Central Oregon, Blackman said, but Bruce Juhola, managing member of the venture conference’s investment group, still counted the company’s win among a strong field as a sign that the conference is growing in strength and influence.

The second-place company, Bend-based RocketBux, is an indication of what the conference’s synergistic clouds can do for Central Oregon, said Nori Juba, co-founder of the local investment group Bend Capital Partners and one of the venture conference pool’s 29 investors.

RocketBux, with its unique cell-phone-based promotional advertising system, didn’t win the pool’s collective $150,000 investment, but it seems likely to attract individual investments from among the pool’s members, Juba said Friday night.

That, Juba said, is an indication of where Central Oregon’s entrepreneurial investment environment stands. There is plenty of money and executive expertise here to finance the kinds of angel investing that small startups tend to need.

“Now we need more companies at the RocketBux level,” Juba said. “And we’re not far off.”

Last year’s conference winner, PleuraFlow Catheter Solutions, a company founded by Bend thoracic surgeon Ed Boyle Jr., used its investment money to produce a prototype of its micro-sized chest drain, Boyle told the conference. More important, though, Boyle said, was the business expertise his company attracted after the conference win.

“It really helped to pull together all of the pieces to make this into a company,” Boyle said.

The diversity of people that the conference attracts was evident in the handshake-and-autograph line that formed early in the morning to meet keynote speaker Guy Kawasaki, the entrepreneurial guru who helped launch Apple’s revolutionary Macintosh line in the early 1980s.

There was a former Intel innovator; a creator of WebRing; and a Webvan refugee. There was the guy who created HouseValues, an online real estate sales lead generator that did $100 million in business last year.

And there was Brad Raether, a Redmond inventor who says he has a revolutionary new engine design, and Joanna Lemus, a recent transplant from Texas who’s looking for money to expand production of her Princess Canopy Beds line.

They didn’t have much luck with Kawasaki, whose venture capital company looks for businesses that are on their way to $100 million-a-year revenues within five years.

“How do I know it works?” was the response Raether got.

And “I don’t think you’re going to get there selling furniture,” was the answer for Lemus.

But that just means they asked the wrong type of investor, Kawasaki said later — not that they won’t find success with a different type.

Venture capitalists and angel investors

There are two broad types of investors in the startup world: venture capitalists and angel investors.

Venture capitalists are on the hunt for companies that are already well-formed, well-led and growing in a business niche that offers plenty of room for acceleration, Formative Ventures General Partner Dino Vendetti said. They’re generally interested in companies that justify the investment of hundreds of thousands or millions of dollars at a time, and they don’t tend to have the time or inclination to do a lot of personal mentoring or serving on boards of directors.

Angel investors, on the other hand, tend to invest smaller amounts in smaller companies but are willing to invest time in one-on-one mentoring to help nurture a business to the next level.

Nationally, both types of investment are thriving.

Venture capital firms have raised $199.4 billion in new financing through the first three quarters of this year, according to the Dow Jones Private Equity Analyst, up 29 percent from the same period last year.

And an estimated 200,000 angel investors are expected to funnel around $25 billion into the nation’s smallest startup and early stage companies, said Eric Rosenfeld, Capybara Ventures managing partner.

Raether said he has attracted around $200,000 so far to help finance development of his efficient piston design, which is close to the prototype stage.

Lemus, after a day of buttonholing investors and other entrepreneurs at Friday’s conference, said it was a great educational experience, if nothing else.

“The beauty of the world today,” Kawasaki said, “is that with $20,000, you can do a lot of damage, especially in high-tech, and it doesn’t matter where you are.”

At the least, the Bend conference has turned Central Oregon into “another place in Oregon to meet-and-greet with entrepreneurial folks,” said Nathan Lillegard, a former Bend resident who’s working now to promote Floragenex, a Eugene-based company that says it has come up with a new-and-improved system to aid selective plant breeding through genetic sequencing.

“That’s generally good because this is the kind of economy you want in the 21st century,” Lillegard said. “But it’s also a big change from what this community has been.”