VENTURE CAPITALISTS’ CUP RUNNETH OVER: MORE MONEY THAN PROJECTS: RECORD INFLOWS MEAN EVEN MANUFACTURERS ARE CALLED ATTRACTIVE

If you’re looking for financing from venture capitalists, put an “e-” in front of your company’s name and you’re likely at least to get your phone calls returned promptly.

But while fledgling technology companies are having little trouble attracting venture-capital money, companies in other industries needn’t worry. They won’t be left out this year, financiers say.

Established venture-capital houses are raising record amounts of cash and need to invest it somewhere. Internet and electronic-commerce companies are sprouting like weeds, but there’s not enough of them to soak up all the venture dollars.

So what other industries stand to benefit? Look for service providers to the health-care industry, outsourcing firms and even some old-fashioned manufacturers to get their share of the venture capital pie, too.

“There’s a lot of money coming in,” says Larry Reinhold, managing partner in the Midwest of technology, information communications and entertainment for PricewaterhouseCoopers LP. “The size of funds of some of these (firms) are huge.”

No kidding:

* Willis Stein & Partners in Chicago just closed an $840 million fund that was initially targeted for $600 million and then capped at $750 million. Demand was just too great to stay within the limit, says Avy Stein, one of the firm’s two partners.

* Sprout Group, the venture capital arm of New York-based Donaldson Lufkin & Jenrette Inc., raised $860 million last year in its eighth fund, much of which will be invested in health care-related concerns in the Chicago area.

* William Blair Capital Partners closed its sixth fund last year at $270 million, the biggest in that Chicago firm’s history.

* And the largest fund ever launched by a Chicago venture capital firm — the $2 billion fund of Madison Dearborn Partners Inc. — is to close this month.

Venture capitalists say the turmoil that virtually shut down the market for initial public offerings last fall has subsided, and IPOs are on their way back. That’s good news for venture firms that use the public markets to cash out of their private-equity positions.

Willis Stein is finding opportunities in media and telecommunications companies, as well as travel-related concerns, Mr. Stein says. In the Chicago area, the firm is eyeing a couple of manufacturing companies he declines to identify.

“Manufacturing is still very attractive,” he says.

Sprout Group’s new Chicago office, which was responsible for $55 million of the $225 million the firm invested last year, is scouting out deals in the health-care services and consumer-services arenas. Another promising field is education services, says general partner Scott Meadow.

“I think we’re seeing signs of health-care services coming back,” he says, ticking off as an example a recent buy recommendation on Wall Street for Norwalk, Conn.-based Oxford Health Plans Inc. “We’re most enthusiastic about companies that support the health care enterprise.”

Most venture capitalists are positive about their prospects in 1999. They’re coming off a strong year, when turmoil in both the stock and bond markets made private equity more appealing to investors and owners of companies in need of capital.

There is still concern, however, about the effect on U.S. markets of the problems in Asia, Russia and Latin America. The impeachment proceedings don’t help, either.

And some worry that if Internet mania subsides, and the soaring valuations for those companies fall to earth, the IPO market could shut down again.

“The big uncertainty is whether the market will continue to be accessible for young companies,” says Martin Zimmerman, chairman of Linc Capital Inc., a Chicago firm that finances machinery and equipment leases. “The IPO market is back, but it’s highly selective. It’s quite possible it will improve, but it’s a tough call.”

But the consensus is that sunny skies are more likely.

“Barring some major problem in the public markets, the venture market in ’99 should be very strong,” says Mr. Reinhold of PricewaterhouseCoopers.