Where innovation finds investment

Published 5:00 am Sunday, October 12, 2008

Executives from five startup companies will walk on stage at the Tower Theatre on Friday and try to convince an audience of venture capitalists that their company’s business plan is worth at least a $100,000 investment from the Bend Venture Conference.

The money can fuel a founder’s dream, even more so in the current economic climate that makes it difficult for any business to find financing and for those with only a promising idea, BVC co-founder Karen Fast said.

“This is not an award … to go get a logo designed; we want to materially contribute to help the company make it to next level,” Fast said.

Now in its fifth year, the Bend Venture Conference is a gathering of entrepreneurs and investors each looking to tap into the other, with the added goal of promoting Central Oregon as a great place to do business, Fast said.

Investors buy into the BVC’s Investment Fund in $5,000 increments, each one worth one vote, said Bruce Jahola, a BVC board member who oversees the fund. After hearing all of the five finalists’ pitches Friday, the fund’s investors leave the theater and discuss which company is most worth the investment. After roughly half an hour, the investors vote and determine the winner.

In 2006, the first year the BVC created the fund, the winner was Dr. Ed Boyle, of Bend, who had helped develop a medical device that would aid in the recovery of heart surgery patients.

“At the time, someone said I walked in with an idea and walked out with a company,” said Boyle.

Boyle’s company, Clear Catheter Systems, formerly known as PleuraFlow, won an additional $600,000 in financing over the summer to fund human trials it plans to begin next spring. Boyle said BVC’s initial investment got the ball rolling.

“It allowed us to move forward from the idea stage to an initial prototype; it also allowed us to crystallize our team and because we needed to license a patent … it gave us the initial funding to make all that possible,” Boyle said.

In five years, BVC has become one of the top venture capital conferences in the Northwest, said Erik Benson, a Seattle-based managing director with the venture capital firm Voyager Capital. Benson attended last year’s conference, and several months later, his firm ended up leading a financing round of $7 million for the 2007 winner, Elemental Technologies Inc. of Portland, a firm that uses graphics chips to create better video-processing equipment.

“I think (BVC) tends to get good companies — they get Silicon Valley guys and Seattle guys — and the quality of the entrepreneurs, attendees and the location all add up to a special event,” Benson said.

Benson will speak at this year’s conference as part of a panel discussion on the relationships between angel investors, who tend to give smaller amounts at a company’s outset, and institutional investors, who invest larger amounts as the company grows.

The BVC is considered an angel investment round, Benson said.

Origins

The BVC was founded in 2004 by Fast and Dan Hobin, now the CEO of Bend-based G5 Search Marketing Inc. According to Fast, the two serial entrepreneurs met at the Starbucks on Wall Street and decided Central Oregon needed a venture capital conference, similar to ones common in metropolitan areas around the country.

Both were familiar with the Portland-based Oregon Entrepreneurs Network annual Angel Oregon investment conference, but they lamented that the companies selected for the conferences were predominantly from Portland or the Willamette Valley. The two also believed Central Oregon was home to a number of innovative companies that might benefit from the “quiet money” accumulating in the area as retirees or telecommuters moved in from Portland, the Bay Area and elsewhere.

“We thought those people would be curious about what’s going on in Central Oregon, and still be in the (investment) game, and it’s easier to be in the game when it’s in your backyard … so we decided, ‘What the heck, let’s try it and see where it takes us,’ ” Fast said.

The first two years, the BVC invited investors to hear about investment opportunities with Central Oregon companies, each of whom took turns pitching their business plans to the gathered investors. The investors then voted on the best opportunity, but it was left to the individual investors whether they wanted to fund the companies in exchange for equity positions.

The third year, the BVC decided to create its investment fund, to add more sizzle to the event, Fast said. The pooled money also enabled the BVC to attract more attention, both from investors and startups. And that helped open up the competition to companies from outside the High Desert, such as the 2007 BVC winner, Elemental Technologies.

Fast said the BVC is still focused on raising Central Oregon’s economic profile and helps do that by inviting outside companies to the conference, who in turn might realize Bend is a great place to do business, Fast said. The other important aspect is finding quality investment opportunities.

“The fundamental premise of stimulating economic development in Central Oregon is still there, and that now comes through several different dimensions, but it’s also realized around the fact that the conference wants to provide the best investment opportunities we can find to investors in the investment fund as well as those in the audience interested in angel investing,” Fast said.

Investors

Investors in the fund are free to arrange their own funding deals with any presenting company, not just the winner. The fund generally has 18 to 20 investors and has so far yielded a high rate of return, Fast said. The 2007 award was roughly $150,000.

