WASHINGTON – Minority small business owner John Huggins felt both relieved and victorious as he walked out of the small room at the Washington Convention Center, after 30 minutes spent pitching his Oxon Hill company to venture capitalists.
“This was a great opportunity for minority entrepreneurs like myself,” said a beaming Huggins, moments after speaking to the potential investors. “I am pleased. This is a great opportunity.”
That was three months ago.
Today, Huggins is wondering what he did wrong. After all, it’s been months and he hasn’t got the “promised response” from the venture capitalists — this, in spite, of frequent calls and e-mails from him.
Does the fact that he’s black continue to play in the minds of the venture capitalists? Did he say anything that upset them? Or was this not so much of a “great” opportunity after all?
“It’s my line of business that venture capitalists all around the country are interested in,” said Huggins, whose Broadband Connect Inc. aims to ease the crunch in broadband capacity by designing, building and leasing bandwidth on fiber-optic “open access” networks.
“So I really don’t know why there is no response at all,” he said. “I have no idea.”
But economic development officials who helped organize the “deal room” where Huggins made his pitch said he is simply getting a first-hand lesson in the difficulties of courting capital.
“It’s important to understand that just because you made a presentation, it doesn’t mean that someone is going to jump up and give you a $3 million check. It takes time,” said Malcolm Lewis Barnes, executive director of the Howard University Small Business Development Center.
The center was one of the organizers of the “deal room,” which aimed to bring minority business owners together with potential investors during the annual conference of the Congressional Black Caucus in September.
A report from the Milken Institute, a non-profit economic think-tank, said that minority entrepreneurs have just $2 billion of the total $85 billion in equity capital currently available in the country, at a time when minority businesses are growing faster in terms of both numbers and revenues.
The deal room was aimed at helping close that gap, giving 13 pre-screened fledgling business owners from around the country a chance to pitch their companies to a group of venture capitalists.
Participants praised the deal room at the time. But since the initial excitement died down, the two Maryland entrepreneurs who participated have grown disillusioned.
“I don’t know why, but I haven’t got a single response from any of the venture capitalists,” said Marshall W. Newman, who hoped to get $2.5 million for his truck maintenance company, Marshall’s Truck Spa.
“I keep thinking about it. I don’t know if my race is playing a factor or whether it’s because of my not having a technology-based company,” said Newman of Upper Marlboro. “It may be the latter, because I think VC’s (venture capitalists) are interested in only tech-based companies. But I don’t know.”
Huggins agreed that high-tech companies are more attractive to venture capitalists, which is one reason why he is perplexed by the “indifferent response.”
Raymar B. Dizon, a venture capital analyst with the Maryland Department of Business and Economic Development, suggested that it might be because of the fierce competitiveness of Huggins’ field.
“He needs to refine his product,” said Dizon, who was present at the deal room. “I frankly felt that it lacked refining and that could be the reason for the poor response that he’s getting. Added to that, there are some big guys out there in the market who are engaged in exactly the same business as Huggins.”
Barnes said that overall response to the deal room pitches has been good.
“Venture capitalists have already invested in six of the 13 firms that made a presentation that day,” Barnes said.
He also said that, despite the waiting, it might not be as bleak as Huggins fears.
“I personally have been in constant touch some colleagues of Huggins. He must be just unaware of that,” Barnes said.