Forum to eye finding capital for start-ups
By Joe Napsha
Published: Thursday, April 28, 2011
For technology start-up companies such as ATRP Solutions Inc. in Oakland, the challenge of persuading investors or the government to finance an idea can be as great or greater than the demands of designing a successful product.
"The No. 1 challenge for early-stage companies is funding. It takes 18 months to get a small-business innovation research grant. For start-ups, 18 months is an eternity," said Patrick McCarthy, president of the 5-year-old ATRP Solutions, located in Mellon Institute.
Start-ups seeking backers for their ideas can find themselves stuck in the "Valley of Death," where there is a "dearth of capital," said Richard Lunak, chief executive of Innovation Works, a nonprofit that helps technology start-ups in Western Pennsylvania. The organization has invested more than $50 million in about 150 companies in Western Pennsylvania since 1999.
How fledging companies can gain access to capital is one issue on the agenda today at the Startup America roundtable discussion at Chatham University in Shadyside.
The roundtable event is one of eight to be held nationwide this year between government and business representatives to address ways to simplify federal regulations that inhibit growth and job creation in small and midsized businesses. The forums are a response to President Obama's order to change regulations after a series of meeting with corporate executives last year.
Other issues being discussed, say regional entrepreneurship and innovation organizations, include bringing ideas to market faster through patent reform; improving access to Small Business Administration money; and building a skilled work force, in part through immigration reform to permit those with work visas to remain in the United States.
Other discussions will focus on energy, environment, technology, robotics, health care and manufacturing.
Lunak said technology start-ups encounter difficulty in obtaining bank financing because small companies cannot show a track record of cash flow or assets that can become collateral.
ATRP Solutions, which is trying to develop polymers, has five employees and landed a $600,000 grant from the National Science Foundation for polymer research, encountering stiff competition for such money, CEO Randy Eager said.
"You have difficulty getting early-stage funding, unless (investors) have a passion for your idea," Eager said. "There are many more start-ups with ideas but not enough (investors)."
Permitting skilled, foreign-born students to remain in the United States through reforming visa laws would help tech start-ups, said David Ruppersberger, CEO of The Technology Collaborative, which has worked with 54 start-ups and invested $7.6 million in those businesses.
"We're very good at bringing talent to our world-class universities, but then we are forcing them to go home and become our competition," Ruppersberger said.
Patent protection is important and linked to funding, Ruppersberger said. Venture capitalists want to know that if a company develops a process or product, it can be patented so the company benefits. The United States needs to bring patent laws in line with those in other nations, he said.
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