Jahola said this year’s award is less than that, which he blames on the state of the economy, but could rise because investors can buy into the fund up until the event begins.

The fund’s amount may be down, but Jahola believes the fund has been critical in boosting the conference’s notoriety throughout the region, even drawing investors now from venture capital hotbeds like the Bay Area.

“This year, we’re seeing a wealth of talent, more so than in other years,” Jahola said. “Most of the 10 wild-card companies would have been selected as presenters in previous years.”

In addition to four previously announced finalists, they will be joined by a fifth. Ten companies are selected by the conference to present as wild cards. Each has one minute to pitch their company to the fund investors, who then vote to elevate one to the finalist ranks. The wild card will then give a 10-minute pitch along with the other four finalists.

For the finalists, their 10-minute pitch is only the beginning. They are then subject to 20 minutes of questioning, first by a panel of professional venture capitalists who probe aspects of the presenting companies’ business plan and then by the investors in the audience. The panel then shares its critique of the company with the audience.

“It’s a critical part,” Jahola said of the investor panel. “The audience wants to hear what a professional investor thinks, how they view what they’ve heard, areas of concern, where they would dig deeper, things they like hearing, and they come up with great comments, and it helps put everything in perspective. It makes it so much richer for investors.”

In addition to investment opportunities, the conference also will hear from several notable guest speakers, including Forbes magazine Publisher Rich Karlgaard and Rodrigo Prudencio, a partner in Nth Power, a San Francisco-based venture capital firm that specializes in energy technology and materials.

Karlgaard is the author of “Life 2.0,” a book examining the lives of professionals who quit the big city but bring their work with them or telecommute from smaller communities that have a more satisfying quality of life. Bend is listed in Karlgaard’s book as one of the nation’s “telecommunity heavens.”

Dune Sciences LLC If you go Golden Signals Inc. Eco-Winter Systems LLC Jama Software

Location: Eugene

Founded: 2006

Web site: www.dunesciences.com

Presenter: John Miller, co-founder and CEO

Using technology licensed by the University of Oregon and other patented and patent-pending technologies, Dune Sciences manipulates materials on a molecular scale, which can then be put to use by manufacturers, co-founder John Miller said.

As an example, Miller said, his company can apply an antimicrobial coating to a material through molecular manipulation that would then be used to manufacture medical equipment.

The company’s technology also can be used to manipulate materials to produce different reactions in chemical procedures, he added.

“This is on the border of materials science, chemical engineering and chemistry,” Miller said. “It’s about creating molecular building blocks we can build value-added products with.”

Miller said the company plans to license its technology to other companies for use in their manufacturing processes and said the company’s business model is centered on establishing partnerships with manufacturers. But before it can get there, it needs money to shore up its intellectual property protections and expand its operational capabilities, Miller said.

“This money will help us secure more partnerships, and this is a good opportunity for us to introduce ourselves to the Central Oregon (venture capital) community,” Miller said. “We are just at the beginning of this process, and this will be good exposure.”

What: 2008 Bend Venture Conference

When: 7:30 a.m. to 7 p.m. Friday (Some pre-conference events are Thursday, including a 5:30 p.m. reception at the Broken Top Club. See the conference’s Web site for details.)

Where: Tower Theatre, 835 N.W. Wall St.

Cost: $199, $75 for students. Tickets for Thursday’s networking reception only, at the Tower Theatre, are $45.

Contact: 541-306-3693 or www.bendvc.com

Bend Venture Conference attendance

2004: 175

2005: 200

2006: 225

2007: 250

Source: Bend Venture Conference

Location: Beaverton

Founded: 2008

Web site: www.goldensignals.com

Presenter: Stuart Golden, president and CEO

In the vision of Stuart Golden, the president and CEO of Beaverton-based Golden Signals, the video projector that’s a mainstay of the corporate board- room will go the way of the dodo.

Golden’s company is developing technology that would allow computer users to wirelessly stream the contents of their laptop to a big-screen TV.

“We think it’s very cool,” Golden said.

The company, founded in February, uses wireless and networking technology to stream music, files and videos to network-enabled devices, including some of the newer television sets available on the market.

For consumers without network-enabled TVs, Golden said his company is developing an adapter it plans to bring to market that can be plugged into any High-Definition Multimedia Interface (commonly called HDMI)-enabled TV.

In the interim, its first product, to be launched later his year, will be software called DisplayShare. It will allow computer users to stream files from their laptop to their television via a PlayStation 3 game console.

The PS3 console is compatible with current wireless and network technology, enabling it to receive a wireless signal from a laptop, which it can then transmit to the TV through its standard cable connection, Golden said.

