Think of places where you’ll find people who pour money and business expertise into emerging companies. What comes to mind? Silicon Valley? Boston?
Pennsylvania may not be known as a venture capital hotspot, but that doesn’t mean startups have to leave the state to find investors. Far from it. Philadelphia, Pittsburgh and cities in between are home to a variety of firms that contribute to early-stage companies. Their cash has funded advancement in social media, business technology and life sciences.
Which investors are most likely to find the next big innovation?
John Sider, managing director of statewide initiatives for the Ben Franklin Technology Partners and Marc Kramer, a suburban Philadelphia serial entrepreneur and columnist for Forbes and SmartCEO, offered their takes on which Keystone State investors to watch.
Ask these venture capitalists how they perceive a startup’s potential and they’ll spend most of their time talking not about the next big idea, but whether an entrepreneur has the skills and experience to make an idea big.
Josh Kopelman
First Round Capital, West Conshohocken
Kramer quickly says more Pennsylvania investors should emulate Josh Kopelman. It’s easy to see why First Round Capital’s managing partner is revered for his business savvy. He founded his first company, Infonautics Corp., as a student at the University of Pennsylvania. He went on to launch Half.com and anti-spam company TurnTide. First Round, which also has offices in New York and San Francisco, invests in other promising tech ventures. Its portfolio includes online marketing firm Monetate and colleague-ranking website Honestly.com.
“He’s like Silicon Valley transplanted into Philadelphia,” Kramer says.
He says many investors in Pennsylvania think more like bankers than venture capitalists. But Kopelman has more of a West Coast mindset, focusing on a startup’s potential rather than how likely he is to make his money back.
Last year Kopelman told Technically Philly he saw a shift in how people use the Internet.
“We are really focused on the cloud and software as a service, and we are very focused on mobile. I think geography and location-based services is (also) really important,” he said. “I think that the concept of redefining the data sets that are available online and their accessibility online is a big trend.”
Glen Bressner
Originate Ventures, Bethlehem
Glen Bressner, who helped found Mid-Atlantic Venture Funds in 1984, says the region is full of opportunity. The swath from the Philadelphia area into New Jersey is full of teaching hospitals, pharmaceutical companies and medical-device makers. The area is home to many tech-savvy people with innovative ideas. Not surprisingly his current firm, Originate Ventures focuses on life sciences and information technology.
Bressner especially prizes experience in the business world and an ability to convince others to adopt a new product. Sales and marketing savvy is key, he says, because people are reluctant to pay for a new product or service from a company they haven’t heard of.
One success he names is ProtonMedia, a Lansdale company whose product, ProtoSphere, creates virtual 3D business meetings, eliminating the need for expensive, time-consuming travel. “There’s a very clear economic justification for the product,” he says.
Reggie Best became ProtonMedia’s ProtonMedia’s president and COO after Bressner told him about the company. Best says Bressner’s years of investment experience and host of connections throughout the commonwealth give him an ability to put the right people in the right places.
“They really understand how things work in this region,” Best says of Originate. “There’s a sense of working together to grow the business.”
Kerry Rupp
DreamIt Ventures, Philadelphia
The founders of SCVNGR, a game that rewards players with goodies for going places and completing quirky challenges, credit DreamIt Ventures for the game’s success.
The SCVNGR team was part of the 2008 inaugural class of startups that took part in DreamIt’s intense three-month program. Participants get up to $25,000 in seed money and are introduced to mentors and investors.
DreamIt managing partner Kerry Rupp have contributed long after that three-month stint ended. SCVNGR is based in Cambridge, Mass., but has does a lot of work in Philadelphia. John Valentine, sales executive with a SCVNGR arm called LevelUp, says Rupp helped the company find office space and housing in Philly.
“She’s very deeply concerned about the inner workings of the startups she’s invested in,” Valentine says.
Rupp says the main difference between DreamIt and other firms is that it gets involved with companies very early, when all they might have is a great idea and a great group of people. “We essentially look for the best team and the best idea,” Rupp says.
She says a strong team has a balance of skills, including someone who’s good at marketing and someone with technical abilities. She watches for intangibles, like team members’ body language as they interact.
Jay Katarincic
Draper Triangle Ventures, Pittsburgh
“You have to understand the difference between a fad and a trend,” Jay Katarincic says.
Katarincic and his firm, Draper Triangle Ventures, look for companies likely to be successful long-term, and he predicts a promising future for cloud computing and medical technology. Draper’s portfolio already includes companies like medical-device maker ClearCount Medical Solutions and printed electronics maker Plextronics.
Plus, given Pittsburgh’s location in the middle of Marcellus Shale country, Katarincic thinks the natural gas industry will present other opportunities. While Draper isn’t about to drill any gas wells, the company could invest in emerging companies in industries like water quality and alternative energy.
One of the biggest things Katarincic looks for is an experienced team behind a great idea. “You’ve got to make sure they can lead people in ways that go above and beyond,” he says. A successful CEO must be able to let others take over pieces of their business and have the flexibility to deal with unforeseen challenges, he says.
Sean Rollman, CFO of Plextronics, says Katarincic stands out because he looks out for the long-term interests of Draper’s portfolio companies, not just a business decision’s impact on the investors’ bottom line. “Whatever’s good for Plextronics is good for Draper,” Rollman says.
Michael Aronson
MentorTech Ventures, Philadelphia
Michael Aronson has started successful businesses. He’s taught at the University of Pennsylvania’s Wharton School. That resume, plus his experience as a venture capitalist, gives him a unique perspective on which companies MentorTech Ventures should invest in.
“I think he has a strong sense of the financial fundamentals,” says Kevin Garton, chief marketing officer at The Neat Company, a Philadelphia company with Aronson on its board.
MentorTech only takes on early-state companies with connections to the University of Pennsylvania, which Aronson notes is one of the country’s biggest entrepreneurial incubators. MentorTech’s portfolio includes companies like TicketLeap and Diapers.com, founded by Penn alums.
Like Aronson, Neat co-founder Les Spero taught at Wharton. The two also worked together at software firm SMG. Now, Garton describes Aronson as a “power user” of Neat’s products, which virtually organize receipts, business cards and other documents. And he’s not shy about giving feedback on how they work.
Aronson likes to see emerging companies with leaders that plan several steps into the future. Prior entrepreneurial experience helps too. “We look for really special individuals, and we tend to know it when we see it,” he says.
REBECCA VANDERMEULEN is a freelance writer who lives near Downingtown. As she tells friends out of state, that’s between the cheesesteaks and the Amish. Send feedback here.
Photos, from top: Jay Katarincic, Kerry Rupp, Michael Aronson and Glen Bressner