Investment Banker Works Variety of Financial Fronts.

TIME was when venture capitalists and investment bankers represented different hues of the money spectrum. But investment bankers are now "getting in" earlier and earlier in the life cycle of a company.

Just ask Steve Koffler, founder of Westside boutique investment bank Koffler & Co. "We are doing a $30 million senior followed by another $15 million private for Intellisys," he says.

In plain English, that means Koffler is helping to arrange a $30 million loan for Intellisys Group Inc. in Woodland Hills, to be followed later this year by a $15 million infusion of equity capital. If all goes according to Hoyle, the telecom company could go public next year, says Koffler, a veteran of Merrill Lynch & Co., Smith Barney and other brokerages.

But Koffler insists he hasn't joined the swelling ranks of venture capitalists on a fulltime basis, because he still does M&A work and regular corporate money-raising.

Among other assignments, he is "taking private" the La Jolla-based Jenny Craig Inc. chain of weight-loss centers. As some may remember, it was local banker Michael Tennenbaum, then managing director in the Los Angeles offices of Bear Stearns & Co. Inc., who took Craig public in 1991.

But Craig stock never really waxed fat on Wall Street. After its debut at $20 a share and its rise to $30 a few months after the IPO, the stock went on a near decade-long diet, dropping to penny-stock status earlier this year.

At one point, Craig -- which owns or franchises more than 750 weight-loss centers globally -- had a market cap of under $20 million.

For the quarter ended March 31, the company reported net income of $1.73 million (8 cents per share), compared to net income of $1.07 million (5 cents per share) in the like period a year earlier. Revenue was $80.8 million vs. $84.6 million. (Financial results for the second quarter ended June 30 are expected to be released this week.)

Still, Wall Street has snubbed Craig, as it has many other small-caps. "The Street doesn't seem to care if the stock sells at $1.50 (a share), and there is no research (on Craig) out there. They (Craig) had none of the benefits of being public," said Koffler.

Advised by Koffler, founders Sidney and Jenny Craig are currently tendering for all shares they don't own, at $3.75 a share -- another example of the increasing number of undervalued public companies being taken back into private hands.

Dialing for Dollars, Digitally

Many techie investors blew fuses in the first half, but not Michael Cohen, co-manager of West Los Angeles-based Alpha Analytics Investment Group LLC.

Cohen's Digital Future Fund earned 32.3 percent in the six months ended June 30, according to Lipper Analytic Services, the fund-rating outfit.

By way of comparison, tech funds in general earned an average of 4.3 percent, while the Nasdaq composite fell 2.5 percent in the same period.

How did Cohen dodge the bullets in the first half? He was heavy into stocks that work in the fiber-optic cable field, such as JDS Uniphase Inc., the San Jose-based cable hardware components maker.

Cohen's "theme of investing" -- an idea that drives his stock picking -- is that advances in fiber-cable technology have hiked capacity 160-fold in just the past few years. The trick is to use different parts of the light spectrum -- red light, blue light, etc. -- to simultaneously carry signals down the same stretch of cable.

Cohen believes big bucks will be made by firms that provide the equipment or technology to facilitate this increased capacity. As with so many of the region's venture capitalists, Cohen is betting on the infrastructure of telecom, not necessarily the content.

No IPOs? Who Cares?

"We're doing tons of private placements right now. We have a backlog of 60 private placements that we are working on, and 20 of those are in the Los Angeles market," said Brian Webber, managing director and top-gun tech investment banker with securities brokerage Donaldson Lufkin & Jenrette Securities Corp. in Century City.

Many e-biz startups have seen the IPO drawbridge drawn high, as investors turn their noses up at new public offerings. But some young companies are worthy, even if snubbed. In general, Webber arranges for an infusion of new capital to keep such companies afloat, either until the IPO market improves or a merger opportunity surfaces.

So how do the early investors do when they have to take on additional private equity? Surprisingly well, answers Webber. "So far, we haven't done a deal where the original investors lose money," he says.

Webber and the people behind the new equity often bring valuable connections to a young company. "If they (start-up principals) want a meeting with a Microsoft or Intel, we can arrange it," said Webber.

Original investors do endure some changes -- control of the company often switches to the investors in the lead of the new private placement. "(New investors) may take control of (more than 50 percent) of the stock, or 20 percent to -30 percent... plus some board seats," said Webber.

But it's better to own a share of a success, than 100 percent of a failure, as they say.

New Fund

Malibu-based Intrinsic Asset Value Management, which has had stellar returns based on its penchant for micro-cap tech stocks (up 100 percent so far this year), is starting a mutual fund. But the firm is still targeting a swanky crowd.

"We will take a minimum investment of $100,000," said founder Ken Luskin.

Separate portfolio accounts, however, start at $5 million, he added.

Luskin likes tech stocks that have been beaten down but have cured their "burn rate" -- the speed at which they go through capital. In addition, he likes to see an upside story.

His favorite now is San Carlos-based Conceptus Inc., which has pioneered a lower-cost, less-invasive method for permanent birth control, to replace the tubal ligation procedure now widely used.

Contributing columnist Benlamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at [e-mail].