Cape tech’s angels of opportunity
By Christie Smythe March 7, 2006

After attempts in recent years to start investment groups produced paltry results, another Cape-based venture capital organization is hungry for investment opportunities and hoping to rejuvenate the local tech industry.
Called the Bay Angels, the group is essentially a club of current and former business executives who meet monthly to hear presentations by startup companies seeking funding.

The term ”angel investor,” which originally referred to wealthy people who funded Broadway shows, usually refers to investors who fund early stage companies.

Unlike in traditional investment capital firms, where investment decisions are made as a group, Bay Angels’ members choose whether to invest as individuals, according to Bob Lamkin, one of the group’s founders.

Also, unlike traditional firms, the Bay Angels group is interested in early-stage startups. Most established venture capital firms look only for later-stage startups, Lamkin said.

But most important, the group is looking for companies with potential to expand and offer significant numbers of job opportunities.

”It can be done. It’s been done before,” Lamkin said, referring to Cape-based Excel Switching Corp. and Taqua Systems Inc., which employed hundreds of residents between them during the height of the tech boom.

While the Bay Angels are based on the Cape, and interested in re-energizing the region’s tech industry, members are also happy to hear proposals from companies based as far away as Rhode Island, Lamkin said.

Quietly organized in 2004, the group has so far made investments in three technology companies: one on the Cape, Centerville-based mTuitive Inc., and two elsewhere in southeastern New England.

The group is in expansion mode, eagerly seeking new members and potential investments, Lamkin said. Eventually, Lamkin said he would like the organization to resemble a more traditional venture capital group - perhaps by building a small common fund and making investment decisions as a group.

But that is a ”longer-term” goal, he said.

Especially since the dot-com bust of 2001, the Cape has seen little in the way of organized venture capital groups.

”We spent the first year or two after the slowdown trying to attract off-Cape investment,” said Spyro Mitrokostas, who served as executive director of the Cape Cod Technology Council from 2000 to 2004. ”It didn’t work.”

Mitrokostas said when the tech council previously tried to start its own venture capital groups, the effort produced few investments.

Some investors who belonged to those earlier groups - which went by names such as Cape Cod Venture Catalyst and Cape Angels - have joined the Bay Angels, Lamkin said.

Mitrokostas said he joined the Bay Angels in 2004, but dropped out because he was disappointed the group was not dedicated to Cape companies.

”My interest was to have them focus on the Cape,” he said.

However, Mitrokostas added the emergence of the Bay Angels could be an encouraging sign for the local tech industry.

Lamkin, who also works for German venture capital firm TVM, moved to the Cape a couple of years ago from Boston. With numerous retired and semi-retired executives flocking to the Cape, Lamkin said, there is a good chance many of them would find a local venture capital organization an appealing way to both stay involved in the business world and make lasting contributions to the community.

”There’s a lot more people like myself,” Lamkin said. ”Most of us believe we’re not ready to hang up our cleats.”

By virtue of the fact that Woods Hole Oceanographic Institution and the Marine Biological Laboratory are based here, marine technology appears to be one fertile area that may produce promising startups on the Cape, Lamkin said.

MTuitive chief executive John Murphy, who has been involved in several Cape tech companies, said the Bay Angels may help stimulate technological developments.

”You’ve got a wealth of not only financial resources, but what I would call intellectual capital,” said Murphy, of the Bay Angels and the rest the Cape’s growing community of older business executives.

About 10 percent of the financing for mTuitive, which was started in 2003, came from Bay Angels’ members, whom Murphy declined to name.

”It helped get our first product to market,” he said.

MTuitive makes software targeted toward health care professionals to help them make diagnoses more efficiently. The company has about 15 customers throughout North America, including both Cape Cod Hospital in Hyannis and Falmouth Hospital.

The company is entering a deal with a health care software distribution firm that may increase its customer base by eight to 10 times, and may soon expand its eight-person staff, Murphy said.

But Murphy said he was unsure whether tech companies, in general, could be as successful as they were on the Cape during the middle and late 1990s.

In 2000, high-tech businesses employed 5 percent of the Cape and Islands work force, according to state statistics. In 2003, the number was about 1.5 percent.

”It will never get back to where it was. The industry has matured,” Murphy said. ”That said, you can still have an environment that’s going to be conducive to it, but it’s not going to be huge.”