What Venture Capitalists
Like to see In a Business Plan 

Things are starting to heat up in Tampa Bay for firms seeking venture capital. Lauren Shiner, of Lauren Shiner Marketing Int'l interviewed a few of the local venture capitalists about their industry and the Tampa Bay market.

“Tampa Bay isn’t an Atlanta or Dallas, but I think we have a strong technology base. And large tech firms in the area don't seem to have problems recruiting talent” says John Simmons of Quantum Capital Partners. The numbers back him up. Florida received $301 million in venture capital investments last year, per the latest PricewaterhouseCoopers MoneyTree report.

Various entities throughout Tampa are hosting and sponsoring a program on how to obtain venture capital in conjunction with the Florida Venture Forum on November 3. How does Tampa Bay stand as a lure for VC firms?

“Only recently has Tampa become a draw for VC firms. Steve Lux of Stonehenge Capital has only been looking at opportunities for 9 months and Simmons has only been seriously reviewing proposals since January. Yet each feels that Tampa Bay is a good place to be right now. What are they looking for and what are they finding?

Lux is looking for later stage firms that are nearing IPO level with about $5 million revenues. Scott Miller, of Lovett Miller and Co., prefers “firms with existing sales, but will consider firms that are nominal but growing rapidly.” Lovett Miller is one of the few VCs that are flexible regarding a company’s stage of development at the time of initial investment.

What does it take?

A venture capital firm can like your product, they can like you, you can be winning awards, but if one of the required pieces doesn’t fit their stringent requirements, then you’ll have to keep looking. If you’re too new, too small, not targeting the right industry, and trying to serve too small a market, forget venture capital financing.

Why is it so tough qualifying for VC? VCs locally receive approximately 20 to 25 business plans a month, but pursue very few of those. Lux said he has “received 250 opportunities in the last 9 months, reviewed 20, and closed on 2, with others in the works.” This falls in line with national averages. For every 100 business plans received, 1% get funding.

VCs look at your business plan carefully. Simmons says he expects a “well thought out plan that reflects the application of management experience with growth companies to the business strategy and numbers.” He will “zip over a plan that doesn’t make sense or the people don’t have the requisite experience and/or the plan doesn’t appear to be rational.”

What’s considered not rational? When “growth rates aren’t practical, or the owner doesn’t appreciate the difficulty in recruiting, hiring, and training the correct people, as well as obtaining the technology they need to use,” states Simmons.

What types of opportunities are they looking for? Depends. Each of the 3 VC firm’s interviewed had a specific niche they operated in. Stonehenge considered all industries except retail, finance, insurance and banking, while Lovett Miller liked technology and healthcare, although they don’t rule out retail. Quantum Capital Partners prefers to invest in services, technology/communications and manufacturing in the Tampa Bay area.

Good vs. Great Deal?

When asked about buying a house, realtors say “location, location, location!” When asked about a great deal, Simmons, of Quantum Capital Partners says “management, management and market.” The “experience of the management team, the market’s size, growth rate, the company’s penetration of that market” dominates his firm’s decision making process. That’s after profitability, of course.

Lux and Miller agree. After profitability, each stated management as the key issue. Not just someone with experience in the industry, but someone with experience having run a similar company successfully. Lux likes a “team that is experienced and a company where all the slots are filled. One that is first on the market, has a patented product with some acceptance already in the market, and a very defined marketing plan in an industry growing rapidly. They also should have engaged solid professional services to back them up: local lawyers and accountants. And it helps if other knowledgeable investors participating.”

Miller says the difference between a good vs. great deal is “the level of management competence, and the company valuation at investment time.”

Simmons echoes those sentiments but adds, “We want to work people who we can have fun with and who have a rate of return greater than 30%.” All want to reach profit goals in less than 5 years.

Tampa Bay may not be New York, Chicago or L.A., but as more and more venture capital firms move into the area, it will be taken a lot more seriously.

Lauren Shiner heads her own marketing strategies firm and helps businesses with business plans and marketing strategies. She can be reached at 813-963-1251 or http://www.shinermarketing.com