BusinessTN

The devastation of the Louisiana landscape following Hurricane Katrina last August is still evident in many of the hardest hit communities despite ardent efforts by residents to put New Orleans and the Gulf Coast back together.

But if there is to be a silver lining to Katrina, it may be that the storm—the greatest insured loss in history—has sparked renewed interest from outside venture capital firms, including some with no prior history in the Pelican state like Memphis’ Three Rivers Ventures.

A startup offshoot of the politically connected Delta Capital Management, TRV partners Joel Wood, David Latham and Mike Smith expect to have a first closing on a $50 million fund “by the second half of 2006,” says Wood, a former investment banker at Stephens Inc. “We expect to invest in 12 to 14 companies in the Midsouth (including Louisiana) with $3 million to $4 million invested in each,” Wood says. “By nature, these businesses are ones that have $1 million to $5 million in revenue before we make an investment.”

TRV’s alacrity is in stark contrast to the federal agency quagmire exemplified at the Small Business Association. SBA chief Hector Barreto finally stepped down in April after months of criticism over the handling of Gulf Coast recovery efforts following hurricanes Rita, Wilma and Katrina.

According to Wood, TRV plans to mirror Delta Capital’s strategy, focusing on early and expansion stage opportunities in health care, supply chain/logistics, business services, information and industrial technology, and a particular focus on energy technology in Louisiana.

Such investment in the Big Easy and surrounding area would calm anxious venture capital lobbyists at the Arlington, Va.-based National Venture Capital Association, which has voiced concern over the malaise in early stage investing.

As residents rebuild their lives along the battered Gulf Coast, a similarly savaged local business community is trying to rally from the state’s worst year for venture capital in more than a decade. Though not solely responsible for the pitiable numbers, the storm put an emphatic kibosh on what outside interest there was from private-equity firms for 2005, which by October boasted but one deal for about $1 million. By comparison, Tennessee had close to 20 deals for nearly $45 million—about half the state’s total the previous year, according to Thompson Venture Economics.

“Most of the businesses that we invest in participate in markets in excess of $1 billion, [and] we look for these businesses to have the potential to grow to $50 million in revenue in five years after our investment,” Wood says.

“They are very important contributors in terms of employment and impact on their community.”