Sam Katz is widely known in Philadelphia for campaigning. But he has had considerably more success in business.
More than a decade ago, he lost the mayoralty to John Street in one of the closest and most controversial big city elections in at least a generation, enough to warrant a celebrated documentary. Running a competitive Republican campaign in an overwhelmingly Democratic city was enough to make him a recurrent candidate suggestion, as recent as this mayoral race. No matter that a mayoral primary loss in 1991, a governor primary loss in 1994 and a failed rematch against Street in 2003 has tied losing in politics to his legacy.
Where Katz, 61, has maintained his air of success has been in business and government oversight.
In March, Katz was named the chairman of the Pennsylvania Intergovernmental Cooperation Authority, the state-created panel that oversees city finances and quickly became the public face of an important body that has often operated in relative public obscurity.
Katz, a former Central High School honor student and Johns Hopkins basketball star, made his wealth working from 1976 to 1994 for Public Finance Management, a firm that advises government authorities on efficient large-scale project management, as the Inquirer reported in 1999.
With that accrued wealth, the West Mount Airy resident dove into investing, taking roles in a half dozen or more investment properties of note in the region.
The native of Wynnefield in West Philadelphia formed in the late 1990s the early stage private equity fund Wynnefield Capital Advisors (though it went by variations of that name) and invested through that organization in a variety of ways until 2004. He is board chairman of BioAdvance, investing in “very early stage life sciences companies,” and a limited partner in Osage Ventures, which is being credited with rethinking how universities profit on intellectual property. Katz has also been involved in launching or leading WellSpring Biocapital Partners, Biotechnology Greenhouse of Southeastern Pennsylvania and other small boutique investment groups.
With that background and with personal computing roots dating back to 1983, it’s no surprise he’s also taken to direct partnership, including investing in Fort Washington-based data-driven campaign analysis firm CampaignGrid and advising cWyze, the interactive video startup with Queen Village roots that presented at the spring 2011 Switch.
And just to show that investing remains something of a hobby, Katz has set his eyes on producing The Great Experiment, a seven-hour series on the 400-year history of Philadelphia the city, kicked off with a pilot proof of concept on 6ABC this past spring. [Support its Kickstarter here].
With that background, below, Technically Philly asked Katz about how Philadelphia has changed, how it’s stayed the same and what we can do about it.
As always, edited for length and clarity.
With more than 10 years of investing in Philadelphia behind you, what has changed from your perspective?
I don’t consider myself one of the serious investors, but in the period I have been involved in this, I have definitely seen more mature business models, more serious and more thoughtful, happening everywhere but here in Philadelphia as well.
Seeing viable businesses early, that just wasn’t the case earlier in the decade. Even right after the bubble, it was just about that word: “eyeballs.” Even now, it is extremely difficult to get support with just a business plan and a clever entrepreneur, certainly more than it was when I began. [The need for] scalability was not always the case, but now that’s the word.
What is something that is holding back Philadelphia’s entrepreneurial community?
The risk aversion. A lot of private equity here has… well, there’s still a tendency to punish failure here. There are some markets, faster moving ones, where the intellectual capital….of failure is seen. We don’t seem to have that.
We’ve heard that before. So what do we do about it?
The solution for fear of risk is more capital. There is a propulsion there. In the Bay Area, there are dozens and dozens of well capitalized firms chasing fewer and fewer Facebooks and Groupons. Capital needs a place to go, so there is a seeking for what is new and that involves greater risk. As that moves forward, the people who have failed are suddenly seen as valuable, as having had that extra experience.
Here, it is not a capital intensive region, There are good firms doing good things, but it’s just not an over financed market. The absence of that makes partners and general partners much more wary of backing people whose track records include being wiped out.
We hear that that’s because as a region, we do a worse job of connecting our strongest young entrepreneurs with the older mentors and the investment that can often come with it.
I wouldn’t have it framed as ‘we do a worse job.’ We don’t do as good a job.
San Diego has institutionalized entrepreneurial connectedness, seeding management into younger companies, having lots of social and technical professional interaction, shining a spotlight on the integration with leaders and the players, all through the Connectors Project.
When I was [CEO of] Greater Philadelphia First [from 2000 to 2003], we came up with a number of ideas but nothing really gained traction. The Science Center is trying to do some of this, and it’s a problem that is being faced by Pennsylvania Bio, the Eastern Technology Council and others.
What’s the problem here.
One of the problems is that there are too many owners of these processes, who want to own it without collaborating.
We have tremendous concentrations of national and federal funding in health sciences and research, but it seems like Boston is eating our lunch when it comes to building a network and reputation for success. We don’t seem to have a history of collaboration. All of these big, regional organizations are competing with each other. It undercuts our capacity to be seen as leaders.
Considering we’re not a center, we don’t do bad in new media, the cloud, consumer products. In health science, though, we are a center, a real hub, with Drexel and the Science Center and CHOP and all the research facilities, yet we are not hitting into the upper echelon of successes in the industry.
And on that front, if you had a magic wand, how would you solve it?
Well, I don’t have a magic wand, but to the extent to which competition creates islands between life sciences institutions, we need some more prospects with collaboration to serve as examples that the sum of the parts can be greater than each institution on its own. I don’t know if many in these industries see their colleagues as possible partners in a stronger, more entrepreneurial region, rather than competitors.
