Something ventured; Entrepreneurs start venture capital fund in Bethlehem, promising high returns
BYLINE: By Sam Kennedy Of The Morning Call
Mike Gausling made a name for himself in the Lehigh Valley by overseeing a local startups transformation to a publicly traded company with revenues in the tens of millions of dollars.
Now, the co-founder of OraSure Technologies of Bethlehem has launched an early stage venture capital fund to help other entrepreneurs with similar aspirations.
We want to invest in good people with great ideas, said Gausling, who raised money for the fund with a sales pitch notable for its unabashed ambition.
An early stage venture capital fund is, essentially, a pool of seed money for startups. The money is parceled out to budding businesses in exchange for an ownership stake.
Startups are inherently risky, but the payoff can be high.
Gausling, 49, of Lower Saucon Township, is partnering with his longtime friend and colleague Eric Arnson, 50, a former Chicago marketing consultant. They are starting their fund, Originate Ventures, with $25 million.
They expect to turn that $25 million into $250 million in 10 years, Gausling said.
Such a return a multiple of 10 would be fantastic, said Fred Beste, who manages Mid-Atlantic Venture Funds of Bethlehem. He said a multiple of three is typical among venture capitalists, and that he doesnt know anyone who has gotten 10.
Bestes own funds, which are highly regarded, have paid back in multiples of about six or seven.
God bless him, Beste said of Gausling, whom he said he knows and respects. Ten times your investment base? Ill be the first to congratulate him.
Told of Bestes skepticism, Gausling a man who radiates good-natured optimism did not back down.
Were kind of going in thinking theres no reason why we cant do a great job, Gausling said. Is that insane? Maybe, but you also saw what we did for our OraSure investors.
OraSure is best known as the inventor of the OraQuick rapid HIV test, which in a matter of minutes can detect the virus that causes AIDS in either blood or saliva. Initial investors in SolarCare Technologies Corp., the name of the startup that eventually became OraSure, saw their money increase by a multiple of 70 in 10 years, according to Gausling.
We have skills and experience and results that are in the exceptional category, he said.
Originate Ventures has attracted about 80 investors; theyve made contributions of various amounts. Gausling and Arnson jump-started the fundraising efforts with a combined $4 million of their own money.
The two biggest contributions from outside investors were for $5 million. One came from a large pension fund, the other from Pennsylvanias New PA Venture Capital Investment Program, which was established during Gov. Ed Rendells first term.
The state hopes to benefit in two ways: If Originate Ventures is successful, the government, of course, will be able to claim its share of the profit. But more importantly, such success would lead to the creation of new jobs, which the state desperately wants.
Job creation, Gausling said, is also one of his main goals: Its the right thing to do for the community.
Originate Ventures itself will, when fully staffed, employ about five people.
The minimum permissible investment in the fund was $100,000. Many of the names of individuals who contributed came out of Gauslings own Rolodex.
Elmer Gates, a civic leader and former chairman of Fuller Co., made it clear he didnt spend much time mulling over the risks and potential rewards of Originate Ventures after he got the call from Gausling.
I invested in it because Mike Gausling is as honest as the day is long, said Gates, 77, of Hanover Township, Northampton County. Hes an achiever but most importantly, hes a man of integrity.
Originate Ventures, currently operating from an office on Lehigh Universitys Mountaintop Campus, will be based in a renovated firehouse in south Bethlehem, right across the street from OraSure Technologies. Work on the structure, which will more than double its 4,500 square feet, is expected to be done by the end of the year.
Blueprints call for a conference room with hardwood floors, a basketball hoop and an electronic scoreboard. Thats where Gausling and Arson plan to interview applicants.
They described how theyll go about it: The timer on the scoreboard will be set to 10 minutes the amount of time applicants will have to make their pitch. When the buzzer goes off, well, that part of the interview will be over.
There wont be a shortage of businesses to look at, Gausling said.
Indeed, Mid-Atlantic Venture Funds Beste said some 1,000 investment opportunities might come before him in a years time. Of those, about 100 will lead to face-to-face meetings, and fewer than 10 will receive financial commitments from Mid-Atlantic.
Gausling said he expects Originate Ventures $25 million to be divvied up among 10 to 15 business in $500,000 to $4 million chunks.
But thats only part of deal. Gausling and Arnson say they expect to get their hands dirty, so to speak. This is a point they stress:
Both men are entrepreneurs. Gauslings experience with OraSure is well-known in the Lehigh Valley. But Arnson also started his own business a marketing company, which in 2001 was sold to the global consulting firm McKinsey & Co. He has worked for well-known brands such as Visa, Nike and Snapple.
They expect to play an active role in the management of their startups.
We hope people want our skill sets as much as our money, Gausling said.
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ORIGINATE VENTURES
What: A local $25 million venture capital fund
Founders: Mike Gausling, former head of OraSure Technologies, and Eric Arnson, a Chicago marketing consultant
Location: A renovated south Bethlehem firehouse, expected to be finished by the end of the year.