Tom Simpson Northwest Opportunity Pulls Investment Manager Back To Spokane

Few attend the prestigious Wharton School of Business at the University of Pennsylvania to bust loose.

Tom Simpson did.

The graduate of Lewis and Clark High School and the University of Washington said he looked around after three years in the auditing department of Deloitte & Touche in Spokane and saw old friends ski-bumming and globe-hopping.

He’d never been east of Missoula.

So he relishes the two years he and his wife Susanne spent in Philadelphia. Summer weekdays were spent commuting to a job in the investment banking department of Chemical Bank in New York.

Weekends they sunned on the Jersey shore.

But when he finished at Wharton, Simpson returned to the Northwest, as an associate with the Dain Bosworth investment firm in Seattle.

Simpson says he handled a variety of financings and other transactions at the firm, including $25 million in notes that helped employees buy the Rosauers supermarket chain from URM in 1989.

He also managed a $40 million private placement in 1994 that allowed Key Tronic to refinance the debt the Spokane company assumed when it bought the keyboard operations of Honeywell.

By 1995, he was a Dain Bosworth managing director.

But in investment banking, Simpson said, the more glittering the title, the narrower the fiefdom. He did not want to be pigeon-holed.

And while he was pondering a change of direction professionally, he was also reassessing his personal situation.

“Spokane is just much more conducive to a young family,” he said. The catch was finding a position that would match his background.

There was one - managing director of Spokane Capital Management Corp., the general partnership spun off by the Momentum business-development effort.

The corporation managed a $2.9 million fund that invested in young area companies like the Waterford and Eagle Hardware and Garden.

Bill Wright, managing director since the partnership’s foundation, stepped down in 1995. Simpson said he told corporation directors he would be interested in the post if they decided to create a second fund.

By September of that year, he was back in Spokane.

“I spent the first two months just finding out what I’d inherited,” Simpson said.

He also prepared a statement for the second offering based on earlier expressions of investor support. He was able to close that fund in March 1996 with $6.1 million, 90 percent of that from the Spokane area.

He’s been trying to spend it ever since. “I told my investors it would take three years,” he said.

So far, Simpson has parked just over $2 million in four companies: Packet Engines in Spokane, PrintPaks in Portland, and World Wrapps Northwest and Pet’s Choice in Seattle.

He said he expanded the second fund’s horizons beyond Spokane to increase the odds investors enjoy the kind of returns that encourage them to roll some of their profits into successor funds.

The first fund, he noted, produced a respectable 200 percent return since 1988, enough to entice many repeat investors.

Simpson said companies must pass several tests before he buys in.

First, they must be generating revenues.

“It gives you customers you can call,” he said. “That’s information you can’t get when companies are in the design or prototype stage.”

The company should have the potential to revolutionize its business.

Management should have a track record in the business. Bernard Daines at Packet Engines would be an example.

And company officials should be highly ethical. After a family dinner, he said, “Would my mother walk away thinking, ‘Gee, this is a good person?”’ The four companies that have made the grade so far are memorialized in “tombstones” framed on Simpson’s office wall.

There are 10 blank frames awaiting the names of companies yet to join the fold. Simpson said he is close to terms on three, but prices are high, and he does not want to overpay.

“Six million dollars, by venture capital standards, is relatively small,” he said.

Simpson leverages his limited funds by working with other venture capitalists, but size remains a drawback.

For many companies, the money he can bring to the table is not enough to bother with, but Simpson is undeterred.

“The opportunity in the Northwest is huge,” he said, noting that over the past five years young companies have consumed much more capital than financiers raised.

Simpson said he hopes to begin forming a third fund next year to bolster his resources.

“I’m trying to build a platform for what can be the leading venture capital firm in the Northwest,” he said.

, DataTimes ILLUSTRATION: Photo