Ben Franklin Technology Partners’ Global Opportunity Philadelphia Fund , or Philly Go Fund for short, announced its first two investment in late August, in two Philly area expansion-stage ventures.
The Fund, announced in February by Ben Franklin along with Newtown-based EPAM Systems, has raised $20 million – a significant portion of it from EPAM and Ben Franklin-towards a $50 million goal. Ben Franklin’s chief investment officer and managing partner of GO Philly, Scott Nissenbaum, told me he sees the fund not primarily as a vehicle for expanding seed funding to more early-stage startups, but as a way for Ben Franklin to participate in some followup fundings in ventures its already helped seed, which it can’t do today.
Its first two Philly Go Fund investments, Ambler-based customer loyalty platform Clutch, and Philly-based ecommerce performance marketing technology company Sidecar, fit the criteria. Sidecar ($1 million as part of a $7.5 million C-1 participating preferred round) has raised $38 million in total to date per CrunchBase, Clutch ($750,000 as part of the company’s $2.5 million senior preferred note in preparation for its forthcoming larger Series C) has raised $24.8 million.
With the Go Philly Fund’s potential level of investment, Ben Franklin can double down in later rounds in some of the promising ventures it seeded. That’s when a VC knows more about a venture’s chances for success, which can result in higher returns. Possibly, Ben Franklin can use such returns to further grow its investment pool.
When fully funded, Go Philly will be a considerable pool of capital. But investments of the size it just made are not, by themselves, going to have a significant impact upon the shortage in expansion stage capital that some feel holds the Philly venture scene back. Its not going to replace the millions that Safeguard Scientifics could sometimes invest in companies such as Clutch. Or going back aways, Portico Systems (where Clutch’s founder was CEO) or ThingWorx. But it will help.
The blockchain feature of the fund, in which one can invest using cryptocurrency, has already been utilized and is an innovative tool for the future.
But a further problem for Ben Franklin is the ongoing cut in its state funding. Since 2008, Pennsylvania lawmakers have cut its budget by nearly 50%, from $28 million to $14.5 million.
My own instincts are to be cautious about state-funded venture investing. I can imagine some states -none near Pennsylvania of course – where such funding might be diverted to political chronies, or even relatives. And everything I’ve ever been taught about investing tells me that the state doesn’t do it very well.
But I’ve been following Ben Franklin closely for a long time now, and I know it works closely with the area’s top VCs to vet deals, and I’ve never heard a squeak about impropriety. Its a model many states try to emulate. Its a winner for Pennsylvania.
In the past, supplemental state funding has eased the burden of the cuts, but Ben Franklin was told those sources would no longer be available in the new fiscal year.
I had an idea that some of the windfall the sate received from the new internet sales tax could be allocated to Ben Franklin.
It is difficult for such a small fund to produce optimal performance because there’s little scale to cover any overhead.
The logjam that exists in Harrisburg on this, considering the relatively small amounts of money involved, is hard to understand.
By the way, EPAM is a great company whose participation can only be a plus for the Philly Tech community..