Eric Rosenfeld of Capybara Ventures on the Portland Technology and Innovation Scene

6/4/09Follow @gthuang

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us. Even just being able to focus on the needs of local industry would be helpful. Having an orientation of market-driven research industry, contracts, and internships—more of that would help. The sportswear and apparel cluster has been strong here. That’s doing just fine. Nike and Adidas and Columbia have driven that.

What we haven’t had, that Seattle and the Bay Area have had, is this virtuous cycle of success breeding success. If you look at the venture capital in Seattle, my sense is it all traces back to Immunex, RealNetworks, Amazon, Microsoft, Starbucks. Same thing with the Bay Area, with a different set of companies. In Portland, it’s been a while since we’ve had a big success that created a new generation of managers who want to start new businesses, or wealth that can be reinvested. Other VCs in town trace their experience to Mentor Graphics, which went public in the mid-80s, Digimarc, and Apple Computer. If we can just get a few companies to have some nice exits, generate some local wealth, and get that reinvested… It happens to some degree, but we don’t have the critical mass like Seattle has. That’s one of our biggest challenges. Entrepreneurs complain about the lack of capital here. But investors complain about the lack of a real success.

X: In terms of up-and-coming tech sectors, alternative energy and cleantech seem pretty strong in Portland.

ER: There’s a lot of interest, I think. Cleantech and sustainability is something very natural for Oregon, and part of the Oregon brand. We have utility companies that have been progressive. The foundation of state law has been very supportive of solar, wind, geothermal, and wave energy. Vestas wind moving here has been very helpful. I still think it’s very early. What we’ll need is some real successes, where real money is made through equity, not just salaries. That will give people more confidence to start businesses.

On the solar side, we have good manufacturing expertise and design, good test and measurement companies, but we don’t have the weather for solar [laughs]. Some of that manufacturing might move to sunnier climes. A lot of the manufacturing of solar is here, partly because of state tax credits and cheap electricity, cheap water, and cheap labor. So there may not be the right reasons—associated with cost, not necessarily high value. That’s one thing to watch.

X: So what are you seeing in the Portland talent pool these days?

ER: The talent in the electronics industry is still very high, coming from Tektronix, Intel, Xerox, HP, Pixelworks. There’s a lot of expertise in manufacturing and design. Internet and software, like any city, we have our fair share. There’s a nice cluster. Image processing and video are good. Pixelworks and InFocus were the anchor tenants. There’s a new generation coming up we’re hoping will carry the torch forward. A lot of good people came out of those companies. Healthcare IT is a very interesting area. Capybara is an investor in Clinicient, which does software for physical therapy and rehabilitation. Other companies [which Capybara is not involved with] are Vigilan, one of the leading companies for nursing homes and assisted living, and Kryptiq.

X: How would you sum up your investment philosophy?

ER: Beggars can’t be choosers. Oregon is sort of a secondary market. Every year, there are 10 or 20 companies that really deserve funding. We have to be kind of opportunistic here. If we can find an entrepreneur who really knows their technology and their market inside and out, they’ve been part of a larger company like Intel or HP, they’ve also been part of a startup, and they know which 20 customers they’re going to sell to first, because they’ve already worked with them and they know their pain, and they really have domain expertise, drive, ambition, and skills… We focus on the people. We can’t narrow ourselves too much to any one sector or industry.

Our culture at Capybara is, we like companies who can get to second base, third base, and home on a couple hits, not all on one at-bat. I think in Seattle and the Bay Area, there’s more emphasis on making investments to see if you can grow really quickly. Our approach is, what does it take to get a company to profitability as soon as possible? Then, once it’s at a break-even point and has proved the market, what can we do to grow it from there? It’s a more conservative approach that’s tailored to the kind of companies that have a history of growing in Oregon. I’d rather be involved with 10 out of 10 companies that are growing at 50 to 100 percent, than try to swing for the fences and strike out on all of them.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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  • David Vale

    I lived in Portland for a long time and now in Seattle and the difference betwixt the two is huge. Portland will never be much of an investment hub due to it’s lifestyle b4 work attitude and small town thinking. Your article fails to mention how much $$ if any has been generated for any investors in these lil’ VC funds down there. My guess is ZERO. Better off buying RIMM and AAPL stock right now IMO.