A Twin Cities venture capitalist for technology companies said
Friday that Duluth is not too far out of the way for his firm, but
companies seeking his help need to have a solid plan for fast
Some technology companies say getting money for their ventures in
remote Duluth, where financiers are more comfortable with
traditional companies, has been a stumbling block to making the
technology sector grow.
"We're looking for good investments, no matter where they are,''
said Mac Lewis, managing partner for Sherpa Partners. Lewis talked
to Northland Technology Consortium members at its monthly meeting.
Venture capital firms look for small companies with solid plans
that can grow fast. They often take an active role in the company,
such as putting a partner on the board of directors.
Because of that, it can be hard to compete with companies located
near a venture capital firm.
"They have so much going on down there, that I don't know if
anyone has invested in Northeast Minnesota,'' said Andrew Lucero,
director of emerging technologies at Minnesota Power. "We need more
venture capital in Duluth.''
The Technology Consortium encourages and helps technology
companies and people involved in technology work. It has a
membership of about 60 companies.
It brought Lewis in so members could hear an outside perspective
on venture capital and, possibly, to learn how to tap that market.
"Some Duluth company is going to be a home run,'' said John
Foucault of Points North Consulting. "We just don't know who it will
Lewis said his company, which has started one venture capital
fund and plans to start a second soon, requires companies to meet
product must target a large, growing and new market.
product must be clearly different from what is available now.
company has to be able to prove its targeted customers will buy the
company's managers need to be outstanding -- and enthusiastic about
"If it's not exciting enough of an idea for people to get
together in a garage and work on it for months, maybe it's not a
fundable idea,'' Lewis said.
company's managers have to be committed to growing and to making
investors' value grow.
Because venture capitalists target new companies testing new
ideas, many investments fail. Because many fail, returns need to be
high to make up for the losses.
How high? Lewis said venture capitalist want to see potential for
a 35 percent rate of return.
"Remember, we're investing other people's money here,'' he said.
The managers of venture capital funds solicit large chunks of
money from wealthy investors. They use that money to invest in
start-up companies and, when the company goes public or is sold, the
returns are distributed back to the original investors.