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Published: Sunday, 10/25/2009

Toledo area's 1st investor fair to hear bids from 15 firms

BY GARY T. PAKULSKI
BLADE BUSINESS WRITER

HER LIPS tend to turn blue, her blood pressure gyrates dangerously, she is frequently feverish, and she often has an irregular heartbeat.

So why is she scheduled to be in the spotlight in a “beauty contest” Nov. 12 at the Hilton Garden Inn in Perrysburg?

Answer: To try to attract the affection of investors attending what organizers are describing as the Toledo area's first-ever venture capital fair.

Toledo's PhysioSim LLC, her inventor, is one of 15 firms invited to make pitches at the event put together by Toledo's nonprofit Regional Growth Partnership and affiliated Rocket Ventures fund. The company plans to manufacture and sell a line of interactive patient mannequins for use in nursing schools and other medical-training settings.

“Presenters” — from Ohio, Michigan, and Pennsylvania — each will get eight minutes to make appeals, no exceptions. A giant clock will tick off the minutes. Cue cards will offer reminders of time remaining.

“In a way, it's like a beauty contest for start-up businesses looking for financial support,” observed participant David Allburn, of Glouster, Ohio, in the southeast corner of the state.

Pacifiers from Branam Oral Health Technologies will go before potential investors. Their inventor, metro Toledo dentist Dr. Stephen Branam, says traditional pacifiers can lead to bite problems.  
Pacifiers from Branam Oral Health Technologies will go before potential investors. Their inventor, metro Toledo dentist Dr. Stephen Branam, says traditional pacifiers can lead to bite problems.
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He joined what he describes as the “beauty contest circuit” after his firm, National Fingerprint LLC, got good reviews at a venture fair elsewhere. Investors liked the concept but did not come through with any money.

“We're ready to go to market, but we need investment dollars to do it,” Mr. Allburn said. Expenses of start-up companies are high, he added. Renting a booth at a trade show to promote the product to prospective customers can cost $1,000.

So far, the two-year-old firm has sold about 200 of its kits to customers who have offered feedback that has led to improvements. The firm, which can produce fingerprints for about $25 each, plus government processing fees, is in the running for $1.1 million from a state-supported fund. But first it has to secure private dollars.

Hence, Mr. Allburn will travel to the venture fair in Toledo in about two weeks to make a pitch to an expected dozen venture-capital funds from Ohio, Michigan, and Indiana. And the firm is being considered for other venture fairs as well.

“They're fairly common,” said Emily Mendell, spokesman for the National Venture Capital Association said of the fairs.

“This is the first one in northwest Ohio,” said Greg Knudson, a vice president of the Regional Growth Partnership and director of Rocket Ventures.

National Fingerprint LLC, which makes this device, is in the running for money from a state-supported fund and is seeking private money that is a qualification requirement. National Fingerprint LLC, which makes this device, is in the running for money from a state-supported fund and is seeking private money that is a qualification requirement.
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Nearly half of the firms selected to make pitches at the Toledo fair were started elsewhere and have main offices in other cities — in a few cases, outside Ohio. But all maintain operations in Ohio or have connections to the state, Mr. Knudson said.

“We are bringing in venture capitalists,” he added. “We wanted the highest-quality companies. We wanted companies from northwest Ohio as well.”

About half of the firms that will make pitches at the metro Toledo fair are in bioscience, and the remainder are divided among alternative energy, information technology, and advanced materials and technology.

Firms that specialize in investing in start-ups — providing money known as venture capital — are constantly on the hunt for new ideas. And fairs provide a place for them to get acquainted with entrepreneurs looking for money, Ms. Mendell said.

Most venture funds solicit applications on the Internet, but many start-ups are uncomfortable sending information about their brainchildren over the Web, she added.

However, she advised entrepreneurs not to expect to walk away from venture fairs with checks. “If the venture capital fund is intrigued, they'll be invited to a follow-up meeting. Due diligence in a situation like this usually takes several months.”

And even then, she added, success is a long shot. Of 100 proposals submitted, 10 will get a good look, but only one will be funded, she estimated.

These are not the best of times for venture capital funds.

To get money to pump into promising start-up businesses, they rely on institutional investors and wealthy individuals to kick in money. But in the July-to-September period, only 17 funds raised money — a total of $1.6 billion. That was the lowest number of firms raising money since 1994, according to Thomson Reuters and the Venture Capital Association.

Those and other funds then made investments of $4.8 billion, an increase of 17 percent from the second quarter. Unfortunately for entrepreneurs seeking financing for the first time, such funding fell 20 percent to $533 million, Thomson Reuters and the Venture Capital Association said.

Far more successful last quarter were well-known companies such as the social networking site Twitter Inc., of San Francisco, which received $100 million in its seventh “round” of funding.

Firms making pitches at the local venture capital fair were selected from two dozen applicants that submitted three-page executive summaries to the Regional Growth Partnership and Rocket Ventures. The submissions were forwarded, mostly by e-mail, to an informal committee of experts involved in business and venture capital for vetting.

