VC creating fund for immigrant ventures

Wednesday, 28 January 2004, 08:00 Hrs
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WASHINGTON: American venture capitalist Henry D. Barratt says Indian American ventures have not been appreciated enough, and he is now seeking financiers to start a fund to focus on immigrant start ups and businesses.

Barratt, founding partner and managing director of Blue Water Capital, plans to name the new venture The Prosperity Fund.

"I was a banker for 18 years (before founding Blue Water), when I financed many businesses owned and operated by first and second generation immigrants and they were very successful," Barratt told IANS.

That has led him to believe there's a certain drive and capacity in new immigrants that remains untapped by the venture capitalist market.

As a banker, Barratt also noticed that new immigrants were hesitant to seek loans.

"A lot of them did not seek loans because they thought they would not get it. When they got involved in the technology sector in 1980s and 1990s, a lot of bootstrapping went on."

The "old boys' network" in the venture capitalist sector was a deterrent, he indicates. But with his partners at Blue Water Capital and their experience with nationals of other countries for nearly 15 years, things are different.

"I guess our view of the world is different from a lot of people. We are used to people who are different from us or don't talk like us," Barratt said.

"My son went to Thomas Jefferson Magnet School (Fairfax, Virginia) and I met his friends -- many from India, China, Russia. Their parents, most of who were not born here, have stories of how well they have done for themselves," he said.

"I have also been observing the population growth - 20 percent of the population is immigrant, yet it is not fully integrated into the business community."

About a year ago, Barratt started actively researching on whether there were any funds that catered to this sector.

"I couldn't find anyone who had started a fund to invest in first and second generation immigrant business."

He began interviewing immigrants who had started successful companies and discovered the difficulties they had getting venture capital, and how some of them had to return to their home countries to get their ideas afloat.

"I kept coming across the same story -- 'if I had the contacts I would have got funds here', that they were not able to get into the business community here.

"We found out that the reason 80 percent of money was going to white people is that in order to get venture capital, you have to know somebody. A lot of it is not discrimination but lack of understanding, not knowing who to talk to.

"Yet, those (new immigrants) that got the money, appear to do much better percentage-wise than the larger community. They spend the dollars wisely, have a stronger link with the company, and are not as cavalier," Barratt concluded.

"Talking to some of these immigrant business people, they have reinforced the idea that first and second generations are the real entrepreneurs. They have more of the sense of building something long-term," Barratt contended.

"Another aspect is that the larger white world defines communities -- 'Chinese do restaurants, Iranians sell rugs'.

"I figure is because that is the contact-point for the white American. But not all Koreans are drycleaners, not all Ethiopians are cab drivers."

When Blue Water invested in Ohio-born Rakesh Gupta's Techbooks in 1996, "people looked at us aghast. That company makes $35 to $40 million today", Barratt said.

Barratt has not found anyone who thinks his idea of a special fund is a bad one.

"At this point we are still finalising the partnership documents. We have plenty of opportunities. We think the opportunity has a lot of merit," he said.

Currently, Blue Water typically invests in companies that have revenue and have been around for two-three years or more. The same principles will apply to this fund. The investment amount would range from $500,000 to $3 million.

"We begin fundraising this first quarter and hope to launch it as soon as we raise enough. We already have people coming forward for putting down capital," said Barratt.

Barratt serves on the boards of Blue Water Capital portfolio companies Cigital, Digital Focus, Access Point, and PlanetGov. Active in several professional groups. He often gives presentations on financing and growing technology firms.

Source: IANS
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