Intellysis Capital Advisors of Tampa takes a new tack, providing seed money to fledgling entrepreneurs with solid business plans in voice, data and Internet communications.
Michael A. Viren and Oscar J. Williams worked 16-hour days for decades, pushing communications companies from start-ups to standing position. Now the two Tampa businessmen, both in their late 50s, want to put their money rather than their muscles to work.
Viren, Williams and three partners have formed Intellysis Capital Advisors, a venture capital firm targeting fledgling telecommunications companies in the Tampa Bay area and throughout the Southeast. They also hope to construct a privately funded incubator to nurture such businesses locally.
Organized in October, the company has made seven investments from its initial fund, which came out of the partners' personal savings. They are now tapping outside investors for a second fund that they expect could be as much as $100-million.
The partners wouldn't reveal how much they have invested to date, but initial investments from Intellysis have ranged as high as $2-million per company, in some cases with a second round of as much as $5-million.
"In the past, money has left Florida to be invested elsewhere," said Viren, who expects that Intellysis' investors will be companies and high-net worth individuals nationwide. "We're going to be bringing money into Florida and using it here."
Intellysis' focus on providing seed capital to technology entrepreneurs is a critical distinction because such early money has been sorely lacking in the Tampa Bay area. Most local venture capitalists prefer to invest in companies that are up and running, with a viable product and employees. Intellysis wants entrepreneurs with solid business plans in the fields of voice, data and Internet communications.
The focus on communications companies stems from the partners' background as early employees with Tampa's Intermedia Communications Inc., which provides communications networks to small and midsize businesses. Viren, 58, was Intermedia's senior vice president for strategic planning, and Williams, 56, was vice president for finance and administration when they left the company in 1998. Two other Intellysis partners, Bruce Wilkinson and Dan Montague, also had been with Intermedia; Wilkinson, 61, was legal consultant while Montague, 64, was chief financial officer in the early 1990s.
In June 1998, the four men, along with Al LaBorde, a veteran of Virgin Islands Telephone Co., founded 2nd Century Communications, another telecom firm targeting small and midsize businesses. They remained at 2nd Century for a year, then turned the privately held company over to managers who have since moved the headquarters to the Washington area.
"There comes a time when you feel you've done this before," Williams said of the partners' involvement in 2nd Century. "We've set it up to go and turned it over to good people who can continue that process. But we see ourselves as having the ability to nurture a lot more businesses."
Now the men are ensconced in low-rent space over a Realtor's office in Temple Terrace, poring over business plans, raising funds and working with their initial investments. Among them: Intelliworxx, a Sarasota company that has developed PC devices managed through voice and touch. A Silicon Valley start-up, Open Entertainment Inc., also attracted Intellysis' partners with its Internet appliance that allows users to download movies and music while protecting copyright privileges.
Pending is a deal with a Tampa firm that is consolidating companies that install and maintain in-house phone systems for businesses. (Intellysis declined to identify the company because the agreement has not yet been signed.)
"The first fund helped us focus," Viren said. "We know we only want to fund seed, not established companies. And we realize we know the service rather than the hardware side of the business. We're looking for businesses selling services that are paid for on a repeat basis."
Nor is Intellysis eager to invest again outside of the Southeast. "The Open Entertainment deal was just too good to pass up," said Viren, who sits on that company's board. "But we don't want to go to California."
Instead, the partners at Intellysis want to bring California-type start-ups to Tampa and cluster them in an incubator on or near the University of South Florida campus.
The partners envision a high-tech incubator that offers entrepreneurs low-rent space subsidized by accountants, insurance agents and lawyers willing to pay a premium for a chance to serve the start-ups.
"We'll provide support with administrative services, office space, communications and computers so the entrepreneur can really focus on the core business," Viren said. "We want to eliminate distractions. When you're worried about meeting payroll rather than developing your idea, that's a tremendous distraction."
Ideally, Intellysis would like to lease space from USF to build a facility that could house up to 10 start-ups for a maximum of 18 months. Alternatively, the company will build its incubator across the street from the campus.
"We're not asking for any public support," Williams said, adding that the company intends to talk with USF's new president, Judy Genshaft, after she takes office July 1. "We choose to be private because we think it will allow us the independence to grow the incubator faster."
(USF's plans for a biotech incubator, announced in January 1999, were scrapped because of a lack of state funding.)
Intellysis' partners know from experience that successful companies breed a cadre of managers who often spin off their own successful companies. And though they've seen examples of such corporate gene-splitting in Tampa _ 2nd Century being one _ they think a focused, fast-turnover incubator could have a tremendous snowball effect. The incubator could become the focal point, they think, for generating new businesses and new investors.
"If you want venture capital in Silicon Valley, you go to Sand Hill Road," Viren said, referring to the address of leading VC firms in Menlo Park, Calif. "But where does an entrepreneur go for venture capital in Tampa? Local start-ups immediately look outside the state for money."
Viren and his partners are aware that many venture capitalists think technology start-ups are demanding unrealistically high valuations. One longtime Tampa investor, Don Burton of South Atlantic Venture Funds, recently decided to put new investments on hold, citing an inflated market. But the principals at Intellysis think their approach _ targeting technology they understand at a very early stage in its development _ can work.
"A lot of venture capitalists are investment bankers who don't have the technical expertise to do the due diligence on some of these investments," Viren said. "This is an area we know. And we simply won't pay too much for an idea."
Encouraged by the response so far, Intellysis' partners hope to raise a fund every two years, with each fund's payout taking seven years.
"We'd be happy with a 25 percent return," Viren said. "But I personally expect it to be much higher than that."