Conference Explores Importance of Venture Capital in New Economy
State Journal 10/30/00
By T.L. Headley
Staff Writer
HUNTINGTON- At 26, Eric Lewis has already helped launch two businesses and raise more than $ 30 million from investors.
Lewis is chief operating officer of Butterfly.net and vice president of Ultraprise Inc., two e-commerce companies located here in West Virginia.
Lewis’s job is to find venture capital for the two businesses- something that is hard to come by in West Virginia. Yet venture capital is what makes the New Economy run. Venture capital is money available for loan from potential business investors. In return for a share of the company, venture capital firms provides startup money.
Lewis talked about the problem of finding venture capital in West Virginia at a forum held Huntington Oct. 23 to discuss technology in West Virginia. "Venture capital is an extremely important part of the New Economy", Lewis said.
Lewis said neither of his two companies would have made it without finding venture capital.
Today, Ultraprise, based in Sheperdstown, employs over 140 people with average salaries of over 70,000.
Rockefeller Forum on Technology and Innovation
Sen. Jay Rockefeller, D-W. Va., would like to see more Eric Lewis’ and more Ultraprises in West Virginia Forums on Technology and Innovation.
The first of these forums was held Oct. 23 at Marshall University in Huntington.
"Are we going to be part of the 21st century?", Rockefeller asked. "If we are, we are going to have to do things that are hard, but they offer the best chance for our future. Our core industries are in decline, and we must keep looking over the horizon. If we don’t move to the New Economy we will be left behind in the dust, and I refuse to miss this opportunity for West Virginia".
Over 200 people turned out for the conference, which included presentation by Rockefeller; Lewis; America Online Chairman Steve Case; Weirton Steel CEO Richard Riederer, Sami Shaaban, president NuRelm and Rachel Welsh, art director of Familiar Tales.
Rockefeller said one of the most problematic areas in the effort to develop the New Economy in West Virginia is the lack of venture capital.
"That issue must be overcome", Rockefeller said. "It is an absolute requirement for the New Economy. Although nine out of 10 high-tech companies fail, the one that doesn’t spawns 20 to 30 other companies. The risk has to be taken. It is high risk, but there is a high return possible".
What Can the State Do?
Tim McClung, manager of technology and innovation at the West Virginia Development Office, said the meeting highlighted many of the problems he is dealing with every day. McClung recently was named to head up the Development Office’s high-tech recruiting efforts.
"I think there are three important issues," McClung said. "Typically, in this type of company, you are borrowing against an idea. I don’t think we have done a very good job in the commercial marketplace of showing lenders how to assign a value to intellectual property for use as collateral."
"Secondly, there is an extended period of time in these businesses where profitablility is not even on the radar screen. It is strictly a burn rate. You are betting on a revenue that will happen later."
"Thirdly, and the hardest issue to deal with, is that we’re just not in an area where there are a lot of venture capital firms, and they don’t want to necessarily come here", McClung said.
McClung said several areas of the state area trying to put together plans to attract more venture capital firms.
"Morgantown is trying to put one together", McClung said. "The West Virginia Entrepreneurial Forum- something they just kicked off in Morgantown. They have had a couple of positive meetings up there.
"It is sponsored by the (West Virginia) university and private industry. They formed the forum to ‘bring ideas to money and money to ideas.’"
Is It a "New Economy?"
Weirton Steel CEO Richard Riederer said he doesn’t really see a "New Economy" at all.
"I don’t like to call it a new Economy," Riederer said. "We are just using new technology, but you still have to have something you are doing that people find of value."
Riederer said new technologies offer a path to the future for the state’s core industries as well.
"When I first started at Weirton, we had 6,600 people working, and few were good with computers", Riederer said. "But when we installed computers, our people were happy and they wanted training. As those abilities developed, it helped stabilize Weirton Steel’s employment."
In fact, Riederer said, the Internet has opened a whole new profit center for Weirton.
Riederer said recent international trade problems led to a downturn in the steel industry. As a result, he said, Weirton had to go back and take a look at what it could do to be more competitive in the international marketplace.
Riederer pushed for the development of MetalSite, an Internet B2B specializing in selling steel products.
Since they started MetalSite, Riederer said the company has been able to double and triple its customer base.
America Online: Example of What is Possible
AOL co-founder and CEO Steve Case believes his company is an example of what is possible in the New Economy, but he also is worried that some people are in danger of being left behind.
"Our company was founded 15 years ago", Case said. "It went public in 1990, and today is sometimes called the ‘first blue-chip company’ of the Internet."
Case said the idea he had was never a slam-dunk.
"The statistics for Internet startups are not very convincing", Case said. "My parents had no idea what I did for a living. Until just a couple of years ago, they just hoped I would make out okay".
Like Rockefeller, Case is worried about what he sees as a growing divide between the information haves and have –nots – the Digital Divide.
"It is great that we can do this - transform the economy – but it would be horrible if this exacerbated the divide between the haves and have – nots," Case said. "The Internet is in 75 percent of the homes with household incomes over $75,000 , but in just 15 percent fo those with incomes under $25,000.
"There is also a rural divide," Case said. "Not everyone in the country has the same access. We have to make sure that everyone has the ability to participate in this New Economy."