The technology is currently limited to Windows-based computers, but Golden would like to expand it to Apple computers as well as make a push into business applications and boardrooms.

“We want further development to increase those products, and to do more marketing,” said Golden.

Golden said he is excited to present his company at this year’s conference and that it will likely be the biggest audience to which he has delivered a pitch. He said he plans to demonstrate the technology at the conference.

The wild cards

Each of the 10 wild-card companies will have one minute to deliver an investment pitch to the audience, who will then select by vote one company to join the four finalists.

Aquamodus of Bend: An indoor pool facility targeting the aqua therapy and aqua fitness markets.

DesignMedix Inc. of Portland: Developer of drugs that overcome drug resistance for malaria and other diseases.

eRep.com Inc. of Gresham: An online employment service that screens, ranks and matches candidates nationwide with employers across a broad spectrum of industries.

FootGaming.com of Bend: An online casual gaming community driven by a patented user interface, the FootPOWR pad.

GadgetTrak of Tualatin: Provider of theft recovery software solutions for mobile devices.

HydraCool Inc. of Eugene: Developer of a proprietary truck transport refrigeration system.

iComprehend Inc. of Vancouver, Wash.: Developer of image classification software.

Ninkasi Inc. of Vancouver, Wash.: Developer of an interactive kiosk containing proprietary software to promote wine purchases in grocery stores.

Quicksilver Interactive Media Inc. of Bend: Publisher of a suite of online travel guides for active vacations.

Take Shape Inc. of Springfield: Developer of a platform technology that provides rich information about the human body.

Source: Bend Venture Conference

Location: Bend

Founded: 2008

Web site: None

Presenter: Tom Barquinero, co-founder

Eco-Winter Systems has developed patented technology to winterize vacation and second homes by filling the home’s water pipes with a nontoxic antifreeze that would allow the homeowner to shut off the furnace while away, thereby saving hundreds of dollars in heating costs, according to co-founders David Swan and Tom Barquinero.

“It’s one of those palm- on-the-forehead ideas,” Barquinero joked.

As envisioned, a large pump and reservoir unit, roughly the size of a standard air-conditioning unit, would be installed in or near a home. Two related shutoff valves would be installed where the main waterline enters the home and at the water heater.

At the push of a button, the shutoff valves would close and the unit would begin pumping propylene glycol, a common food additive approved by the Food and Drug Administration with a freezing point of minus 60 degrees, into the home’s plumbing.

At the same time, the homeowner would open all the home’s faucets to allow the heavier-than-water antifreeze to push all of the home’s water from its pipes. When the pink solution begins pouring from the faucets, the homeowner would turn the faucets off.

“Then you turn off your furnace,” Swan said.

The whole process would take roughly five to 10 minutes, he added. When the homeowner was ready to use the house again, a vacuum system would suck up the antifreeze solution and store it for reuse.

Barquinero said Eco-Winter is developing a green building technology that if installed in the nation’s roughly 5 million vacation homes that are subject to winter weather, it could ultimately save millions of dollars in wasted energy costs and reduce the nation’s carbon footprint.

Barquinero said the company would like to work with government to create a tax credit for its product as well as with green building certification agencies that could help market the product.

Swan and his family have for 25 years marketed a similar system for use in RVs. He said he’d frequently hear RV owners wish for a similar product for their vacation homes, and last year, Swan formed Eco-Winter with Barquinero to pursue the idea full time. The company is currently building a prototype that will be installed in Swan’s home by November.

This will be Eco-Winter’s first pitch for venture capital, Barquinero said.

Location: Portland

Founded: 2006

Web site: www.jamasoftware.com

Presenter: Erik Winquist, founder and CEO

Jama Software has developed a software application that helps companies manage product development, said company founder and CEO Erik Winquist. Its target market is companies that develop technology-based consumer products that have multiple design needs and complex technical requirements, all of which are hard to fit on a spreadsheet or other planning document, Winquist said.e_SClB“Eighty percent of product-development teams now try to use spreadsheets and documents and e-mail to communicate all this information, and the (technical) issues in these products is getting so complex, so doing that in a single document is overwhelming,” Winquist said. “And the other issue is teams now are (geographically) distributed more than ever, so it’s hard to develop products with tools not designed for that.”

Winquist said the company’s software application, called Contour, can make product development teams more efficient, cut development cycles in half and get products to market quicker, thereby saving money at a critical time in the nation’s economy.

The company, which has eight employees, has been self-funded, but Winquist said he entered Jama in this year’s Bend Venture Conference to seek capital to grow his startup.

“We’re at a point where we got a pretty significant number of customers who have validated our product, and so we want to push forward now and grow,” Winquist said.