The organizers, who promote economic development in northwest Ohio and assist technology start-ups, are determined to get their inaugural venture fair right.

Organizers will be strict about keeping each start-up's pitch brief.

“The reason we do this — and this is very common — is that many of these really smart technologists can talk for hours,” Mr. Knudson said. “The challenge is to articulate the business proposition and market opportunity in as quick a time as possible to keep the audience — in this case, venture capital firms.”

He acknowledged that not all of the ventures seeking financing are traditional “start-ups.” Some have been around a while.

For example, the Toledo environmental remediation firm AquaBlok Ltd. began in the 1990s.

But the firm recently made organizational changes that make it “almost a start-up,” Mr. Knudson said.

AquaBlok markets a clay material, already used in places such as a polluted section of the Tennessee River, that seals contaminants at the bottoms of streams, rivers, and lakes. The product is touted as a less costly alternative to practices such as sediment removal.

The venture fair will be the first for two-year-old PhysioSim, which wants to begin sales a year from now of a $30,000 patient-assessment mannequin. At one-fifth the cost of models from top competitors, the devices have internal circuitry that gives users experience checking skin coloring, blood pressure, heart rate, and breathing.

PhysioSim was founded by an existing medical device manufacturer in Ottawa Lake, Mich., but will be based in Toledo.

The firm hasn't decided on a name or gender for the mannequin and doesn't yet have a working prototype. But design of the circuitry — which is the most important part of the device — is well along, said Rick Wasserman, chief executive of PhysioSim and sister firm Pinnacle Technology Group in Ottawa Lake.

Production of the doll will be outsourced to a company experienced in the field, but circuitry production and mannequin assembly will be performed in Toledo, Mr. Wasserman said.

He is enthusiastic about the venture fair. “It will expose our product and our ideas to potential funding sources,” he said. “The issue at this point is to finalize the funding for the production-ready prototype.”

Branam Oral Health Technologies Inc., in the Toledo suburb of Oregon, also hopes to snag investor interest. It plans to begin sales early next year of a specialized infant's and children's pacifier.

Dr. Stephen Branam, a longtime metro Toledo dentist specializing in care of children, developed the product a decade ago. In his view, standard pacifiers — a $150 million business annually in the United States — can lead to bite problems and poor jaw development.

His firm will roll out a line of tooth gels, toothpastes, and other oral hygiene products designed to reduce tooth decay, which he regards as the “No. 1 childhood disease in America.”

Sales representatives are negotiating with a distributor to get the products into independent grocery and drugstores. The company also plans to market the pacifier — which is expected to sell for about $4.50 — through dentists and pediatricians.

Branam Health hopes to attract about $1 million in initial financing. Mike “Mick” Janness, chief executive officer, is optimistic about the venture fair. But he recognizes that many venture firms will invest in companies only after sales have begun. “This will be an opportunity to build relationships with those companies looking for post-revenue type of investments,” Mr. Janness added.

RealBio Technology Inc., which is based in Kalamazoo, Mich., plans to tout its system for growing cell cultures for scientific research in a setting that more closely mimics natural conditions. The technology grew out of a $5 million U.S. Defense Department grant for a system that promised to create an artificial immune system, said Paul Neeb, chief executive. “We think this is a significant step forward,” he added.

PharmaTrope Ltd., a consultant and software designer involved in drug development, is considering a move to Ohio after being founded in the Philadephia area last March by an former pharmaceutical executive and a software executive.

The firm learned about the Toledo job fair from contacts at Ohio University, with whom the founders have been working to advance the business, said Jeffrey Wiseman, chief executive. He and his business partner are talking about moving to Ohio. “Our goal is to start making contacts and get financing to get this company off and moving,” Mr. Wiseman said.

Shadeplex LLC is working with specialized fabric for use in mounting solar panels on parking canopies, said Brian Tell, a co-founder. The firm plans to erect a test site in early 2010 in the Toledo area.

Obviously, the idea wouldn't work for heavy glass panels that currently dominate the market. But Mr. Tell and many others believe that future panels will be made of lightweight materials produced by the roll. Xunlight Corp., Toledo, produces such a product.

Parking canopies, which are found in universities, office parks, and shopping centers in places such as Arizona, provide an ideal application. The electricity could either be fed into the electricity grid or — if electric vehicles became more popular — used to provide power for charging stations.

Nextronex Energy Systems LLC, Toledo, which has developed a less costly, more efficient system for connecting solar arrays to the electricity grid, hopes to be logging $50 million a year in sales within four years, Chief Executive Norman Rapino said.

The firm believes it has made a breakthrough in a so-called “inverter system” used in all solar-energy farms that are connected to the grid.

“We're really proud of our product and it has been tested and appears to work,” Mr. Rapino said. “We're optimistic about our chances. If investors give us a really good look, they'll see we have a very good product that is timely.”

Contact Gary Pakulski at:gpakulski@theblade.comor 419-724-6082.



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