VCs and Investment Funds Optimistic About Financial Distress
October 12, 2008
Credit remains tight for Asian American small businesses
Recent weeks have seen the collapse of financial giants and the unprecedented passage of a $700 billion bailout bill through Congress. But while the American market continues to suffer from unprecedented volatility, ample reasons remain to keep investors looking for capital for entrepreneurial ventures optimistic.
While other institutions have folded in the face of recent economic developments, it has been “business as usual” for US Bank, according to the organization’s Northern California president, Michael Walker.
“The fundamentals of [raising capital] quite frankly never change,” Walker said. “Having a good, solid business plan, knowing your numbers, knowing what drives your business, all of those key things never change.”
Jan Le Chang of Centinela Capital, which manages the $1 billion fund of the California Public Employees’ Retirement System (CalPERS), echoed Walker’s sentiments.
“The core of what we do hasn’t really changed as far as our overarching strategy,” she said.
While Le Chang expressed concern about the current state of the market, she also stressed that Centinela Capital’s long-term focus has protected its portfolio. “Our evaluations don’t necessarily change as a result of what’s going on in the market on a daily basis because the investments we make are made over a multi-year time frame,” Le Chang said.
Seth Miller of DBL Investors, which focuses on socially responsible Bay Area companies and manages the $75 million Bay Area Equity Fund, also remained optimistic, saying the current environment could even be favorable.
“It should increase deal flow and drive down prices,” Miller said. “You’ll have time to see your company grow for when the windows are open again.”
Miller also expressed confidence that the downturn will not overly and adversely affect DBL Investors’ ability to raise funds.
“Banks and insurance companies are an important part of our investor group, but those guys need to take some time to analyze their portfolios before they start investing again,” he said. “We can make that up with foundations, pension funds and corporate investors.”
For owners of small businesses, of whom Asian Americans constitute a considerable chunk—24 percent of Korean Americans and 15.4 percent of Taiwanese Americans over 25 are self-employed, according the 2000 Census — these times are tougher.
“Credit’s tight,” said Le Chang. “For Asian American small business owners, not being able to get credit, that really gives them an inability… to get the inventory and equipment that they need to run effectively. It’s very difficult.”
But for those looking for loans from institutions like US Bank should not be overly pessimistic, said Walker. “Our small business funding activity remains reasonably robust. It may be down a little bit, given the environment we’re in, but clearly there continues to be demand in the market place.”
“We’re impacted because our clients are impacted,” said Walker of the economic downturn. But he added that institutions like his remain standing on the strength of sound financial strategy. “We’ve avoided a lot of the businesses that other banks got into that created problems… We’re well capitalized, highly liquid and still highly rated. And we’re open for business.”
Bay Area Capital Connections III
Investment and Business
Resources for Companies in
Urban Markets
Friday, October 24
8:00 a.m. – 6:30 p.m.
Computer History Museum
Mountain View, Calif.
Tickets: $125-175
allianceforcommunitydevelopment.org
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