Go Small

Entrepreneur, June, 2000 by Cynthia E. Griffin

Not netting any capital? Try smaller venture funds.

In the world of venture capital, there was a time when a $10 million fund was considered small. Today, less than $50 million is considered miniscule.

This resizing has been driven by a dramatic increase in start-up financing needs, says John Huntz, managing director of Fuqua Ventures in Atlanta. "In the past, $3 million to $5 million would take the company through its first year. Now it's $20 million," he says. "Smaller funds have greater difficulty participating in big rounds of financing. They have to be much more collaborative. [The marketplace] is also forcing smaller funds to participate at an earlier stage."

For entrepreneurs, this means raising $10 million to $20 million can take an experienced, already venture-backed management team, says Andrew Robbins, managing director of Sparkventures, a $20 million fund in Watertown, Massachusetts, that makes regional, early-stage investments.

"We initially invest $250,000 to $1 million, and up to $1.5 million over the life of the relationship," says Robbins of the fund targeting Net companies. "The companies we invest in must have a strong team that has either developed strong technology or that knows the vertical market well but lacks the Internet expertise."

Fuqua Ventures also seeks companies with strong management. "We use other people's intellectual capital and minds to help us sort through deals," says Huntz, who targets early-stage tech firms in the business-to-business and wireless markets. Fuqua starts with $1 million to $4 million investments.

To find small venture funds, look locally and ask your professional service providers. And visit entrepreneur.com/Entrepreneur.hts. Click on "Biz Smarts" and go to "Money."