There is $15 million invested locally and $150 million available throughout New England in the fund, which is a good number. More than 100 Rhode Island entrepreneurs have sought investments from the fund in the last six months, which is another good number.
The bad number for the entrepreneurs would be the total of projects the fund has invested in so far: zero. That’s the number Zero Stage Capital, the management arm of the fund, says is misleading.
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“Venture capital is 100 to one. Meaning it takes 100 proposals roughly before you find one that you will fund,” said Mark Thaller of Zero Stage Capital of Cambridge, Massachusetts.
Thaller said the fund, which is administered locally by the Business Development Company of Rhode Island, is nearing deals with two companies that have had ongoing discussions with Thaller.
Even though talk of the fund goes back to a year ago, it was only recently that Thaller had a Rhode Island office. He said there has been an intense promotion of the fund, which has paid off in terms of piquing curiosity.
Getting the word out is almost as important as putting money into the fund, a process that ended last week. The first of April marked the deadline for investors. In Rhode Island there are 15 investors, including Fleet, Textron, CVS, Citizens Bank and Bank of Newport.
Together they raised $5 million, which can become $15 million by leveraging the money to borrow up to three times the amount.
Thaller said because $15 million is coming from Rhode Island doesn’t mean entrepreneurs here will be limited to that amount.
“This is a $150 million regional fund. We don’t cap it at $15 million, which would be enough to make maybe one or two deals,” he said.
Many entrepreneurs would wonder what exactly Thaller and his associates have planned for all that money, because they surely haven’t seen it.
“Yes, it is a slow process. But, my job is to fund great deals that work for the fund and the business. It’s about building a relationship,” he said. “We are on the right track.”
Bill Jackson of the Brown Venture Forum, which regularly gathers entrepreneurs, investors and business executives to discuss early-stage companies, said the fund has been administered so far at an appropriate pace.
“One should realize that venture capital funds look at a large number of companies and make a very small number of deals,” said Jackson. “The probability is extremely low of being selected, so a Rhode Island company that doesn’t should not be disappointed. It’s par for the course.”
Jackson said he thinks Thaller is making an aggressive attempt to get out into the community to find the companies that would make the right fit.
“I think it is great having him there (at his office in downtown Providence). It’s something we have not had in the past, someone onsite a certain number of days a week to talk to early stage companies,” Jackson said.
And what kind of companies is Thaller interested in talking to? “Companies with a technology slant,” he said.
“Rhode Island is making a transition from more manufacturing to high tech information technology. We very much want to see the latter,” he said. “We are not in the business of low technology.”
Thaller said he is not necessarily interested in companies using “molecular physics,” but companies that plan to use new technologies in the way they do business.
“For example, we recently made an investment in Massachusetts with a company that sells naturally oriented vitamin supplements, a business that is generally sold through catalogs or mom and pop stores,” he explained. “This company though is selling the products on the Internet. They thought outside the box and it was a fantastic idea.”
Thaller said it’s a rare company that makes the grade for any capital venture fund. He said it is important for him to be encouraging to those companies that don’t.
“We don’t want people to leave here upset at us, because maybe down the road something will change with their business and we can get involved again,” he said. “There are a lot of great ideas out there that just need some focus.”
Thaller added that he hopes to announce at least two of those great ideas in the near future.
