Raleigh Investment Banker Targets Northern Virginia
The company will work with a partner in Reston, Va., to finance telecom, bio-science and software start-ups
P> Venture capital is great -- if you can get it. But often as not, a few hundred thousand might just do the trick.
So Trident Group Inc. of Reston, Va., has partnered with Ostrander Burch & Co. Inc. of Raleigh, N.C., to bring small investment banking opportunities to Northern Virginia.
"There is a small company niche here that has been underserved by investment bankers," said Raymond Jones, president of Trident Group, which provides technology commercialization services to small, high-tech companies.
Under the terms of the deal, Trident will provide prospects for Ostrander Burch, which will remain in Raleigh. The banker will attempt to fill a need long ignored -- financing small, young businesses. According to Jones, the area lacks investment bankers interested in investments between $250,000 and $1 million.
Ostrander Burch will target technology companies in the early stages of business with the goal of helping those companies attract venture capital and other financial resources. It will also provide management consulting services, but the company has no plans to take equity stakes in its clients.
"In this area there is a gap between investments for large, older companies and young, emerging companies," said Jones, a Trident founder.
Ostrander Burch serves companies in the medical, information and electronic technology markets in the southeast. They provide direct capital resources from their own fund, High Point Capital, or through participation with other institutional lenders and investors.
Craig Ostrander, managing director of Ostrander Burch & Co., said, "Venture capitalists have a targeted market. They are looking for the next cure for death, and we want to cure the cold."
Ostrander speculates that venture capitalists invest in only 2 percent to 5 percent of the deals they see, while smaller investment bankers, such as Ostrander Burch, will invest in 70 percent of the deals they see. Ostrander Burch plans to target software, bio-science and telecom companies located in the Dulles-Reston corridor.
According to Douglas Poretz, an investor relations consultant in McLean, Va., there is a movement of investment banking firms that are realizing the investment opportunities in the Washington metropolitan area. He said that although Washington is not known as a Chicago or New York City for investment banking or venture capital, it is recently becoming a hotbed for both. The area holds large international investment bankers such as Silicon Valley Bank in Rockville, Md., Friedman Billings Ramsey Investment Management Inc. in Arlington, Va., and Ferris Baker Watts in Baltimore.
One reason for the paucity of investment bankers in the area is that local businesses have not been capital intensive and therefore haven't had a need for investment banking -- until now. Companies are expanding outside of the government world, becoming more growth oriented and are finding a greater need for capital.
In a recent survey conducted by the Fairfax County Economic Development Authority, 401 senior Fairfax County business executives said that making capital available for new ventures should be one of the authority's top priorities.
Stephen Fuller, professor of public policy at George Mason University in Fairfax, Va., agreed with Poretz that the Washington metropolitan area has never been a center for banking services. This is mainly because the market was not big enough to attract the major investment and venture capital players. But he said that you don't need to have capital located in the region because money can come electronically from anywhere in the world in a matter of minutes. On the other hand, it is favorable to have the money based in the area.
"The financial community has not fully discovered the potential of the technology businesses that we have in Fairfax County," said Dr. Gerald Gordon, executive director of the Fairfax County Economic Development Authority. "This is exactly what we want -- to have more capital available locally."
Fuller said that investment bankers and venture capitalists outside the area have a misconception of the economy of the Washington area.
"People outside think that our money is tied to the government and that if the government sneezes, the economy gets sick."
The recent growth of investment banking in the area can be attributed to the leading-edge technology originating here. Investment bankers see high risk and big profits. "Washington is now recognized as a national and international business center," said Fuller. "It's the nexus for big decision making."