By Allan Maurer
HERNDON, VA—Tom Weithman, managing director of the Center for Innovative Technology’s GAP Funds in Virginia says, “We are absolutely looking for new deals and we’re seeing a really remarkable level of deal flow involving top notch companies and high quality entrepreneurs.”
The Commonwealth of Virginia decided to take a pro-active approach to filling the seed-stage capital gap that keeps many promising new tech ventures from launching and in late 2003, created the CIT Gap funds.
CIT has typically invested about $1 million to $1.5 million a year. The $1.9 million GAP I fund is fully invested in an array of seed-stage companies, all of which are still up and running. The current multi-year fund has $9 million to invest.
“We’re on track for six investments or so in Virginia’s fiscal year,” says Weithman.
Necessity is the mother of invention
He says software, SaaS, green IT, and alternative energy are among areas of interest. The downturn may even be giving birth to new ideas from people leaving big companies or pushed out of their startups, he says.
“Necessity is the mother of invention, so we’re seeing some very high quality people.”
CIT generally invests from $50,000 to $200,000 in a Virginia startup, with $100,000 the most common amount.
“We’ve seen a better than 10 to 1 match (of outside funds) across our three portfolios,” Weithman notes. “As we look at our statistics, we feel good about the significant value in our portfolio,” he says.
CIT companies have attracted a significant amount of follow-on funding, although many go up to three years before attracting a Series A round. In 2008 alone, KZO Innovations (a presenting company at Southeast Venture Conference in March), RollStream, Mpowerplayer, and Global Cell Solutions raised venture-backed rounds.
Optimistic about CIT portfolio
Weithman says CIT has touched base with its portfolio companies to see how they are weathering the current economic downturn.
“We engaged with them about where they are from a financial standpoint and getting to market.
“But the bright side for us is that CIT’s portfolio companies are always hunkering down and conserving cash. They have always kept costs low. When you only have a couple hundred thousand dollars to keep your company going, you’re pretty frugal.”
Weithman says CIT encourages them to remain open to alternative sources of funding such as SBIR grants “and such controversial means as generating revenue,” he quips.
He says he’s optimistic about the ability of CIT’s portfolio firms to weather the storm and says the Commonwealth of Virginia shows every indication of continuing support for CIT.
Speaking at SEVC in March
Weithman will be one of more than 40 speakers at the Southeast Venture Conference March 11-12th at the Intercontinental Buckhead in Atlanta, Georgia (see: www.seventure.org).
“Venture forums provide great networking value for investors and early stage companies to interact with others in the venture community,” says Weithman. “The financings that come out of them are almost a spillover benefit to the main value of networking.
“This even in particular gives us an opportunity to mingle with the Southeast investment community we wouldn’t see otherwise. It’s a great opportunity to share ideas about startups and calibrate viewpoints about what’s going on in the marketplace.”
Online: www.CITgapfund.org
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