Happy New Year and whooo-hooo. 2004 already promises to be pretty
exciting here in the boonies. I feel like I’m part of a snowball
rolling down a mountainside.
I had lunch today with Mark Montgomery, Founder and Managing Director
of Initium Capital (www.initiumcapital.com) , a nascent venture
capital firm specializing in early-stage life science and information
technologies. Initium is Latin for beginning, or commencement. How
fitting.
Tomorrow Mark is announcing that the fund’s General Partners have
decided to establish the company’s headquarters in Scottsdale, AZ,
despite having been asked to relocate several times. He has been
working on this project for over eighteen months, under the radar and
behind the scenes. I’d say he was in stealth mode, but we hadn’t
heard about him either :-)
If this fund actually materializes as he thinks it will, Mark will
have put together the state’s first venture capital fund since the
change of leadership at ASU and the creation of TGen.
The Fund, which has commitments for about $250 million from
institutional limited partners, is now looking for General Partners
(people who can commit full time without a paycheck) with industry
expertise in life sciences or information technology and geographic
desirability (they live in Arizona or nearby). The current General
Partners have initially allocated only a modest portion of the
planned $250 million Fund 1 to be invested in Arizona start-ups, but
the amount is expected to increase as the recent Arizona investments
in research and development mature.
Fund 1 also contains provisions for a significant Fund of Fund
allocation in seed firms targeting pre-institutional investment
within life sciences and information technology. This, as you know,
is the kind of money I believe we REALLY need for local companies.
Initium will also continue to negotiate with venture teams on both
coasts for future expansion opportunities during the ongoing shakeout
in venture capital worldwide.
What makes Mark Montgomery think he can succeed at this? Things are
different in the venture capital business now, Montgomery says. It’s
a good time to start a fund because many of the big funds are
unwinding their commitments and the partners are retiring. That
leaves some talent up for grabs. And the institutional investors are
requiring more transparency, which makes Montgomery feel comfortable.
He feels he can provide that to his limited partners.
Montgomery has been running a private incubator here since 1995, from
his home in Dewey, outside of Prescott. He made a “lifestyle” move
here from Seattle when that community became costly and impersonal.
Like most people who came to Arizona, he loves it here, and wants to
stay. So he’s trying his best to get the fund going here.
And for him and his partner, Rob Kennedy (formerly with Koch
Ventures) it’s not a matter of luring the investors. They need
partners ready to share the decision-making and management risks of
venture capital fund. Since Koch moved to Dallas, Kennedy has been in
South Florida and South Dakota. He has been commuting to both
places. He’d like to stay home.
“We believe Arizona is compelling given a number of economic
development initiatives taking hold. Initium Capital will be in a
great position to participate in this development, locating here is
the right thing to do” added Kennedy, CFO and Managing Partner. “We
have reviewed several hundred partner applicants during our search
efforts, and remain confident that we will attract top tier talent to
Arizona”.
What does all this mean? It means we all get down on our knees and
pray to the capital formation gods that good General Partner
candidates materialize in this market � enough to enable Infinium to
close its fund in the first half of 2004. It also means we
collaborate with Infinium, and share our knowledge and connections
with the company.
Most important, it means we may have evolved our economic development
efforts to the point where outsiders think we are a big enough, solid
enough economy to bet on.
People who try to start venture capital firms in Arizona have to be
crazy. If they were sane, they’d just start real estate partnerships
or invest in mortgages. But every once in a while, it’s nice to break
bread with a few crazies: without them, nothing different would ever
happen.
See you next year!
