Youth keys economic stability

Editor's note: As the Economic Development Authority and Northern Nevada Development Authority roll out their strategies for economic growth, this is the first of a two-part series examining how the region can develop capital for new ventures. NNBW staff

BY U. EARL DUNN

The next big change in the region's economy is waiting in the wings, but some worry that the capital to bring it to center stage may be hard to round up.

Efforts in the past two decades that drew manufacturers, fabricators, distributors and others to the Reno, Sparks and Carson City areas paid dividends in terms of increased jobs. But they have not produced the high-wage jobs that the technology sector can create.

That's why the latest battle plan to be rolled out by the area's economic development entities could change the future of northern Nevada's business landscape. They intend to target young, smart, entrepreneurial professionals who would bring new business ideas to the area through startup companies.

Some of the players are already here. But the seed money, some argue, is not.

Ideas need fuel to fly. That means bringing together government agencies, non-profits, research institutions, and wealthy individuals to help fund entrepreneurial companies.

Earlier this year, Wisconsin consultant Rebecca Ryan told business leaders in Reno that the area will need to attract and retain professionals aged 25 to 44 to grow and sustain its economic momentum.

"Three of four Americans in that age group first choose a place to live and then they find a job," said Rebecca Ryan, a leading consultant on young professionals.

Northern Nevada already has become a recreational mecca for young professionals who live in the region and the nearby Sierra. Skiing. Water sports. Snowboarding. Hiking. Kayaking at the new whitewater park in Reno. Biking. It's all in place for outdoor enthusiasts.

In fact, a chorus is growing in the region that attracting entrepreneurial professionals is not only possible, but should be pursued with vigor.

A key question, says Michael Thomas, director for investor development with the Economic Development Authority of Western Nevada, is determining which ingredients are necessary to kick-start an effort to create fast-growth, high-potential technology companies.

Thomas said the same fervor which the region employed to encourage employers to relocate, expand and grow will be needed to assist startup and commercialization efforts.

"We don't yet have the sophistication the Silicon Valley, Denver or Phoenix has in making this happen," he says, "But when you see a university or a research institution such as the University of Nevada that has potential in turning ideas into applicable commercialization opportunities, and you ask, can we really do this, the resounding answer is yes."

Tim Casey is another who believes this region can produce the next generation of successful business startups. But he acknowledges it will require a change in thinking and a change in local and state priorities.

Casey, a lawyer whose journeys have taken him from Apple Computer and Silicon Graphics in California's Silicon Valley to Washington, D.C., as chief technology counsel for MCI/WorldCom, is director of economic development at the University of Nevada.

He also heads UNR's Institute for Innovation and Informatics which seeks to ensure that students have accesses to courses in entrepreneurial skills including marketing, finance and business. The focus is teaching them how to innovate, to enter a business plan in competition, or to simply dip their toes into the entrepreneurial waters.

"Part of the reason this institute exists," he says, "is to help the university do a better job with connecting with the business community. When a company (outside the state) considers relocating, they want to know about research programs that are supportive of that business."

Highly skilled labor is in short supply in northern Nevada, he says. Tech-oriented companies from California who look at the Reno-Tahoe area wonder where they will find parts suppliers, distribution networks and other business infrastructure they need.

"So it becomes our responsibility to develop it ourselves," Casey says.

He believes if the region comes together and pushes the right buttons, "It will not only make us more attractive for technology-based companies to relocate here, but it means we may one day not even need them at all."

New startups are not the only businesses that need infusions of capital. If it takes a lot of green to get an enterprise off the ground and into commercial production, it takes even more to make it soar.

Ask Darik Volpa.

Volpa is president and chief executive of Reno-based Understand.com, a company that creates software utilizing animation that is customized for physicians who are trying to communicate with their patients about surgical procedures.

When he was in charge of global marketing for the $4 billion medical orthopedic giant, Stryker Corp., Volpa discovered that a lot of surgeons had difficulty translating medical terminology to patients who were about to make a decision on whether to have a surgical procedure.

He created Understandsurgery.com and, three years ago, relocated from Boston to Reno.

"No personal income tax and no corporate income tax," he says were the primary reasons. "Plus, this is a really nice place to live. It's the best of both worlds for me and my family."

Volpa has seen the company grow as the result of agreements with companies such as GE, Johnson & Johnson, Stryker and others. But Understand.com now is at a crossroads in terms of capital needs.

"When you ask where my startup money came from, the answer is simple," Volpa says. "I bankrolled me through monies I made through stock options while at Stryker. My partner, Aldo Panattoni, also contributed, and we are now at the point where we want to grow faster. The question is how."

Enter the world of angel investors and venture capitalists.

Both were foreign to Volpa until two months ago when his company appeared before the Silver and Gold Conference in Reno attended by high net-worth individuals, some of them members of Incline Village-based Sierra Angels. Volpa's company's presentation was voted best of show during the two-day conference.

Volpa wants to secure another slug of capital perhaps in the $3 million to $4 million range to help the company move more aggressively into a market where he thinks the company can compete on a global level.

"The question I ask continually these days is do we continue to grow the company organically, albeit at a slower rate and not give up any equity in the company, or do we do the VC (venture capital) or angel investing route and get an infusion of another $3 million or more and really take advantage of our position of first-to-market, entrench ourselves and get into more specialties," he says.

"That's what I am trying to figure out right now," says Volpa who controls 55 percent of his company's stock, noting that his thoughts are somewhat analogous to piloting a Piper Cub, then trading up to a 747 only to discover he is no longer the pilot, but now relegated to flying coach.

"I have yet to talk to anyone who has gone through the VC or angel process and, at the end of the day, are glad they did it. I'm really torn."

He may, instead, wait for a larger firm to buy his company. A former college classmate, he recalls, created an Internet-based company in 2000 and sold it four years later for $38 million.

Most startups, say the experts, begin with what EDAWN's Thomas calls "Three F" funding.

"It stands for family, fools and friends," he laughs. "But that is where a lot of startups get their seed money. It's when they get to the next stage that it can get difficult."

Because of his wide experience working in Silicon Valley and in the nation's capital, UNR's Casey has observed what is needed to fund new, potentially successful ideas.

"Entrepreneurs must be willing to bootstrap themselves," he says, acknowledging that fact alone can frighten some from even trying.

"People can get scared off," he says. "But that's why we need to do something to fix that, to make it less frightening."

Larie Trippet, business development manager for the Northern Nevada Development Authority in Carson City, says the search for funding is one reason why the NNDA Executive Director Ron Weisinger obtained a grant to create a business startup incubator.

"It will be a physical place where entrepreneurs can set up shop, manufacture a prototype if that's what is called for, then can obtain help in writing a business plan, doing a pro-forma financial statement, get marketing help, assistance in operations management whatever that prospective entrepreneur needs," Trippet says.

The goal, he says, is to help entrepreneurs nurture ideas and transform them into a successful business ventures.

NNDA officials watch first-hand as entrepreneurs struggle with raising the money they need.

"I know of one entrepreneur who has a dynamite product, but is unwilling to give up any equity to a venture capitalist, yet doesn't have what it takes to get conventional funding," Trippet says. "You cannot fault the VC or angel investor for wanting an equity position. They are funding an operation that holds great risk."

Next week: Show me the money.