State Venture Capital Firm Opens Texas Office
By Don Mecoy
The Oklahoman
4-20-2003

As venture capital investing continues to retreat from its historic peak in 2000, some investment firms are scaling back their operations. But an Oklahoma company — Chisholm Private Capital Partners — has opened a new office in Dallas.

Chisholm, which backs several state-based start-up firms, has invested about 80 percent of its funds in Oklahoma companies with the balance heading south of the Red River, said Chisholm general partner John Frick. Opening a Texas office to work with fledgling companies and strike partnerships with other investment firms "just makes a lot of sense for us," Frick said.

"With all the turmoil in the venture capital industry, a lot of the West-Coast and East-Coast firms that set up branch operations in Texas have effectively withdrawn from the market, and we've always had good relationships with the local Texas- based venture firms," he said.

The new office will be run by Chisholm partner Jeff Williams, formerly of Markpoint Venture Partners, an early-stage private equity and venture investment firm based in Dallas.

"Jeff Williams has terrific experience in the kind of deals we try to do where you're putting $1 million to $4 million to work in companies that have an Oklahoma and Texas focus. He's previously invested in Oklahoma companies and has a strong presence in Dallas. It was a good fit of market conditions and personality," Frick said.

Venture capital investing peaked in 2000 when investors poured more than $100 billion into entrepreneurial enterprises. But the bursting Internet bubble, other technology woes and a sagging stock market brought an abrupt decline to that unprecedented run-up.

Last year, venture investing totaled $21.2 billion, about half of the previous year and similar to 1998, the last pre-bubble year, according to the MoneyTree Survey from PricewaterhouseCoopers, Venture Economics and the National Venture Capital Association.

Venture capital investment has been a highly regionalized game, led then and now by Silicon Valley, New England and the Southeast. Oklahoma has never been a major player, but in recent years has started making some noise although there are only a handful of state venture capital firms, Frick said.

"We've always had less than our fair share" of venture capital investment, Frick said. "Last year, for the first time, we had more. But we still don't have as much as we'd like or we need."

Last year, five Chisholm portfolio companies secured nearly $50 million in financing — a record for Oklahoma. Four of the companies -- ForHealth Technologies, Inoveon, Advanced Academics and Critical Technologies — are based in Oklahoma City. The fifth, Cemara — a health benefits management company — is in Tulsa.

Oklahoma hasn't been immune to the slowing economy, but Frick said Chisholm remains engaged, anticipating two to four deals a year. Chisholm isn't currently raising money, having distributed only about half of its present funds, he said. The firm is actively working with a dozen companies.

"It's less active than it was, but it's active," he said. "At any one time, we've got a half-dozen companies that we're working on hard and another dozen that we're sort of monitoring at a less intense level."

Frick said most venture capital firms expect that for every 10 companies they invest in, two will be big successes, four will be moderately successful and four will lose some or all of their capital.

One of the bright spots nationally last year was a comeback in health care investing, which was largely ignored during the 1999-2000 boom. Most venture capital firms avoid health care because of additional obstacles for such start- up companies such as government regulation and reimbursement headaches. However, Chisholm is comfortable in that arena, Frick said.

Among Chisholm's four full-time employees is William D. Paiva, who earned his doctoral degree from the University of Oklahoma while conducting his dissertation research at the Oklahoma Medical Research Foundation, and Frick also has experience in the health care investment field.

Health care is a field that is resistant to economic doldrums, Frick said.

"If you're worried about the economy you might not go out and buy a new big-screen TV, but if your doctor tells you there's a shadow on the X-ray you are going to go do something," he said. "People have to deal with their health in good times and bad."

Also driving health-related business are recent technological and biomedical advances that are being absorbed in the industry, Frick said.

Despite wide pessimism in the sagging venture capital sector, Frick said business will bounce back.

"I believe that we will never invest in the kind of telecommunications and Internet infrastructure plays the way we did before, but there will be a new boom sometime down the road," he said.

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