A Reason To Invest

There are a dozen or so middlemen in the Twin Cities dedicated to helping early-stage companies find capital. Few, however, have been at it as long as Rich Daly, whose historical perspective is particularly useful given how much the environment for early-stage financing has changed in the past 15 years.

Daly grew Comserv Corporation from a small start-up into a global software corporation that became one of Minnesota’s first publicly traded software companies in the early 1970s. He then founded a business consultancy firm, Burnsville-based Consatech, Inc., which has in the past two decades advised close to 200 start-up and early-stage computer software and services companies. Daly also has helped raise more than $175 million in financing for many of those companies.

In addition, Daly was an organizer of the Minnesota Software Association, and founder of the nonprofit Software Technology Center. The two merged with the Minnesota High Tech Council in 1998 to form the Minnesota High Tech Association.

How are companies raising capital in today’s tight-money environment?

Rich Daly: You have to go beyond conventional venture capitalists and hidden angel-types, and find investors with a special reason to get involved, perhaps because of what they do. A company’s founder often hopes to someday sell his business. Between now and then, potential buyers can make for good strategic partners, if not investors.

There are economic development players that provide start-up funding, too. Sometimes it’s to attract companies to smaller communities or rural areas. I’ve helped with six of these types of transactions over the years.

Communities are very helpful and excited about the jobs this can bring to them. But the entrepreneur [must] keep in mind that each community or regional area has its own interests and over time, they change. Biofuels are big right now, for example. So you have to know the focus of whoever you’re talking with.

Minnesota’s start-up and venture capital funding community has a reputation for being very conservative and risk averse. Is that a fair perception?