We don’t have a dominant hospital that is leading this charge and bringing everyone together: our good hospitals are all connected to universities and they are all competing for patients and dollars. There are too few examples of an institution taking on a major, ground breaking project and bringing on other institutional partners to take in large-scale funding that could change the industry and spinoff other projects, business and leaders.
How have you been part of the solution?
BioAdvance [of which Katz is chairman] is having serious conversations about that this year. We’re saying, ’10 years later, are we any stronger, have we met the objective — not just jobs alone but are we moving the needle on being a life sciences center?’
There’s probably a consensus around that table that we have not. We have not succeeded as a region to be what we thought we could be. One of the aspects was pharma being seen as a key stakeholder, and it has been on the decline in an unexpected way, so it could be the recession, but other regions are facing those same difficulties and we just haven’t moved the needle enough.
Are there legislators who you think are doing a good job representing innovation and entrepreneurship to help move the needle?
My answer might surprise you.
When I look at the Marcellus Shale opportunity — certainly with lots of risks — I see a transformative prospect for the Commonwealth of Pennsylvania. It is not often that a state gets, through no fault of its own, to create an entire new industry, to use that industry to lure others.
I don’t think the Governor does the best job of educating why that’s important, but his resistance to extraction tax shows he has a steely determination to do everything he can to have the Marcellus Shale get so deeply inbred in the economy and infrastructure of the state, so that by the time it’s mature enough an industry to have a tax, it won’t matter, and we’ll have other options.
[Editor’s Note: PA Governor Tom Corbett nominated Katz to the financial oversight PICA board, as noted above, and Katz’s investments span across industries. How to treat the Marcellus Shale industry in Pennsylvania remains a hotly contested debate, though Corbett recently received the highest polled approval rating of his short tenure.]
i have an admiration for what he does, if not an admiration for how’s he’s communicating it, so I’d say Tom Corbett is someone who is showing an impressive entrepreneurial spirit. There are ideas I don’t agree with, but he has seen this the same way the entrepreneur would see the new social media whiz-bang thing, a real, strong viable business venture that needs to be cultivated.
I’d also mention Rob McCord [the state treasurer who spoke to Technically Philly in February].
As far as legislators, well, I don’t think Philadelphia is represented by a lot of people who get technology. They are focused elsewhere. The day to day problems that most Philadelphians deal with, doesn’t leave a lot of time to be interested in bandwidth and ventures.
What are you excited about for the region?
I think the combined work of Steve Tang of the Science Center, Barbara Schilberg of Bioadvance and RoseAnn Rosenthal of Ben Franklin Technology Partners continues to be impressive. I think the combination of those three — they are not starting the companies or funding the companies, but making connections — really means a lot. They appear to be out there doing good stuff, and they don’t get enough recognition or encouragement.
Though, recognition and encouragement are two other things we don’t do very well in this region.
While we have you, what is the latest with the Great Experiment documentary on Philadelphia, other than the Kickstarter?
We ran our pilot episode on 6ABC this spring, and now we are working on the first episode of four shows for 2012, which we hope to follow up with four more in 2013 if funding permits.
[kickstarter url=http://www.kickstarter.com/projects/878400143/the-great-experiment-episode-ii-capital-in-crisis width=420]
And you’re already looking to 2026, what’s that about?
I’ve started promoting and advocating for a conversation leading up to 2026, which will be the 250th anniversary of the signing of Declaration, which has potential to be a dynamic and transformative event. For now, I’m involved in conversations with what we as a region can do, and we’ll be looking for more ideas in the future.
And with your new board chairmanship with PICA, tell us why our audience should care about the work you do there.
On multiple fronts, it matters.
In neighborhood renewal and building preservation, with new restaurants and new exhibiting culture and arts, Philadelphia is disconnecting from government and has become quite entrepreneurial. Most of it’s happening without permission.
Many of them younger but not all, and they’re making the place they live better. That’s the breeding ground for a guy like Rich Florida to point to a place ready for a knowledge based economy for science and engineering and media.
So, with the universities — brain factories – and with Comcast being arguably at the forefont of broadband and media, you have to ask the question, ‘why aren’t we getting and keeping a larger share of those businesses?’
The answer is money, the incentives, the regulatory environment.
The connection between what we’re doing at PICA — not making policy, just overseeing the city to avoid fiscal bankruptcy — is direct to affecting Philadelphia. We don’t attract jobs, we havent for a while. Every once a while, there is the exception, but we are not a destination for business. We know this.
If the city had a less onerous tax regime, we would be a natural for startups and everything that comes with it.
Let me push you on that because the Nutter administration has maintained that they’ve toed the line on the business privilege tax and other increases have been out of necessity, revenue shortfalls because of the economy. How would you grade the administration’s effort to do what you’re saying?
I wouldn’t. But the problems aren’t the administration’s making. They have been exacerbated by the national economy, sure, but given the economy, we have failed to take hold to try to fundamentally change the way we do business.
Given the opportunity presented, I think we could have done more as a region. Look at other places. You don’t have to like what happened in New Jersey and Wisconsin [with sharp budget cuts and union battles], but what we saw there were attempts at doing something big, taking on the financial instability a lot of governments have and doing something about it.
We haven’t seen that here.
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