RIVERSIDE, Calif. – While the Inland Empire region of California lies only 50 miles east of Los Angeles, to entrepreneurs and new media professionals there trying to attract venture capital financing, it may as well be located 50 miles west.
Through a coalition of 24 local universities, cheap living and regularly scheduled venture capital forums, an infrastructure for an information technology-based economy in the region is gradually being cultivated.
“We do all the up-front work,” says Mike Stull, coordinator of the Diamond Venture Forum, which was held in early October. “Venture capital firms should be parked on our doorstep.”
The tone of the forum, which included business plan presentations from 10 regional start-ups, illustrates the challenges entrepreneurs face in luring institutional cash. While several individual investors were in attendance, the forum got scant attention from the venture community.
“In Silicon Valley, all the resources are there, and it is easier to get access to capital,” Stull says. “There is a challenge here for that activity to make its way east.”
While elite companies based in IT epicenters seemingly go from incubation to public offerings in the time it takes to sit through a commercial, the plan for most companies in this region is to raise money from angels and position themselves as attractive acquisition candidates.
“Raising capital, in general, is more of a networking thing than having a great idea,” says J.D. Davids, chief executive of Deal Management Systems Inc., which presented at the forum and is seeking $3 million in private equity.
Encinitas, Calif.-based Deal Management Systems, which has raised $200,000 in angel funding to date, develops an Internet-based digital conference room that helps deal makers facilitate transactions. If anything, the viability of its product will help with due diligence once the term sheets are on the table, or more appropriately, in cyberspace.
“It’s a nice model for us,” Davids says. “When we speak to customers, we know that they could be potential investors.”
One company seeking to enliven the Inland region’s e-commerce industry is Newport Beach-Calif.-based Webcaskets.com, which undercuts the margins taken by funeral homes. In addition to selling caskets, the business-to-consumer site offers flowers, estate management planning services and other products and services designed to ease the grieving process.
“Most funeral homes take advantage of consumers at their most vulnerable state, says Chief Executive Alex Frost. “We can run a very profitable business without charging such mark-ups.”
Webcaskets.com is raising $1 million, which it intends to devote to sales and marketing and infrastructure costs. One can only imagine the commercial.
With an IT infrastructure in place, the Inland region can develop and accommodate growing companies, with hopes that some will hit the big time and bring even more industry and investments to the land.