Monroe Fund investments nourish growth at startups

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Christopher Campbell truly appreciates the value of hard-to-get venture capital.
“It’s absolutely crucial,” says Campbell, founder and CEO of Connected Energy Corp. “As a small company, you’re trying to grow and when you’re growing something, you need a little fertilizer.”
Connected Energy’s fertilizer included a $500,000 investment from the Monroe Fund in 2000. At that time, the cash allowed Campbell to expand his company, add two staffers and advance the company’s Internet tools for data acquisition and data analysis. Today, the company has 14 full-time and three part-time workers.
The Monroe Fund was created in 1996, spearheaded by former Monroe County executive Jack Doyle to help retain more cutting-edge companies here and achieve maximum financial returns for its investors.
The more than $10 million fund is a private venture fund managed by Trillium Capital Partners LLC, a subsidiary of venture capital firm Trillium Group LLC. Since its inception, the fund has invested between $250,000 and $750,000 each in startup, early-stage or turnaround businesses in and around Monroe County.
Connected Energy is among the 13 firms to receive assistance from the Monroe Fund. Founded in 1997 as Clean Dry Air Inc., the company offers a Web-based platform for monitoring and managing distributed power generators and industrial process equipment. It also supplies packaged systems for delivering outsourced compressed air to industrial users.
Connected Energy’s efforts seem to be paying off. The firm recently opened a sales office in Philadelphia, where it plans to add four employees by the end of 2005.
While he admits it can still be a struggle, Campbell is optimistic about the company’s growth this year.
“I don’t want to jinx it, but I’ve got my fingers crossed,” says Campbell, who believes the Monroe Fund contributed to the company’s growth.
Dennis DeLeo, general partner at Trillium and managing executive of the Monroe Fund, says it was created to fill a need for startup businesses in the community.
“Western New York is a region rich in innovation with woefully inadequate venture capital to support (it),” DeLeo says.
The fund is fully invested, he says.
Trillium scouted for companies operating in high-growth markets such as digital imaging, medical technology, software, Internet and network systems, photonics and wireless communications.
As a provider of early-stage capital, Trillium requires a meaningful ownership position in the company receiving funding, representation on the firm’s board and other terms typical for the risk associated with post-seed, first-round investments. The Trillium Group does not routinely seek a controlling interest.
The Monroe Fund has an advisory board-private member organizations each invest a minimum of $500,000, and individuals each put in $100,000, according to documents filed with the Securities and Exchange Commission in 1998.
Members of the Monroe Fund include Canandaigua National Bank and Trust Co., Chase Manhattan Corp., Global Crossing Ltd., Gleason Foundation, Monroe County, University of Rochester, Rochester Gas and Electric Corp., Rochester Institute of Technology and several other organizations and individuals.
The fund made its first investment in 2000 giving $500,000 to Rochester-based Web Product Realization Network Inc., which filed for bankruptcy shortly after capital for dot-coms began drying up.
Another Monroe Fund recipient, Chadakoin Interactive Inc., also went out of business. The company, which developed shop floor management software for small manufacturing firms, was hurt by a poor business climate following the Sept.11 terrorist attacks.
A number of the companies received an initial investment through the Monroe Fund and had access to additional dollars through the fund as the businesses grew, DeLeo says.
Austin Haines, CEO of Instant Images Inc., which does business as DigiQuick Portrait Studios Inc., says the $125,000 in funding it received from the Monroe Fund in 2000 allowed the company to develop its event location model, which took the company’s capabilities on-site to daycare centers, dance studios, proms and business functions.
“It was a jumping-off point in the Rochester area,” Haines says. “We were able to grow and expand our product portfolio.”
Since then, DigiQuick has added two more locations in the Rochester area-the firm owns a total of four stores here and three stores in Buffalo.
“The Monroe Fund was extremely helpful to us,” Haines says.
Haines opened DigiQuick in 1999 and with the help of money from the Monroe Fund was able to solidify its concept.
When Haines first spoke of his plans for digital photography he was told by some that his idea would not sell, Haines recalls.
“The Monroe Fund and the Trillium Group believed in the concept,” he says. “And they put their money where their faith was.”
Like Campbell, Haines agrees that the Monroe Fund was an unusual phenomenon in Upstate New York.
“Before the Monroe Fund there was no venture capital,” says Haines, noting that there was some private funding available for small businesses, but that was limited.
Rochester traditionally has been a town of angel investors versus venture capitalists, mainly because venture capitalists don’t pay much attention to a company with capital requirements below $3 million. That amount is a tall order for a small startup, Haines says.
“If it weren’t for the Monroe Fund, I probably wouldn’t have gotten the funding,” Haines says.
The Monroe Fund helped pave the way for two other similar funds at Trillium: the University Technology Seed Fund and Trillium Lakefront Partners III Fund.
The University Technology Seed Fund is a $6 million seed stage venture fund managed by Trillium Venture Development seeking to commercialize inventions and discoveries in areas including optics, electronics, IT and communications. Two companies who received money from the Monroe Fund-Lumetrics Inc. and OyaGen Inc.-also received money through Trillium’s University Technology Seed Fund.
Trillium Lakefront Partners III Fund, a $50 million-plus fund, which aims to accelerate the growth and retention of companies in Upstate New York, received $25 million in matching funds from state comptroller Alan Hevesi.
Terrence Sick, CEO of eBidenergy Inc., formerly Logical Energy Solutions Inc., says funds like the Monroe Fund are important to companies such as his because with a small startup, “banks are out of the question.”
Sick founded eBidenergy in 1996 and was the sole employee. Today he has roughly a dozen workers. He received a $500,000 investment from the Monroe Fund in 2000 and has had access to the fund’s line of credit.
While the company reported profits in 2001 and 2002, Sick says the last couple of years have been challenging. He expects better financial news in 2005 based on new products and market opportunities throughout the Northeastern United States.
In November, the company moved out of High Technology of Rochester Inc.’s Lennox Tech Enterprise Center with IBC Engineering P.C. and Extradev Inc., which provide complimentary services to eBidenergy customers.
Ian Cunningham, CEO of Scene Genesis, is another supporter of the Monroe Fund. He says his firm wouldn’t be in business without the support of the Monroe Fund and Trillium Group.
“Their impact was huge,” says Cunningham, adding that fund and Trillium not only invested money, but offered their business expertise as well.
Scene Genesis received $500,000 from the Monroe Fund in 2001, followed by additional funds in 2003. The money was used to strengthen the company’s operations, from adding staff to equipment, Cunningham says.
But Cunningham, a former top executive in Virginia, cautions that venture capital is available for those who have an idea that can work.
“If you have a good executive team, business model and are in a big and growing market, you’re going to be attractive to venture capitalists,” he says.
Although not all the businesses have been a success, DeLeo says the majority of the companies who tapped the Monroe Fund are still in business.
“A couple have not met our expectations, but in general most are about where we thought they would be or are ahead of that,” he says. “The experience has been very positive for the investors, Trillium and the community.”
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02/25/05 (C) Rochester Business Journal