THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, April 17, 1995 TAG: 9504150226
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
TYPE: Column
SOURCE: Ted Evanoff
LENGTH: Medium: 83 lines
Almost every day the mail brings another package of ideas into the Virginia Beach office of J. Alan Lindauer. These are ideas assembled into business plans and mailed off by hopeful entrepreneurs in search of cash.
It seems there are no shortage of good business ideas in Tidewater. There is a deficit of money with a tolerance for risk. It's called startup capital. Lindauer is building a reputation as a financier willing to entertain risk.
Lindauer, a lifelong businessman in Hampton Roads, is putting the final touches on a venture capital fund. He'll pool about $6 million belonging to Tidewater investors, including several cities, with up to $18 million from the U.S. Small Business Administration.
Once it's licensed by the SBA, probably next month, the result will be the Eastern Virginia Small Business Investment Corp. ``We are in the process of winding things up,'' Lindauer said. ``I wouldn't say it's a given, but I think we're certainly going to be qualified. We have raised the funds we need beyond the minimum.''
While the Eastern Virginia SBIC exists only on paper, at least for now, the notion of a capital fund has been widely discussed since '93 in Hampton Roads. Entrepreneurs who have never met Lindauer have heard about the fund. They're mailing him their ideas.
``I'm getting a business plan a day in here from people who think we're in business,'' he said. ``Once we become more active we'll probably get more.''
As many as 500 business plans a year could cross Lindauer's desk. No doubt, $24 million is one big pile of money. It's not enough, though, to finance every good idea.
Business ideas are a dime a dozen, as Lindauer well knows. For eight years, he headed Waterside Management, a Tidewater merger-and-acquisition firm. And he's examined at least 1,000 applications for conventional business loans. He himself once needed startup capital.
After graduating from Old Dominion University with an accounting degree, he joined a large Norfolk accounting firm. It was 1963 and he was discontented. He wanted to open a construction company.
``I didn't have the money to get a business started,'' he said, although he ventured on his own anyway. As a commission agent for an oil company, he built up Minuteman Oil Co., which he sold in 1986.
Minuteman had banked at the old Citizens Trust, which invited Lindauer onto its board of directors. Citizens changed hands - it's now part of Signet Bank - and he became a director at Commerce Bank of Virginia Beach and chairman of its holding company, BB&T of Virginia. Serving on the bank loan committees drove home a point.
``I saw so many businesses not happen because they were not bankable deals,'' Lindauer said.
Even a venture capital fund, however, cannot finance every good deal. In fact, many entrepreneurs may shun the capital fund. It's no secret why. Some business owners liken venture capitalists to vultures.
After all, Lindauer isn't a banker. He won't loan the money. He'll invest it. That's a big difference, especially in Hampton Roads. Most of Tidewater's 31,000 businesses are family enterprises under the owner's strict control.
Entrepreneurs who accept Eastern Virginia SBIC cash also will accept Lindauer and his board of directors as partners. He'll be in position to peer over the shoulder of the entrepreneur and praise and criticize, recommend and direct.
Venture capitalists, after all, expect profit. They're tempted to ensure their investment is managed well. They want to come into the business for a spell and then exit with money in hand. Bankers today might book a business loan at 12 percent interest. Venture capitalists hope for returns of 15 or 20 percent, sometimes more.
Lindauer insists he and his board won't run the companies they invest in. ``Our culture will be to make an investment and then sit back,'' he said. ``The last thing we want to do is get into a situation where the guy throws up his hands and says, `Why am I doing this?' You don't want to smother the entrepreneurial spirit that attracted you to the company in the first place.''
In many ways, Eastern Virginia SBIC will bet its money not on the idea, but on signs the individual can organize and make the idea profitable. That means the venture fund will hoard its capital, look for the surest bets.
``I would hope the first year out of the blocks we would move at a gradual pace,'' Lindauer said. ``We could do maybe three or four deals. I believe our ability to identify good deals will grow with time.'' by CNB