Seeking 'Smart Money'
NY tech firms hit West Coast capital confab

San Francisco-Twenty-eight of New York City's newest and brightest high-tech start-up companies met here yesterday searching for cash-but not just any cash.

These Silicon Alley firms came looking for Silicon Valley's fabled "Smart Money." Smart money is the label given to venture-capital funds that offer a benefit beyond simply an infusion of cash. Nascent high-tech companies increasingly look to venture capitalists for everything from executive placement to a network of potential partners-in effect, membership in an exclusive and profitable club house-services that California venture capitalists are famous for giving their roster of start-up investments.

"The New York investment community has been slow to embrace the Internet, so the hard-core technology dollars are out here ," said Brad Farkas, a partner at i-Hatch Ventures, a venture-capital firm on Park Avenue in New York.

That perception is behind the draw of the annual "Alley to the Valley" conference, now in its third year. The conference, which runs through today, is co-sponsored by the New York City Economic Development Corp. and AlleyCat News, a magazine covering the city's Silicon Alley neighborhood.

The conference's sponsors select the 28 companies as New York's most promising new crop of start-ups, mostly doing business over the Internet.

For the companies, the conference is a coming out party where executives can shmooze Silicon Valley's elite, as well as each other.

The conference also is meant to serve as buzz for New York City's ongoing effort to be considered a tech capital, especially by business decision-makers in Silicon Valley.

"We expect to get more recognition," said Michael G. Carey, president of the city's Economic Development Corp., which is an arm of the Mayor's office.

"I think New York City has arrived. It's time we got recognized for that." The companies at the conference, all of which had to be invited by the sponsors, range from PredictIt!, a Web site that hopes to make money by selling ordinary people's predictions posted over the Internet, to WebAppointments.com, an online appointment system for doctors and hair salons, to RocketBoard Inc., a special computer keyboard designed to make the Internet as easy to use as a TV remote control.

For the entrepreneurs behind these companies, this year's conference is a gateway to Silicon Valley-style venture funding. Recent statistics on high-tech investments in New York companies underline its importance. Since 1997, initial public offering equity and venture funding has funneled $6 billion into New York Internet start-ups, according to the New York New Media Association.

"It's no problem to get money thrown at us," said Kevin Lee, president of Briefme.com, an Internet newsletter delivery service on Seventh Avenue in Manhattan. "But you can get into trouble by taking dumb money. We want money that comes with the ability to network and the potential for strategic alliances." In addition, some New York start-ups concentrating on non-Internet related technology complain that New York venture capital is fixated on traditional New York businesses, such as advertising and content.

"We have a half-million now, but I could really use $30 million to get my company rolling," said Chip Ruhnke, president of iStreamTV, an company building products for receiving Internet content through TVs. "New York VCs [venture capitalists] don't understand us." While the start-up companies here were limited to Silicon Alley, new efforts are underway to create new high-tech centers in New York. Carey of the Economic Development Corp. identified Long Island City as the next candidate for his department's marketing efforts.

Turning the spotlight on other boroughs has taken on a note of urgency because of skyrocketing commercial rates in Silicon Alley, according to high-tech executives.

"In the spring of '98 we signed a lease for $17 a square foot," said Bruce Frank, chief operating officer at Javelin Technologies Inc., on Wall Street.

"The going rate now is $36." The high cost of doing business downtown has Andrew Merkatz, president of PredictIt!, looking at the outer boroughs for a production facility.

"There's just no more space left in Manhattan at a reasonable rent," he said.

At the conference in San Francisco, talk quickly shifted from the subject of rent to the much more pressing need to find the VCs with smart money to spend. During a lunch presentation by a well-known industry executive, Stephanie M. Cohen of Javelin Technologies gave up trying to find her CEO.

"He must be out talking to venture capitalists," she said. "If these other companies are smart, they'd skip the panel and do the same thing, too."