Startups Prepare for Pitchfest
Believe it or not, venture funding activity still exists. And 30 young companies -- including some telecom and wireless startups -- are getting a chance to pitch their wares to an audience of more than 400 moneymen from Texas and elsewhere in the southwest who will gather here at the Southwest Equity Capital Summit (SECS), an annual venture investment confab.
"It's a good place to learn what's on the minds of the VCs," says Scott Grout, CEO of Chorum Technologies Inc., a company that closed a $54.7 million funding round about this time last year.
So what does a young startup do to raise money in this environment? Grout's advice for startups seeking capital is to be realistic about funding terms, demonstrate a deep understanding of the market you're trying to penetrate, and "state credibly what your exit strategy will be."
"At the end of the day, investors get into an investment so they can someday get out," he says.
One startup that's busily preparing for its moment in the spotlight is jNETx, a Dallas-based developer of middleware for telecom operators. "Obviously we're excited about the opportunity and we want to do the best possible job," says Steve Hollis, founder and VP of jNETx. "That excitement might lead to a little nervousness."
Hollis says jNETx is looking to attract $5 million in new financing for its middleware, which he says will help wireline and wireless carriers implement new phone services, ranging from short message services to automated personal secretaries. JNETx's software enables the new services, but the service creation itself is left to third-party developers, a division of labor that is paying off handsomely for NTT DoCoMo Inc.'s (NYSE: DCM) i-mode platform.
In a way, jNETx's software appears to be a next-generation service control point, the node in a telephone network that hooks into several databases and signals network switches to provide specific services. The startup says one European wireless network is already installing its software to run tests.
Hollis says jNETx competes with Infitel International N.V., Incomit, and AePona Ltd. So far it has raised about $2 million in funding from its founders and Mint Capital, a London-based venture firm.
The company has about 35 employees, most of them software developers based in Moscow [ed. note: Russia, that is, not Idaho].
Other attendees will include big corporations who are either looking to partner or invest in startups. Fujitsu Network Communications Inc. (FNC), based in Richardson, Texas, says it is always looking to team with photonic component startups and, in rare cases, systems vendors. "I'm going to be talking a lot less about investing and a lot more about partnering," says Brian Gawick, senior VP of product development at FNC.
Not all early-stage startups seeking funding will be met with fistfuls of cash, despite the prime audience, says John Adler, a venture partner at InterWest Partners. "I know we're going to see deals, but I don't expect that I'm going to see one that makes me stand up and say, 'I'm going to fund that thing.' "
However, startups like jNETx, that are looking for additional funding at SECS or a similar venue, may have more success. "I think it's really good for companies that have got funding already and they're getting ready to go out and get follow-on funding from groups like VCs," Adler says.
— Phil Harvey, Senior Editor, Light Reading