Business Leader | May 2000 | Playing to Win -
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Published on: 5/1/2000
Last Visited: 7/11/2006
And it is never going to get less expensive to catch market share," says David Blivin, managing director, Southeast Interactive Technology Funds.
Southeast Interactive is in the business of attacking these challenges and creating leaders in information technology in the Southeast.It raises money from individual and institutional investors and then use it to buy stakes in early-stage companies with high growth potential.Its new fund, Southeast Interactive Technology Fund III, at $135 million, is the largest pool of venture capital based in the Southeast dedicated to the IT industry.And the cash, says Blivin, is just the beginning of the resources the venture capital firm offers.
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"Southeast Interactive's founding looked a lot like the beginnings of most entrepreneurial companies," says Blivin."We identified a need in the market and a way to address it."
In the mid 1990s, as the CFO of Montrose Capital Corporation, a merchant banking firm known for investing in companies, Blivin couldn't help but notice that his firm's comfort with IT deals was not high.It often took the firm over six months to make an investment in an IT company, a delay that caused both the bank and the company to miss many opportunities.Blivin knew there had to be a better way to capitalize on the rising technology opportunities in the Southeast.
In the summer of 1995, Blivin raised $6 million.Strictly focused on IT, the fund was the first of its kind in the Southeast, says Blivin.Southeast Interactive had their pick axes, now all they needed were a few gold mines.Blivin set the criteria that he believed would be critical for successful early-stage growth investing.The portfolio companies he sought would have a strong management team, a product generating revenues, strategic partnerships and strong potential to either grab a public offering or become an attractive acquisition candidate.
BuildNet, Virtus Entertainment, Alternate Realities Corporation, Usendit.com, and Interactive Magic were among the first companies the firm invested in.This first fund has already returned $20 million, minus investments such as BuildNet that they haven't cashed in yet.As Southeast Interactive grew, so did the management of the fund.Norvell Miller, managing director, Bill Glynn, director, and Chris Austen, director, joined Blivin.
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"We had no pre-conceived notion of how to do this," says Blivin.
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Dealing in the Southeast The Southeast is seriously undercapitalized, believes Blivin, a fact that has made it difficult for companies to secure necessary funds.With the high level of research being funded, facilities in place, and high per capita Ph.D.s residing in the area, there is substantial pent-up supply of venture opportunities at attractive valuations.But, though the area's profile is rising and the opportunities are growing larger, Blivin says there are still challenges the region must overcome."Everything that IT companies need to be successful is not always here - the capital, the partners, the investment banks, the talent," says Blivin."We strive to deliver these elements."Many more companies get bought than IPO, Blivin points out.For this to change, he says a shift in mentality is required.
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"Southeast companies, particularly first-time entrepreneurs, tend to be overly confident with their technology," says Blivin."They don't realize that people are playing to win and that technology is rarely the barrier to entry.They must be best of breed on every front."
Blivin says he laughs when companies tell him they have no competitors."That means two things - either you have no market or you don't understand your market.Competition is everywhere."
It is a global network, warns Blivin, one that is getting larger and more interconnected by the second, and companies tend to not appreciate the fact that they are playing in an international game.
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A side car fund is quite common in Silicon Valley and other technology centers, says Blivin, though he believes his firm's marks the first of its kind in the Southeast.
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This doesn't cost our companies anything extra - in fact, it costs us - but we expect the increase in our returns generated through these relationships will more than cover the cost," said David C. Blivin, co-managing director, Southeast Interactive.
Southeast Interactive also strives to link companies and raise the profile of technology in the Southeast through its annual conference.Coordinated in conjunction with UpSide Magazine, the UPSIDE Southeast Technology Conference, features than 60 senior-level executives from the information technology industry and more than 30 select private IT businesses based in the Southeast.
The annual conference compliments monthly meetings in which Southeast Interactive brings in national IT leaders to mingle with its portfolio companies."We want to cross-pollinate ideas across our portfolio," says Blivin.
Getting in the Door
Southeast Interactive has led or co-invested in 22 companies to date.The partners receive approximately 50 business plans a week, out of which they invest in about 10 to 15 companies in one year."We are turning down lots of good deals," says Blivin.
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