Chattanooga, Tenn.-Based Medical Dot-Com Firm Seeks Venture Capital.

By Mike Pare, Chattanooga Times/Free Press Knight Ridder/Tribune Business News

Feb. 24--Wesley Kliner is president of a Chattanooga dot-com firm focused on helping doctors better communicate with their patients.

But, securing the financing to help his business take off hasn't been easy. He's talked to a dozen different groups, though he's trying to stay away from Silicon Valley financiers because they often want businesses to relocate near where they live.

"We would like to keep our company here," said Mr. Kliner about National Med.com.

When high-tech business people in the area met last year to talk about growing more jobs, one issue that came up quickly was venture capital -- or the lack of it. Linking fledgling and growing firms to capital has surfaced as among the top cross-cutting issues in the Chattanooga region's growth plan.

"We heard it from a lot from small business people, especially in the technology area, 'We just can't find any money to finance our ideas,'" said Jeff Olingy, who's overseeing the Chattanooga Area Chamber of Commerce's economic development strategy.

Mr. Olingy said venture capital came up not only in information technology meetings but in groups involving business people in the medical devices and logistics and transportation fields.

Some answers to the problem of capital are tied to development of a high-tech incubator, said Tim Andrews, who heads Chattanooga's existing business development center on Cherokee Boulevard.

"Part of the (high-tech) incubator will be linking the people with the ideas and the financiers. We do some of that now at the current incubator. We want to take that up a notch," said Mr. Andrews.

The technology incubator is moving ahead on two fronts, with the hope of having a site around mid-year, officials said.

Al Butler, coordinating site selection for Hamilton County, said they're looking at locations near the University of Tennessee at Chattanooga to tap into the expertise at its business school.

Also, officials are trying to identify a location near a railroad line to build an Internet connecting station that would serve as an off ramp for the information superhighway. Parking and space needs of businesses are also being considered, said Mr. Butler.

To help on financing issues, the Chamber and the city's Small Business Development Center additionally are joining to sponsor seminars this spring on how to start a high-tech enterprise.

Dr. Craig Harston, a counselor at the center, said a lot of high-tech people don't understand how to do market research and roll out a business plan.

"Developing reasonable financial projections is important to venture capitalists," he said.

Traditional venture capital funding often involves the funding source taking a piece of the ownership in the company. Sometimes, the financier will provide management expertise, too.

Some in the Chattanooga area say the dollars aren't plentiful here when it comes to traditional venture capital.

"The funding sources are very few," said Jerry Adams, managing partner for Joseph Decosimo & Co., the Chattanooga-based accounting firm that also helps companies find investments to grow their businesses.

Along with boosting traditional venture capitalism, however, the Chamber wants to enhance the entire small-business financing network in the Chattanooga area.

Mr. Olingy said there's "a good bit of money" in the city to finance ideas and small businesses, but the people with the vision aren't connecting with it.

"A lot of people haven't known where to go," he said.

Another hurdle is that while venture investments in emerging enterprises nationally set a record last year, financing slowed sharply in the fourth quarter.

The National Venture Capital Association and Venture Economics said that while $103 billion was deployed in 2000, the last three months of the year was 30 percent off the third quarter.

Jeff Green, managing partner of Arthur Andersen LLP in Chattanooga, said people with ideas found it easier a year ago to find financing. Much of that money has dried up unless someone has a proven company, he said.

"We're seeing venture capital providing the second round of funding. It's tougher to get an idea off the ground now," said Mr. Green.

Mr. Kliner said he's spoken to key business people locally and nationally to locate investors.

"We've been looking at a number of sources. Not just the institutional lenders, but also trying the angel networks," he said. Angel investors are often wealthy individuals who are interested in funding businesses.

Dr. Harston also said there's the potential for companies to secure investments from a privately and publicly financed Oak Ridge-based entity called Technology 2020. Also, there are opportunities to contract with the government at Marshall Space Flight Center in Huntsville, Ala., as well as federal facilities in Oak Ridge, he said.

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(c) 2001, Chattanooga Times/Free Press, Tenn. Distributed by Knight Ridder/Tribune Business News.