State: Small venture fund likely to spur private investment

In the world of venture capital, the $5 million available to the newly created Battle Born Venture fund doesn’t go very far.

But state economic development executives think the money will be only half the story. They want the fund to serve as a vehicle to mobilize private investment as well.

“Five million dollars can go a long way, because we can bring along other investors,” says Karsten Heise, director of technology commercialization for the Nevada Governor’s Office of Economic Development. “Our focus is to find good ideas and get them out to the market.”

Battle Born Venture opened its doors just before Labor Day. The $5 million its managers hope to get on the street within the next three years comes from the U.S. Treasury Department through a venture-investment program that’s been established in 30 states.

Nicola Kerslake, the investment manager for the Battle Born Venture program, says the fund looks to make equity investments — or equity-like investments such as convertible debt — in Nevada companies in aerospace and defense, agriculture, energy, information technology, logistics and operations, manufacturing, mining, tourism and gaming and water resources.

Those investments are expected to cover companies ranging from tiny, pre-seed operations that need $40,000 or $50,000 to take their first steps to established companies that need a bigger dollop of venture funding to finance growth.

The fund can invest as much as $1 million in a single venture capital deal. As a practical matter, Kerslake says, typical investments by the fund will probably be in the neighborhood of $40,000 for pre-seed companies, $200,000 for companies in need of seed capital and $200,000 for venture-stage companies.

As the fund’s pipeline begins to fill with potential investments — it’s already looking at a couple — private investment firms, angel-financing groups and venture funds around the state will be given an equal opportunity to take a piece of the deals.

That, Heise says, may strengthen the venture-capital sector in Nevada. And a stronger capital-formation sector, in turn, may help keep companies established in Nevada from moving elsewhere — the Silicon Valley, for instance — when it’s time for them to tap into the venture-capital markets.

With the addition of private investment funds to the dollars available through Battle Born Venture, Heise says the new fund could spur $30 million to $40 million in investment in fast-growing Nevada companies.

Like most private-sector funds, the Battle Born Venture program will use Gust, a Web-based platform that’s the industry standard for entrepreneur’s applications. (The application and details are at www.battlebornventure.com.)

Even so, Kerslake says the fund likely will provide financing to only a small percentage of the companies that come knocking on its doors. It’s looking for high-growth opportunities led by experienced teams.

A key question she’ll be asking is this: Does the company have real, live customers?

“This is not the place to come for your first grant,” she says.

Nonprofits won’t be funded by Battle Born Ventures.

Battle Born Venture’s team also will be paying close attention to the exit strategy proposed by company founders. The fund will use the proceeds it generates from the first companies to finance investments in other firms in coming years.

But Heise and Kerslake acknowledge that not all of the investments will be winners.

“There will be losses,” says Heise. “That’s not bad. That’s what venture funding is for.”

Kerslake says the fund’s team hopes to use its knowledge of the business landscape in Nevada to match up young companies with the resources — management expertise, for instance — that they may need.

And even for companies that aren’t ready for Battle Born Venture funding, the program hopes to point founders toward organizations such as the Nevada Small Business Development Corp. that can strengthen them.