The State’s Biggest Tech Investor Wants to Clear Things Up: ‘We Are Not Venture Capitalists.’
Benjamin Franklin Technology Partners, the group that invested $8.9 million in local technology-based companies last year is doing something new – it is trying to clear up its public perception.
The conglomerate of partners that has invested in Philadelphia-based companies (and companies of the surrounding Bucks, Montgomery, Chester and Delaware counties) for over three decades says it’s losing out now because people just don’t have the right idea about them.
“The misunderstandings hurt us because companies won’t come to us and [when they don’t] they’re hurting themselves, too,” said Ben Franklin Technology Partners business development director, Mark Trabbold.
For one, Benjamin Franklin says they are not venture capitalists and they are not equity investors, either. The distinction is in their reach with individual companies, the organization says.
When a company approaches Ben Franklin with a pitch, they are vying for more than just money. The pitch is a threshold to a sustained relationship of mentoring, coaching, and industry connections. And if a company gets approved for funding through the group, one of Ben Franklin’s investment directors takes a seat at the board.
“We aren’t just going to throw money at you and abandon you like some venture capitalists might,” Trabbold said to a group of entrepreneurs at the University City Science Center on Thursday.
Ben Franklin, partially funded through the state and through co-investment partners like Temple and Drexel universities, can provide companies with three different tiers of loans, but only disburses investments of $150,000 to $250,000, which is relatively small compared to venture capitalists in the region like Comcast Ventures.
And the non-profit organization expects to get its investment back in five years. The goal is to grow jobs in Philadelphia, with a requirement that companies have a physical presence in the region for at least five years, and send money back to the state, which has received a $3.60 return on every dollar it invested in Ben Franklin from 2007-2011, the organization reported.
“When we give you that money, it’s in our best interest to do everything we can to get you successful. We want that money back to put it in different companies,” said Trabbold.
And those companies don’t have to be information technology related. Last year, the organization invested in Manayunk-based Sweet Note Bakery, which manufactures gluten-free and allergen-free bagels.
“They hear ‘technology’ and think IT, and this couldn’t be farther from the truth,” Trabbold said. Adding, “People think we just give money to startups.”
Of the 14 deals the economic development company made in its third quarter, 36 percent were with information technology companies amounting to about $1 million in investments. Deals were also made in the digital health, health, and physical sciences sector.
But all deals were with early-stage companies. Some were even pre-revenue.
“It’s very difficult to find resources for companies to innovate that aren’t startups,” said Mia Levesque, who has operated her web design development agency, Yikes, out of Fishtown for the past 20 years.
“Sometimes you’re starting up something new in an established business. And we’ve been here. We are Philly,” said the Yikes co-owner who wants to take her business to the next level by innovating around the web applications they builds for clients.
While Ben Franklin’s investment portfolios did swing to the information technology sector last quarter, they say they work with anyone trying to “inject an element of new technology,” not just fresh-out-of-the-garage novices. That includes manufacturers, existing companies, and larger companies.
Last year, the organization approved investments for a total of 48 companies of the 300 to 400 companies that embarked on the 12-16 week application process, including two rounds of pitching and multiple levels of internal approval, all priced at $500.
“Whether you get good or bad feedback, it’s all valuable to you. We do our due diligence,” Trabbold said.
The company wants to clear up one more misconception.
“Philadelphia is a fantastic place to start a business,” said marketing director Jason Bannon, “the community is supportive and approachable. There are a mix of investors.” According to the organization, its pipeline for prospective companies has never been more full than it is now.
And for companies that still want more investment options, Ben Franklin is seeking more grant money from the U.S. Economic Development Administration to finance impact-focused companies this year.
Follow @fabiolacineas on Twitter.