Economic Development and Technology and Small Business

Venture Center's Beck plans seed capital fund: Former Rose-Hulman Ventures prez returns to town

July 31, 2006

Over the last three years at the helm of Indiana Venture Center Inc., one thing became all too clear to Steve Beck: Not much money is available locally for early-stage companies.

So he's going to raise some himself.

Last week, Beck, 59, announced he's stepping down as Indiana Venture Center president to become co-managing director of IVC Equity Partners, a new local seed capital fund. His IVC Equity cofounder is Scott Prince, 38, a Columbus native and Indiana University graduate who spent most of his career building sales divisions for Silicon Valley startups.

The Indiana Venture Center's new chief will be Jim Eifert, 63, the former president of Terre Haute-based Rose-Hulman Ventures. Eifert resigned RHV in January 2005 when Jack Midgley, then-president of Rose-Hulman Institute of Technology, reorganized the business incubator.

Because of U.S. Securities and Exchange Commission regulations, Beck said he can't yet share details of his plans for IVC Equity Partners, including how much money he'd like to raise.

But he can talk about why Indiana needs more seed capital. Promising infant hightech startups are so risky they can't secure bank loans. Even most venture capitalists balk at their likelihood of failure. Without cash, some wither and die. Others are cherry-picked by investors from other states.

"People are frustrated, saying they'll up and go where the money is," Beck said. "That's nuts."

Beck, a former Indianapolis banker, aims to help fill the seed gap. It's the same reason he co-founded the Indiana Venture Center three years ago with Bruce Kidd, who now serves as director of small business and entrepreneurship for the Indiana Economic Development Corp.

Since then, Indiana Venture Center has helped hundreds of companies, evaluating their business plans and advising them on growth strategies. It showed the best to members of AngelNet, its private database of wealthy individuals in Indiana who are willing to speculate on startups.

Take for example Lafayette-based Vasc-Alert LLC, an IT startup formed in 2002 that specializes in bioanalytics.

Indiana Venture Center helped the company find its first investors through AngelNet, said Vasc-Alert co-founder Douglas Curry. Now it's aiding Vasc-Alert as it attempts to raise $1 million from venture capitalists.

"With a small, rapidly growing company, we don't want to misstep. I learned many, many years ago to seek counsel early and often," Curry said. "It's good to vet ideas with other people, or know if I fell off the rocker again."

As a not-for-profit, Indiana Venture Center's formal venture capital efforts were always limited. Advice is allowed. Direct investments aren't. That's why Beck had to resign to form IVC Equity Partners.

"We kind of tiptoed right up to the line," he said. "We never stepped over it, but we leaned and breathed heavily."

Donald F. Kuratko, executive director of the Johnson Center for Entrepreneurship and Innovation at Indiana University, said attracting investors for risky startups is always an uphill battle. The majority fail, so the handful that succeeds must do so spectacularly to provide a profitable return.

Thus far, even the Indiana Venture Center has attracted only one sponsor. Financed entirely by Silicon Valley entrepreneur Mike Hatfield, it charges nothing for its services. Hatfield, a Middlebury native, made his fortune in telecommunications, selling high-speed optical transport company Cerent Corp. in 1999 to Cisco Systems Inc. for $7.3 billion. Hatfield provided $3.5 million to underwrite the center's organization.

Kuratko, a board member, said Indiana Venture Center hopes to diversify its revenue sources under Eifert. That means approaching corporations, foundations or the General Assembly.

"I think even Mr. Hatfield would like to see a broader base of financial support," he said.

Meanwhile, if IVC Equity Partners can successfully raise a seed fund, local venture capitalists would welcome it. More seed activity means more potential venture deals for them to consider, once startups ripen and show they have stamina.

"A new fund with the objectives that Steve has laid out would be a welcome addition to the private equity community in Indiana, which is too darn small," said Tom Hiatt, managing director of Centerfield Capital Partners.


Beck Eifert
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