With both returning and home-grown management talent, Maine’s high-growth companies are catching the eye of investors.“In the past couple years, Maine has become a very interesting place because of the management talent here,” says John Burns, managing director of the Maine Venture Fund. “Companies are putting more experienced management and goals in place.” He expects […]
With both returning and home-grown management talent, Maine's high-growth companies are catching the eye of investors.
“In the past couple years, Maine has become a very interesting place because of the management talent here,” says John Burns, managing director of the Maine Venture Fund. “Companies are putting more experienced management and goals in place.” He expects that trend to continue.
MVF was started by the Maine Legislature in 1995 to invest in the smaller companies that fell through the funding cracks. Since then, MVF has received $13 million in capital contributions from the government to operate as a revolving evergreen fund. It has invested in 56 companies, all Maine-based, with an average investment of $200,000. Of those, 22 are active in MVF's portfolio, and a half-dozen received funding in 2014.
Burns says groups like MVF, Maine Angels and Coastal Ventures are important to servicing the smaller companies, which may only want to raise $100,000. Some two-thirds of venture funding nationwide goes to companies in a handful of states like Massachusetts, with the rest, including Maine, considered “fly-over” states.
Large venture capital firms' funds have gotten bigger since 2002, but at the same time there are fewer of them, he says. Plus, they're looking to dole out upwards of $40 million per deal. “Small, emerging companies don't have access to that capital,” Burns explains.
The idea of states being involved in funding small companies isn't new, says Burns. “Most states spend 3% of their gross domestic product on growth-stage companies. Maine was spending a bubble over 0%,” he says, when the former King administration moved in the mid-1990s to counter that paucity of capital. It looked both to private industry and the public sector.
The Maine Technology Institute was one public sector effort, and MVF was the second. In 2000, MVF got $3 million from the proceeds of a 1997 bond issue. MVF always invests with partners, and doesn't take more than a 50% share of an investment.
One of the top successes was Recruiternet, which was sold to a small public company that in turn was bought by another company. Recruiternet sold applicant tracking software to human resources departments at Fortune 500 companies. Burns says MVF made a one-time investment of $250,000 into the company, and got $2 million of the sales proceeds (its partners got the rest) four years later.
Looking forward to 2015, Burns says about a dozen Maine companies are trying to raise capital at any given time. A lot are pre-revenue, making them risky. Says Burns, “We recommend the '4 Fs' before coming to us: founders [people who share your ideas], family, friends and foolhardy strangers.”
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