Would You Give This Guy Money?
For the second-largest city in New England, Worcester sure is a small place.
Perhaps nobody knows that better than Paul Ballantine, a Holy Cross alumnus currently living in Boston who has spent the last nine months trying to raise capital for the Worcester Venture Group, a $15 million venture capital fund he hopes to start focused on early-stage high technology companies in and around Worcester.
"In Worcester, everyone knows everyone, and that's a blessing and a curse," Ballantine says of his efforts to raise money for the fund.
"The blessing is that if you get the support and confidence of a few of those folks, you'll get the rest of them. The curse is if you don't get one or two, you probably won't get anybody."
Since the beginning of last summer, Ballantine has been making the rounds, meeting with the city's power elite. He said he has asked only for introductions, enough time only to make his pitch and state his intentions.
Now, after half a year of introductions, Ballantine - whose background as an institutional venture capitalist includes 24 investments in early stage tech companies, as well as executive experience - said it is time to start asking the question that counts: Will you write me a check?
Infiltrating The Network
For the most part, he said, folks have been receptive, putting him in touch with others, opening more doors, and helping to spread his gospel that there are deals ripe for the taking in Central Massachusetts.
But despite all the good feelings, to date, nobody has signed on the dotted line.
Ballantine said this is because he hasn't really asked anyone yet, but also admitted there is a "healthy skepticism" in town regarding his mission.
"People want to know, is there deal flow in little old Worcester?" Ballantine said. "Are there things that would be facilitated if this kind of fund existed?"
Ballantine's answer is a resounding yes, especially for those small companies looking to get from the lab to commercialization without getting lost in the dreaded "death valley" of funding, when government money runs out, but the company is still too small for private funding, he said.
But identifying deals is not the only hurdle Ballantine has to clear in order to get his fund off the ground.
Kevin O'Sullivan, president and CEO of Massachusetts Biomedical Initiatives, a biotech incubator facility in Worcester, admitted that he and his company have a vested interest in seeing Ballantine succeed, and have done all they can to ensure his success.
But O'Sullivan also identified several critical challenges Ballantine faces, not the least of which is timing.
"It's a tough economic climate right now, and times could be better for him to do something like this," O'Sullivan said. "The challenge of the economy is something he needs to overcome."
But the die has been cast, O'Sullivan said. Having gone out and established a name for himself for the past nine months, Ballantine can't just take a step back at this point and wait for things to get better.
Complicating things even further is some key investors' experience with previous efforts to start similar funds in Worcester, said Michael DiPierro, who has signed on to chair the advisory committee of the Worcester Venture Group.
DiPierro is currently a member of the board of directors at Fallon Clinic and a former trustee at Worcester Polytechnic Institute. He has served on a number of boards in the city, and has an extensive network of business contacts that he has let Ballantine tap into, he said.
Many investors originally sold on groups such as Worcester Capital Partners, started several years ago by John Merrill, current Massachusetts market president for Sovereign Bank, were disappointed when the money raised by that fund did not end up in local companies, O'Sullivan said.
Market Shift
Merrill said the intent of Worcester Capital Partners was to invest primarily in and around Worcester, but the realities of the market forced a change in strategy.
Conceived at the height of the tech boom, Worcester Capital Partners had to weather the change in the marketplace that came after the tech bubble burst, Merrill said. That meant expanding its proposed geographic reach.
"(There was not) enough deal flow just here in Central Mass. to support one fund of just Worcester investments," Merrill said. However, Merrill said the concept of a Worcester specific venture firm is still a good one.
Worcester Capital Partners eventually became part of Long River Ventures, which has offices in Westborough and Hadley and invests in companies across New England and as far away as Maryland and New York.
"There's a skepticism that we'll raise money locally and invest it elsewhere," DiPierro said. "It's been difficult to convince some people that's not our intent, because it hasn't turned out that way in the past."
Despite Ballantine's local connections, he must constantly assure potential investors of his intent to deal solely in Central Massachusetts, O'Sullivan said.
"In addition to knowing what he intends to do, people want to know who Paul Ballantine is, too," O'Sullivan said. "His Holy Cross connections have opened a lot of doors, but people want to know who you are."
It's a problem Ballantine said he has prepared for.
"I can appreciate that someone's going to sit and say they're going to check me out very thoroughly, and that's fine," Ballantine said. "I've got no skeletons in my closet."
Ballantine, a self-described "Worcester guy" who's mother still lives in town, has used his old Holy Cross connections to the fullest. But as deep as the so-called "Holy Cross mafia" goes in this town, he stills needs help with introductions.
To that end, he said O'Sullivan and DiPierro have been immensely helpful. DiPierro said he has used his network of contacts in the city carefully, knowing that, regardless if they decide to invest or not, he must still be able to do business with them in the future. He would not introduce them to Ballantine if he did not think Ballantine's idea was a good one, he said.
"I'm simply hoping my credibility will help carry the ball over the finish line," said DiPierro.
Landing The Big Fish
Despite the potential pitfalls, Ballantine is optimistic.
In a market rife with entrepreneurial spirit and universities and institutions that foster creativity and new ideas, Ballantine said, the only thing missing is the availability of risk capital.
Ballantine's business plan calls for $15 million to be raised in increments of $50,000 from Worcester and Central Massachusetts institutions and individuals. The first closing will be at $5 million.
While the plan calls for incremental $50,000 investments, Ballantine's strategy is to land a big fish at the beginning that will invest significantly more than that.
That initial investment, he hopes, will lend credibility to the fund, which will in turn attract other investors.
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