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License gets Vista acces to funds

By Tony Kindelspire
The Daily Times-Call

BROOMFIELD — A Colorado company will be better equipped to help other new and fledgling Colorado companies, thanks to the granting of a license recently from the U.S. Small Business Administration.

Broomfield-based Vista Ventures has received a Small Business Investment Company license from the SBA. The granting of the license means Vista will have access to more than $60 million in funds through the SBIC program, which allows private organizations to expand their own investment capital with money obtained through the SBA. The SBA will invest equity capital equal to twice the amount of a private fund’s capital.

“I think it’s very good news for the Colorado entrepreneurial environment overall,” said Catharine Merigold, one of Vista’s founders and a general partner in the firm. “We’re going to be investing that money here, primarily, in 15 to 20 companies over the next couple of years.”

Vista specializes in early- and mid-stage investments in IT and communications companies. Merigold said that there are fewer than 10 venture capital groups in Colorado that have received SBIC licenses.

“The last time a private firm received this type of license was 1979,” she said. “In 2002 and 2003, there is not a whole lot of money going into investment funds, and that is why this license is so significant.”

Venture capital investments in Colorado — and nationwide — have taken a dramatic dip since the peak of 2002. According to PricewaterhouseCoopers, VC investments for Colorado were $4.34 billion in 2000. The following year, the amount was $1.4 billion, and by 2002 that number was down to $547 million.

Nationally, last year’s venture capital funding amount of $21.2 billion was nearly half of what it was in 2001, and very close to the 1998 figure of $21.6 billion.

Also last year, venture capital funds cut back sharply on the amount of money they raised for future investments. According to the Associated Press, taking into account the money they returned to investors, 108 VC funds raised a net total of $1.9 billion for future investments in 2002, the smallest inflow into the venture capital community since 1981.

“I don’t think you are going to see much money coming into the industry for three or four years,” Martin Pichinson, the chief executive officer for Sherwood Partners, told the AP last month.

Colorado companies that are looking for early-stage funding don’t simply try to tap the VC market here — they look all over the country to find investors. But it’s not always easy for these entrepreneurs to make the contacts or generate the interest that they need to out of state.

“Companies in Colorado are at somewhat of a disadvantage because roughly 90 percent of the money that comes into Colorado companies comes from out of state,” Craig Hanson, a principle at Vista Ventures.

The $40 million that this license grants Vista access to means it will have more money to invest in companies here, which will in turn lead to interest from VCs located in other parts of the country.

“It turns out that for early-stage investors, it really helps to have investors nearby,” Merigold said. “Early stage, it’s really helpful to have local feet on the street.”

Paraphrasing an out-of-state investor, “I’m interested in investing, but I want somebody there on the ground. I may be interested, but I don’t want to be on a plane every two weeks,” Merigold said.

Hanson added that Vista’s receiving the SBIC license, and the additional funding that will go along with it, runs counter to trends affecting venture capital firms around the country.

“Sixty million dollars is a significant addition to Colorado’s capital base,” he said.

Tony Kindelspire can be reached at 303-776-2244, Ext. 291, or by e-mail at tkindelspire@times-call.com.